Is It Worth Purchasing A Car On Finance Alone?

Accountancy Resources

Is It Worth Purchasing A Car On Finance Alone?


I just got a new job and need to buy a car to commute. Fortunately, I have enough saved to be able to buy either a used car or a new car on finance. The used car would cost considerably less, is the new car worth buying?

The answer depends on whether you prefer to own outright immediately, or would rather take the three years to pay off the new car and not have to pay out the entire amount at one time. Buying a car on finance has a number of advantages over getting a used car.

The main advantage is that new vehicles sold with financing generally carry a warranty on parts and labor for ex amount of years or ex amount of mileage on the car.

In addition, many car dealers offer a roadside assistance program that will assist the owner anywhere they might have car trouble.

Besides the fact that the car is under warranty and will not present any major repair or maintenance expenses, driving a new car feels good to many people. Nevertheless, new cars can be extremely expensive over time with financing costs, and tend to depreciate instantly once you drive away from the dealership.

Used cars also offer a number of advantages, primary among them is that they are considerably less expensive than buying a new vehicle. The depreciation on cars is dramatic once they have been sold from the dealership. After one year a car can depreciate by as much as 20 to 25 percent, with subsequent depreciation of up to 10 percent more per annum.

Another advantage of buying a used car is that you own the vehicle outright immediately after the purchase. Being obligated to a bank or finance company for three years might not suit everyone’s purposes.