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Cars: New versus old

New car sales are heading for another record year while used imports are declining. Mark Jennings reports on some of the reasons why more car buyers are favouring new over second hand.

Buying a car can be a tricky thing. Unlike houses, they rarely go up in value. As soon as you drive them off the showroom floor or out of a dealer yard they start costing you money. Real money.

Not too long ago I was in the market for a car and faced the common dilemma – do I buy a new car and have peace of mind knowing that no one has thrashed it or do I go for a second hand car that costs less because the previous owner has already copped a big chunk of the depreciation?

Part of me wanted to show support for one of Newsroom’s foundation partners and buy a new Holden, but the car (unlike many New Zealanders I didn’t want a SUV or a Ute) most suited to my requirements, an Astra, didn’t quite seem right.

The Astra is a fine car and, as Holden kept hammering away in its marketing, it won European car of the year in 2016.

But cars need to please on a variety of levels, (many of them subjective) and the Astra’s styling and driving position didn’t quite do it for me.

I ended up buying a three-year-old Volkswagen Golf Highline with relatively low mileage. So far, things have gone well. It drives nicely and has all the technology I need.

However, a full service recently set me back nearly $500 and it made me think again about the case for buying a new car.

A new Holden comes with three-year-free servicing and so do other brands like Mazda, Kia etc.

Andrew Collett, the boss of the big Holden dealership, Davies Motors in Manakau, says free servicing is a major incentive for new car buyers.

“It is a really big deal. If you are doing moderate mileage like most people you are fully covered and it can save you a heck of a lot of money, up to $3,000 in some cases."

Collet also points out that most new cars these days come with at least a three-year guarantee and usually roadside assistance for a similar period.

But don’t you pay a hefty price for that peace of mind?

Well, not as you once did, according to Collett.

“The price of new cars haven’t moved much in recent years and they are comparatively a lot more affordable than they used to be years ago.

“I remember in the 90’s a four wheel drive Ute cost about $40,000. These days, you can get a new UTE for about $45,000 and of course you get a lot more for your money.”

Statistics show that sales of new cars have been steadily rising since 2009 and registrations hit a record monthly high in October 2018 with 16,670 new vehicles. Total new car sales are likely to end the year close to 110,000.

Part of the rise has been due to New Zealand’s on-going tourism boom, which is driving demand for rental cars.

On the other hand, sales of used imports have declined month-to-month for most of the year.

According to Collett, “safety” has become a major factor in the minds of buyers weighing up whether to buy a new or second-hand car.

“It is really big in people’s minds and we get asked a lot about them (safety features) in the showroom. It is not just about ABS brakes like it once was, now buyers are interested in features like lane keep assist (it steers the car back into the lane if it detects that you are drifting).

“The safety technology goes in leaps and bounds year by year and the thing now is that much of it is in entry level cars not just the premium models. You can now buy new cars in the mid $20,000 range to the mid $30,000s that are very well equipped and you didn’t used to be able to do that.”

The better fuel efficiency of new cars now that petrol prices are rising again is also influencing buyers.

“It is the second most important thing after safety,” says Collett.

But what about the depreciation?

Collett gives a speedy but self-evident response: “You only lose when you sell.”

He quickly adds that the new car market is very competitive and dealers will always “meet the market”.

In other words, buyers can limit the amount they lose by driving down the price when they buy.

"I don’t believe in this no haggle buying policy of companies like Toyota. We are always happy to engage with the customer. Negotiating a better price has been part of the car business forever and ever. That is why they call us dealers.”

If you don’t want to haggle or don’t back your skillset then Collett says you should decide exactly what car you want and then wait until there is an 'offering' in the market.

“Holden, for example, will nearly always have an offering in the market and so do other brands.”

He agrees that finance deals make things more complicated.

“There are a lot of low interest rate offerings in the market and rates through a new car dealer are now very competitive compared to other lenders, but buyers have to realise there is no such thing as a free lunch.”

Asked to put the case for buying a second hand car Collett is hesitant, saying the gap between the price of new and used cars “is not really that great these days”.

He also finds it hard to recommend cars that are more than three years old, especially Japanese imports.

When pushed, he conceded that ex-rentals can be good buys.

“When the rental fleets are being turned over and there are quite large numbers of them on the market the buyer can get good value but you have to keep a look out from week to week.”

*Holden is a foundation supporter of Newsroom

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