Should you buy a new or used car in 2023?
Buying any car recently has been kinda difficult, but it’s getting a little easier - as long as you’re patient.
Where it was once just anxiety-provoking or hard, you now have an added layer of complexity known as supply constraints and surge in demand.
Three and a bit years ago, it was relatively straightforward buying a new car, or a used one, and you knew where you stood. You knew what yours was worth, and you could make fairly simple determinations about whether you should go through with a deal or not. It was clear, measurably so, if you were getting a good deal. You could figure it out.
New cars were more expensive, but good value because they gave you new features, especially for smaller models. Especially this was the case regarding safety and known history of a vehicle. Obviously a new car was untouched, having only been driven on/off a ship and truck.
Used cars were older, but superior in value if safety and perfect cleanliness were important but not priority #1, because the same vehicle second-hand, but only a couple of years old meant you saved thousand by letting someone else take the depreciation hit. But, of course, the compromise was you had to do the negotiating with a regular person, potentially in weird places, you weren’t always going to be certain of their honesty about the car’s history. Then, if you were the seller, it was an added financial and logistical hurdle to get through letting multiple people test drive your car, on your tank of fuel, visiting your house (or meeting publicly), then there was the unanswered calls and texts; the list of inconveniences goes on.
At least buying new was simpler. All you had to do was wrestle the anaconda known as a car dealer. Life was straight-forward.
Now, however, you have a supply shortage of cars, which is the knock-on effect of the global pandemic, which caused a computer chip shortage thanks to millions of additional computers, gaming consoles, wireless headphones etc due to the human race working from home. And car companies don’t have a big pile of computer chips out the back to simply shovel into their factories.
Where does that leave you? It means you need to be careful with how you spend your money, not only because you could pay thousands more instead of waiting until things return to normal, but also because it depends on your financial and personal situation.
Do you desperately need a change of vehicle, or can it wait? Can you hold out and keep your old car going a little while longer?
You also want to think of this situation as a potential hole in your full water bucket. How big is the hole? Will it hold enough water to be useful, long-term, or do you need to ditch the bucket in the event it fails catastrophically?
Keeping your old car going a bit longer, until 2022, for example, will be the ideal situation because a few hundred bucks of ongoing maintenance could save you thousands when the market returns to familiar territory.
But, if you need to replace your bucket (rust bucket?), and you must decide definitely to change cars, lets help you buy new or used.
NEED HELP DOING YOUR RESEARCH?
How to find the best new family car in 2021_
SUV or Ute: Which is the best family car?_
Your Ultimate Child Seat Installation Guide: Common mistakes and getting it right_
New cars: clean, shiny and all yours
Buying a new car gives you peace of mind. Nobody has abused the powertrain, the handbrake works on steep hills, the brake rotors aren’t gouged to hell, the seats haven’t been farted in endlessly, there are no boogers or food under the seat, and the front bumper hasn’t touch-parked at any parallel parking situations. You also don’t have to look at scuffed alloy wheels from all those failed attempts.
Peace of mind with a new car extends to many areas like servicing, owner abuse or simple neglect, there has not been any engine wear and tear of concern, and there are no dodgy repairs that haven’t been relayed to you during the purchasing process - unlike what can happen buying a used car.
But you do pay for these benefits. At least, in the past it was that simple, because now it seems you pay more or the same amount for a used car with all that potential risk, which is why buying new still makes more sense. Except for the supply shortage problem.
It’s like trying to keep your king out of check.
I think it’s best to try your luck for a new car first, assessing what vehicle you need based on what you can afford, and then figuring out what's in stock and how far you’re prepared to go to get a vehicle in-stock. Try as best you can to avoid ordering a brand new car that hasn’t been built and sits at the dealership (or in the dealer’s lot).
Ordering a spanking new car could take a long time and could get complicated due to the global shortage, and it limits how much leverage you can apply to the dealership to sell to you.
Used cars: less polish, lower cost
What you lose in perfection, you gain in savings. At least, that’s how it used to be - the high demand for cars, but low supply of new cars means used cars are now more valuable - so the price, and the leverage a buyer can apply on the asking price, is reduced.
Does this mean used cars aren’t worth bothering with, if you can have a new car for the same price? No, because new-car demand and supply is whacked.
