Should You Buy a New or Used Car?

Given the overall increase in financial pressures experienced by South African consumers — such as rising food and utility prices —  it’s important to stretch your rands as far as possible when  buying a car.

One of the most important decisions you will make is whether to get a brand-new vehicle or buy a used car, says Ernest North, co-founder of Naked, the fully digital insurance platform. “Choosing between a new or used car isn’t just about the retail price, it’s about what will fit your financial plan and lifestyle the best,” he says.

“Buying new and buying used both come with their trade-offs and benefits. Understanding the latest market trends and how the car will impact your finances is key to making the right choices.” North offers some insight into the ups and downs of new and used cars as well as what’s trending among South African car buyers this year.

The new car smell versus the affordability of used

“Given the cost of living pressures in South Africa, it’s unsurprising that new car sales are in a bit of a slump,” says North. According to the National Association of Automobile Manufacturers (Naamsa), new vehicle sales decreased by 3% to around 516,000 units in 2024. The used car market has also had its ups and downs, but data suggests demand for second-hand vehicles is outpacing new models by more than two-to-one. Whether buying new or used, South Africans show a strong preference for value for money brands like Toyota, Volkswagen, and Suzuki.

Pros of buying a new car:

• Reliability – No previous wear-and-tear, covered by a full manufacturer’s warranty.
• Lower interest rates – Lenders offer better financing deals as new cars are lower risk (but this depends on an individual’s risk profile).
• Latest features – Access to the newest tech, safety, and fuel efficiency improvements.
• Lower maintenance costs – No major repairs needed for the first few years.

The downsides of buying new:

• Depreciation – Usually a car loses 20-30% of its value in the first year.
• Higher insurance costs – Comprehensive cover is required if financed.
• Expensive upfront – Even with lower interest rates, total cost is higher.

Advantages of buying a used car:

• Slower depreciation – The value of a car stabilises after the first few years.
• Lower purchase price – You can pay less for an equivalent car than you would if buying new. That means you can save money or get something with better specs and features for the same price.

The disadvantages of a used car are:

• Higher interest rates – Lenders often see used cars as riskier, which can lead to slightly higher rates.
• Potential maintenance costs – Older cars may need more repairs, and warranties may be limited.
• Unknown history – Unless certified pre-owned, previous maintenance and accidents could be a concern.

Says North: “The decision will depend on your budget, how long you aim to keep the car and the must-have features. It seldom makes sense to buy new if you aren’t planning to keep the car for four or five years. And if you need a bigger car with more features, buying used will open up your options. You can mitigate many risks of buying a used car by choosing a brand with a reputation for reliability and getting a certified pre-owned car with a warranty.”

Getting the best deal

North offers some insights into how to get a good deal for your car:

1. Do online research: Use platforms like AutoTrader, and Cars.co.za to compare prices across dealerships. When buying used, remember that factors such as mileage, the condition of the car, and the service history will affect the price. Knowing what to pay will help you negotiate a better deal.
2. Watch out for deals: Keep your eyes open for incentives like cashback, trade-in assistance, or low-interest financing. Promotions may help you to get a better deal when dealers are struggling to move cars.
3. Negotiate: You can often negotiate a better deal for your car, depending on the dealership, the brand, and the demand for the specific model. While many dealerships have set prices, you can often get free extras, better financing terms, or a higher trade-in value for your old car if you push for it.
4. Be careful of the extras: Dealers will often try to throw in added extras when you buy a car. Some can be worthwhile, like smash-and-grab glass tinting and service plans. Others, like paint protection or premium audio, are usually not worth it. Feel free to turn down unnecessary extras to avoid inflated costs. Avoid having extras added to the financed value of your car.
5. Consider Certified Pre-Owned (CPO): CPO used cars are popular because they come with manufacturer inspections and warranties, offering extra reassurance.
6. Choose the right time to buy the car: Keep an eye on sales trends, when sales are down, dealerships may be more willing to negotiate. Many dealerships in South Africa also run year-end sales to clear out older models. If you’re not in a rush, waiting for these periods can help you get great savings.
7. Get a vehicle history report: A vehicle history report from services like Dekra Automotive or South African Insurance Association’s online tool can flag any accidents or repairs the car has been through.
8. Don’t forget insurance: Whether you drive off in a brand-new car or a tried-and-true used one, you need to protect it with insurance. New cars usually cost more to insure due to higher repair or replacement costs, while insurance for used cars tends to be cheaper. If your used car is paid off and has a lower value, third-party cover might be an option to save some money. Digital insurers like Naked let you get a quote and buy cover in under 90 seconds, even while you’re at the dealer, with instant Proof of Insurance to share with your car financing company.