Should I buy a new or used car for a long commute?

While the appeal of buying a new car is undeniable, it probably isn’t a great idea to buy a new one if you’re planning to spend a lot of time in it. This statement may seem contradictory at first, but once you go into the details and do the math, you’ll soon realise why this is indeed the truth. 

Related: What are the best used cars you can buy?

It's (mostly) about depreciation

When you buy a brand-new car, it will be worth less than you paid for it, the moment you drive it off the showroom floor. This is due to depreciation, simply because cars lose market value when they change from new to pre-owned – something that happens to almost all cars after their first few years of service. 

There’s another factor at play as well: When you finance a car, it will be for the value of the car, minus your old car’s trade-in value and any deposit you may be able to put towards the deal. In addition to this financed value, you’ll also have to repay administration- and licensing charges, as well as the interest on the car loan amount. It all adds up to become a total cost much greater than the actual car’s purchase price.

 

Going the distance

Once you’ve settled into your new car, you’ll start driving it to work or to see clients. And, with each passing kilometer, the car’s value will decrease a little more. The issue should be clear now: if you drive great distances in a new car, it will lose value quicker than another, identical car that doesn’t cover as great a distance.

This will have a really detrimental effect on your new car’s value in a few years’ time. And, if you plan to keep the car past its warranty- or service plan distance, its depreciation will be even worse when the time comes to sell it on.

Related: Buying a new car vs buying a used one - here are the pros and cons.

 

When it’s time to sell again

Let’s say 4 years have passed since you bought a used, low-mileage (around 20 000 km) commuter car instead of a new one. The chances are that you’ll have added so many kilometers (more than the general industry standard of around 15 000 km per year) to its odometer over the course of your ownership, that its resale value will be down the drain due to the excess mileage. 

But this is where the good news kicks in. Remember how you paid less for it in the beginning, and thus took on a smaller loan and less interest? When your (now very well-used) used car hits the market again, it will be worth even less than it was when you bought it, but, because you started off with a smaller finance agreement, the financial blow will be softened somewhat. 

And, because there isn't much of a value gap between a used car with 180 000 km on the odometer and one with 160 000 km on the clock, the same would have applied to a new car in the same usage pattern as well, so that factor mostly evens out in a few years’ time.

 

Rather buy used

With this in mind, you’d be better off buying a low-mileage used car instead of a new one. After 2 years on the road, even used cars that didn’t cover huge distances will have lost up to 20% of their new values, making it possible to buy a low-mileage car (most likely still with part of its warranty and service/maintenance plans intact) for quite a lot less than that same car costs new. This is again due to depreciation, as discussed earlier, but it then turns in favour of the buyer instead of putting them at a disadvantage. 

So, if you need to put serious mileage on a car in the course of your work or commute, it’s obviously better to save money on two fronts (instead of losing all the way) by buying a lightly-used car instead of a new one. You’ll have a smaller interest load due to its lower purchase price, and its previous owner will have taken the financial knock of its initial depreciation on your behalf.