What you need to do is assess carefully the vehicle you want, like a Mazda 3 for example, which I’ve advised a family member is a very good small car with proven reliability and excellent build quality. The current model has been around for a couple of years now and is not going to change substantially in the next few years. And we know the previous version was also a very good vehicle as well.
Given my relative’s situation, they can keep their old car going a little bit longer in order to wait for prices to stabilise and new car supply to improve into 2022, by which time their approximate $15,000 budget will be able to buy a much better, albeit used, Mazda 3.
The primary benefit of buying a used car is the depreciation hit you take buying new has already been taken by someone else. This depreciation is what you want to avoid when not buying new.
Currently, a Mazda 3 Astina hatch is pretty expensive at $43,000 driveaway, but according to Redbook.com.au, a 2019 version is estimated to sell privately between $33,000-$36,000, which is a massive saving without even having to negotiate at this point. And it’s basically the same car, with some minor changes. You still get all the safety tech, the leather seats will still be in good nick, the engine will only have a few thousand kilometres on it (thank you, COVID), and you get a brilliant car which will hold its value for many years to come.
The biggest problem with doing this is finding a shortlist of worthy vehicles, visiting the owners, inspecting, negotiating, and eventually getting the paperwork and banking done - but that’s only if you don’t have to sell your current vehicle first, in which case you have to do all that back-and-forth with a second car, someone else’s car, and figuring it all out during lockdowns, when you’re not supposed to be working, figuring out what to do with your kids, and then trying to organise weekends to visit the vehicles you’re interested in.
And you haven’t even had to deal with VicRoads, NRMA or your state’s registration authority. If your state’s local depot is anything like VicRoads here in Melbourne, it’s something of a nightmare, at least to me.
If you can endure all this, you’ll save a big bucket of money over the convenience factor built into trading-in your old car the dealership (for much less) and getting a brand new car. If you are made of the right stuff in this regard, congratulations. I honestly mean that.
Don’t get ripped off: It’s your money; your power.
The key to this whole buying process is to have the right mindset from the beginning. I want you to think this to yourself:
It’s my money, I make the rules.
It’s my money, I make the rules.
It’s my money, I make the rules.
The reason you need to start this inward looking dialogue is because you need to be your own best advocate - nobody else in this situation will. The seller wants the biggest sale they can get, regardless of whether they’re a dealership sales suit, or the private seller whom is looking out for their best interests. And not entirely unfairly. They’re going through the same thing you are, mouths to feed, etc.
You need to have the right mindset because it’s about to get messy and you haven’t even made contact with anybody yet. You’ve just been looking at cars on the internet. The next step is picking up the phone and you need to have your bullshit sensors engaged. These sensors are your ears and your brain comprehending what’s being said to you, which will only be to paint the best picture for the seller, even if that means flooding you with all the good things you could possibly want to hear.
The only thing which matters to you is your budget. Your money is your power. The seller wants and needs your money. But you’re not going to hand it over easily. You have standards which need to be met. The vehicle needs to be clean, it needs to be properly serviced by a qualified mechanic and on time as dictated by the service manual, there needs to be a clean history and no damages or repairs.
When you take a test drive the tyres need to be full of healthy but boring-looking tread (no flat spots or signs of wearing out, and the spare needs to exist and be intact and stowed properly with all the tools). You need to drive the vehicle sensibly, but you’re also entitled to check it handles correctly by testing the brakes in a safe manner, you need to feel the steering is easy and free of any whines or clicking or stiffness which might indicate disrepair, or unchecked fluids, or worn joints, or poor parking abilities. Test the steering in twisty corners at moderate speeds, then check it again in low-speed parking exercises which will rely on the power steering system and highlight any (undisclosed/unknown) problems. Does the steering wheel pull hard to the left or right, and does it sit dead-straight?
When you use the brakes (fairly hard), listen for any noises, feel for any vibrations. If you happen to test the brakes hard enough to engage the ABS braking system, don’t be confused by the groaning sound of the ABS functioning properly; there is a distinct and sometimes confronting sound this system makes when the brake calipers are opening and closing 20 or 50 times a second in order to stop the vehicle without locking the brakes. But if you push the brakes hard enough to, say, stop at an amber-to-red traffic-light, and you hear something clicking or thumping or squealing, then this could be a sign of worn brakes or rotors.
