April 20, 2022
Buying a brand new car is exciting, there’s no doubting that – but is it worth it? We take a look at the concerns, thoughts and answers when buying a brand new car.
Check out the information below if you’re in the market for a brand new car.
Firstly, what does it all mean?
“Brand new” means you’re the first owner, but not the first driver.
A brand new car in Australia won’t have 0.0 kilometres on the clock, despite being new. This is because a “new” car is a vehicle that has not been registered before.
Ie; the first registered owner is the first person ever to have that particular car in their name in government systems like VicRoads in Victoria.
This means that if car dealers or prospective buyers drive a brand new car on public roads prior to buying the vehicle, eg. on a test drive, it will have trade plates attached where usual number plates go on the front and rear.
*A trade plate is a temporary number plate used by car traders or vehicle testers to save them the cost and time to register and tax every vehicle temporarily in their possession.
Why don’t brand new cars have zero km on the odometer?
Typically, brand new cars go through a few steps that add mileage
- Driven off the production line to a storage area
- Taken for a short road test
- Driven on/off a truck
- Driven on/off a cargo ship
- Driven on/off a truck again to a dealership
- Some even get road tested again as part of a pre-delivery inspection
- Also, most manufacturers select vehicles at random and give them a more thorough road and safety test to ensure their products are of high standards
All these things usually add at least 20 to 30km to the odometer, maybe more. Most dealers will let their customers know the mileage, especially if it’s over 50km.
– Did you know?
Some high performance cars can’t be purchased with less than several hundred kilometres on the clock. Manufacturers take these top-dollar new vehicles out on a race track to ensure everything promised in the brochure, like acceleration, top speed and braking is delivered.
The benefits of a brand new car
Other than the excitement, a brand new car comes with more benefits, for example;
- The latest technology
- New designs
- Latest safety and driver assist features
- 100% unmarked/unscratched and undamaged vehicle
There are a few other overlooked benefits too.
These include
Warranty
Of course, late-model used vehicles come with a manufacturer’s warranty, but being the first owner, you’ll know the entire history of the vehicle and whether any parts have failed and/or been replaced. If your new car requires something replaced or repaired under warranty, you’ll have all the information surrounding it.
Note that if a vehicle goes through a recall, there’s a record per VIN (Vehicle Identification Number) usually on the manufacturer’s app or website so used car buyers can check too.
Options
“a fully-optioned and customised range topper can be over 160% of the base model price”
Many people argue that no two new cars are the same anymore. That’s because of the customisation on offer like an array of colours, wheel packages, interior materials and other features.
Examples include
- Navigation equipment
- Transmission
- Lighting (eg. fog lights, LED lights)
- Rear seat entertainment
- Power seats / tailgate
- Off-roading equipment (eg. bull bars, snorkels)
It’s a long list that new car buyers can select from.
Optioning up isn’t cheap. Going from a base model without any options to a fully-optioned top-of-the-range model can add around 37% on a family SUV from Kia or Mazda for example.
Premium brands like Porsche are more extreme where a fully-optioned and customised range topper can be over 160% of the base model price. However, this pays for customised paint colours, carbon ceramic brakes, carbon fibre and the likes.
Interest rates
Did you know that interest rates on brand new cars are lower than used cars? It’s true and is often a reason why these vehicles are attractive to buyers.
If you’re comparing car loans, you’ll typically find that new cars attract some really low rates which is because they carry much less risk to lenders like banks.
Are there any drawbacks?
There can be a few drawbacks on brand new cars, here are some to consider.
Depreciation
One of the biggest reasons some people shy away from cars fresh from the factory is depreciation. Typically, a new vehicle will lose more of its value in the first few years of its life.
For example, a new car might lose 15% of its value within the first 24 months but only 7-8% of its value during the next 24 months, from 2-4 years old.
Additional costs
There can be a few more on road costs from dealers, like registration fees for example as you’ll be the first owner.
Most of these costs can be covered in a car loan meaning less out of pocket expenses, this can also include a deposit which can, in some cases, be refunded to the buyer and added to the loan amount.
Calculations
You’ll have to consider how important the benefits of a brand new car are to you.
Of course, in the case of almost all passenger cars, the newer it is, the more it’ll cost but these extra dollars pay for things like:
- Knowing there’s no damage or wear and tear
- Knowing the history of the vehicle
- Considering your transportation “covered” for the next several years as most people who buy new cars keep them for a long time
- The excitement of owning a new vehicle fresh from the factory, even if you past and future cars are used vehicles
If these things are important to you, the higher costs of a new car can be worth it.
How do most people buy brand new cars?
“9 out of 10 brand new car buyers are choosing not to use their own money”
Did you know that around 90% of new vehicles are bought on finance in Australia?
If 9 out of 10 brand new car buyers are choosing not to use their own money, it’s worth taking a look at their reasons.
Here are some reasons why so many people use a car loan for a brand new car.
It’s a depreciating asset
One of the biggest reasons most people use finance is that they don’t want to put their own savings into something that will depreciate in value. This often means they’ll borrow money to buy the car (a car loan) and put some savings into investments that (hopefully) increase over time.
Perhaps when the car loan is over and all paid off, the invested money will be worth a significant portion of the original car price.
The ultimate goal for many people is to have their investments cover the total cost of a loan with a little left over but, of course, this can be tough.
Savings tied up in one thing
Using savings to buy a vehicle can, for most people, be a large chunk of what money they’ve saved. This can mean less (or no) emergency savings or remaining money for other things like home renovations or furniture.
Safe and reliable family transportation
Buying a cheaper, older used vehicle and saving over many years to buy a newer car can mean those years are spent travelling in something less safe and reliable.
Some people choose to finance a new car to avoid using older, less reliable vehicles.
Borrowing money for a brand new car is relatively cheap
With lower interest rates and higher chances of approvals on new vehicles, car loans are usually a good answer for most people.
Cheap and easy car finance, along with the other benefits discussed above, can often outweigh the higher price of a brand new car.
Of course, everyone’s needs and circumstances are different so there’s no one-size-fits-all answer.
Get your brand new car
If getting into a vehicle fresh from the factory sounds like a good idea for you, start with an OnlineLoans.com.au quick quote.
OnlineLoans.com.au has the power and expertise to match your circumstances to a loan product best suited for the right outcome. Furthermore, our process allows you to do everything online from your device at your own pace.
Choosing the best type of car for your lifestyle is also crucial so make sure to do some research.