Should you buy a used or nearly new car?

Buying nearly new

We found an ex-demonstrator Holden Spark LS with 1500km on the odometer for sale at a Holden dealer in Hamilton. It was advertised for $15,888 including on-road costs. That’s an instant saving over new of about $3000. It also has a “driver assistance pack” (parking sensors and rear-view camera) that’s usually an extra-cost option on a new Spark. The buyer gets the new-car warranty and service package, and the satisfaction that someone else has absorbed the new-car depreciation.

Cars typically have a three-year model cycle, with a mid-cycle freshening (or “facelift”) halfway through. If you time it right, towards the end of the model cycle, you can pick up a one- or two-year-old used auto that’s near-identical to a brand new one, at a significant discount. Buying a previous model (or pre-facelifted model) will save you even more, though that may be offset by a lower future resale value.

Some brands offer “approved” or “certified” used cars, such as Toyota’s Signature Class vehicles. These are cars the manufacturer has vetted and, in some cases, restored to near-new condition. You’ll pay a premium over a regular used car, but you’ll receive a vehicle with the equivalent of a new-car warranty and perhaps a service plan. However, you may be better off using the extra cost to inspect and service a non-approved used car and leave a “rainy day” fund to pay for any maintenance and repair. You’ll still be covered by the Consumer Guarantees Act should anything go wrong.

Buying used

Most cars sold in New Zealand are pre-owned, and many are freshly imported from overseas (mostly Japan).

Any used car should be durable, safe, fit for purpose and free from major defects. What’s reasonable depends on the vehicle’s age and distance travelled, the price paid, and any representations made.

Our survey data show a used car is more likely to be trouble-free if it was “NZ-new” (originally sold new in New Zealand). NZ-new used cars are less likely to experience major and minor faults (though serious faults are similar no matter where the car was originally sold):

Our experience backs this up. Every year our advice line deals with more than 300 complaints from members who’ve bought cars that have gone wrong. We see a few common themes: cars freshly imported from Japan, at least eight years old, at least 70,000km, with no repair or maintenance history. Many are premium European makes – cars that aren’t as reliable as you might expect and cost a premium to fix.

Used car dealers should thoroughly check and service cars before sale. They should have confidence in them and be prepared to make things right if they go wrong – under the Consumer Guarantees Act (CGA) it’s their responsibility to fix problems. However, the hundreds of calls we receive to our advice line show many sellers aren’t so thorough.

Check it out

It’s unlikely a used-car freshly imported from Japan comes with maintenance history. So, buyer beware. Even if the dealer tells you it’s a fine example and assures you nothing will go wrong, it’s doubtful they can confidently make these types of claims. Interrogate the dealer: ask what they know about the car’s history, whether they’ve serviced or inspected it and, if so, what that service or inspection covered (it may not have scratched the surface of any underlying problems). Get their responses in writing if possible – if they are being less than honest and a problem shows up after you’ve bought the car, their hollow assurances are valuable in any Consumer Guarantees Act claim.

If in doubt, arrange your own pre-purchase inspection. It’s also worthwhile to have any used-car serviced by an independent mechanic immediately after you buy it. You can ask them to look for any potential trouble, and use this as evidence to get it fixed at the dealer’s expense, or even reject a real dud with serious problems.

At the very least, use our used car checklist (99.7 KB) to assess any used auto you view. It covers the basics you need to ensure there are no major problems lurking. It isn’t always possible to view and drive the car before purchase – but we advise doing so if you can.

How old should you go?

Our data show you should buy the newest car you can afford. Newer cars with fewer kilometres have fewer faults and are more likely to be trouble-free.

Fault rates halve between the 2011-2015 and 2005-2010 age groups: a quarter of the older group have serious or major faults, compared to 12 percent of the newer group. That suggests you should go for as new as your budget allows – something significantly younger than the average 14-year-old car on our roads.

Older cars are cheaper to buy, but cost more to run – you should budget more for servicing and unplanned repairs (our data show owners of older cars spend more to keep them going).

You’re more likely to find modern safety features in newer cars too. While older cars have anti-lock brakes and a couple of airbags, you’re more likely to find side and curtain airbags, electronic stability control, traction control and passive safety features, such as brake-assist on newer models. You can find an assessment of new and used car safety performance for most NZ-new and imported models at rightcar.govt.nz.

Sticker price

Whereas new cars have a list price, used cars have a sticker price. That’s the starting point for your negotiation – you should never pay sticker price.

Research the price of the car you are looking at: look for examples of the model of similar age and with a similar odometer for sale on trademe.co.nz or autotrader.co.nz. If this particular example is listed on one of the sites, check out how long it’s been there unsold – the longer, the better for negotiating a discount. It can also pay to get a valuation report from redbook.co.nz ($20).

Your biggest point of negotiation will be wear and tear or problems you find during your pre-purchase inspection and test drive. While the car must legally have a WOF no older than one month, that’s the minimum. Tyres or brake pads worn close to the legal limit, or other signs of neglect give you opportunity to haggle a reduced price, or make repairs or replacements a condition of the sale.

Of course, if your investigations sound too many alarm bells, or you aren’t comfortable with the dealer or the price you can negotiate, walk away. There’s no shortage of used cars to choose from.