Have a look around the vehicle as it sits in the person’s driveway. Are there any gashed alloy wheels? If the steering wheel pulled unusually hard during your drive, it might need an alignment from botched attempts at parking or hitting driveways/kerbs too hard. Have a look where the vehicle is parked overnight and inspect for any signs of fluids, particularly oil. Don’t be confused if droplets of water are found underneath the vehicle where the air-conditioner outlet allows condensed water vapour to escape.
Ask the owner to open the bonnet (and watch in case they’ve snapped the bonnet release latch; and to make sure you don’t snap it yourself), then have a look around the engine bay for thick layers of dust, or patches of dried fluid like brake/trans/engine oil, and check the battery for signs of green/white powdery corrosion which might suggest the vehicle’s accessories or lights have been left on a lot and drained the battery. While the bonnet is up, get your phone torch or a conventional torch and have a look down into the various cavities and check for any frayed wires or belts, any spilled oil, any sticks or various damage. And check out the debris channels under the windscreen and around the bonnet strut mounts for leaves, sticks, seeds and watery gunk that may suggest the vehicle sits under trees or out in the open, as opposed to being garaged.
The point of all this is to gain trust. Trust not only of the current owner’s story of how they use the vehicle lining up with what you’re seeing, but also to trust that the vehicle you’re potentially about to own will be okay in the next few months as you learn to live with this car. If something was rattling when you’re introduced to the vehicle, you’re going to have a hard time keeping track of what’s ‘normal’ and what is a sign of needing attention/repair/inspection etc.
And for goodness sake, look at the servicing manual and check all the mandatory servicing intervals have been met; stamped, dated, signed. Make sure the current odometer reading corresponds with the most recent service and the ad you responded to (keeping in mind there may be a slight difference as the owner drives the vehicle while the ad is posted; but if it’s thousands of kilometres’ difference, start asking questions).
Also, on servicing requirements, ask for all the documentation on those services and have a scan for any major problems, especially if you’re likely to buy that particular car. You can also go one step further by contacting the mechanic and checking everything matches up. You should definitely do this with the mechanic who provides the roadworthy certificate; and ask them (out of earshot of the owner) if the vehicle had any concerning parts or issues you should be aware of. Ask yourself if this correlates with the story the owner has given you.
Adopting a child is not simply walking down to a hospital and picking up a newborn baby some mother doesn’t want. There’s a process of background-checking, which you need to do for your next new - or used - car.
If you’re happy with the vehicle in question, it’s time to sharpen your teeth and get serious about exactly how much you’re going to pay.
Negotiate like you mean it
Remember that self-talk you did earlier? Now is the point to get tunnel vision and close this deal. Channel your inner Raymond Reddington or Harvey Spectre, Wolverine, or maybe James Bond. Someone. Whatever.
You need firm confidence that youre going to make this deal on your terms, or they get nothing. Remember: the seller has probably been doing this for a while now, and seller’s fatigue is real. Use it. Remember this when it comes time to walk away, even if you’re bluffing and really want that car. But don’t flop on your price; there are other cars out there.
You need to know exactly what your absolute budget maximum is. This is the only amount you are going to spend on X-vehicle, or less.
Used cars
Dealing with used cars means you have the advantage of working with a seller who is probably quite poor at negotiating, or they can be the opposite: too confident. This is something you need to assess as you get to know them, which is of course yet another drawback of buying used; having to borderline befriend the seller to figure out if they’ve treated the car like crap.
When negotiating with the used seller, if you need the price to come down by more than about $3000-$4000, you're going to struggle to justify it, unless there are signs of abuse all over it. But it’s possible. Just don’t start coming up in price too easily, otherwise you’ll appear like a pushover and your claim will be deemed illegitimate. On the other hand, starting at $4000 below the asking price is good if you’re a strong at negotiating and have the gusto to pin them down, metaphorically. It can also be a good test to see how they react. But you need to be prepared to back yourself up for such a potentially outlandish figure.
When negotiating for a used car, you should only ever buckle on your price and come up once. Once. And the seller needs to earn it. Otherwise, buckling twice makes you look like you’re simply trying to extort, when in fact, you're telling them what you feel the car is worth.
Subtext: What is ