A car is one of the biggest purchases you’ll likely ever make. And a key question you’ll need to answer before you go car shopping is whether your want to buy a new or used car.

There are advantages and disadvantages for both types of cars; the answer will ultimately depend on what kind of vehicle you want and how much you’re willing to pay for it.

The benefits

A new car typically comes with a range of extras such as a full warranty and capped price servicing. You have peace of mind that the car has no history and therefore no existing problems to spring up out of the blue. And even if your new car is faulty and something does go wrong, with a full warranty and capped price servicing you’re unlikely to be too much out of pocket, if at all, to get it fixed.

The main benefit of buying a used car is the amount of money you’ll likely save at purchase time. You’re taking a bit of a gamble on its history, but provided it has a good service history and you get a mechanic to check it out beforehand, you can be pretty confident in your purchase.

The (possible) negatives

New cars can be expensive and depreciate in value very quickly – as soon as you drive out of the dealership, it will be worth less than what you paid.

No matter how new the used car you’re interested in is, there’s no guarantee it’s going to run well. Any savings you make at the time of purchase may be wiped out by costs further down the line. Buying a used car at an auction can be risky, since for example you may not be able to take it for a test drive before you buy.

Other considerations

At some point you may want to sell your car and recoup some of your money. A new car will depreciate a lot faster than a used car, but no matter which way you go it’s likely that you’re going to sell your car for less than you bought it for.

Check out car trading websites to get an idea of how the car you’re interested in will hold its value. Though you’ll probably lose money, picking a car that will re-sell well could save you some money in the long term.

Paying for your car

If you’re looking for a loan to help you buy your car, you have a few options with CommBank. You can take out a Fixed Rate Personal Loan, a Variable Rate Personal Loan or a Secured Personal Loan.

A Secured Personal Loan is available for new cars as well as used cars that are up to seven years old. This is an important consideration when looking at used cars because using your car as security can typically reduce the amount of interest you pay on your loan.

Find out more about the difference between each loan.

novated lease is a way you can finance a new or used car and make your repayments from your pre-tax salary with approval from your employer. It can also bundle your vehicle’s expenses into one simple payment. Novated leasing is a form of ‘salary sacrificing’, which effectively reduces your taxable income.

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Things you should know

This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. The commentary provided from external companies that are not a member of the Commonwealth Bank of Australia Group of Companies (the CBA Group) does not represent an endorsement, recommendation, guarantee or advice in regard to any matter. The CBA Group does not accept any liability for losses or damage arising from any reliance on external companies and their products, services and material. Commonwealth Bank of Australia ABN 48 123 123 124.

Car Insurance is provided and issued by Hollard Insurance Partners Limited ABN 96 067 524 216, AFSL 235030 (Hollard) and distributed by the Commonwealth Bank of Australia ABN 48 123 123 124, AFSL 234945 (CBA). Hollard is not part of the CBA Group. CBA and its related entities do not sell, issue or guarantee the obligations or performance of Hollard or the products Hollard offers and this insurance product does not represent a deposit with or liability of either CBA or any of its related bodies corporate. If you purchase a Car Insurance policy, CBA is paid a commission which is a percentage of your premium.

For products issued by Hollard, information about the target market can be found within the product’s Target Market Determination available here.

This information has been prepared without considering your objectives, financial situation or needs.  You should, before acting on this, consider the appropriateness of the product to your circumstances. A Product Disclosure Statement (PDS) is available at all Commonwealth Bank branches, by downloading them from commbank.com.au or by calling 13 2423 and should be considered before making any decisions about this product. You should also read the Premium, Excess and Discount Guide (PEDG) and Financial Services Guide (FSG) by clicking on the links, or by calling 13 2423 for a paper copy.

Taxation considerations are general and based on present taxation laws and may be subject to change. You should seek independent, professional tax advice before making any decision based on this information.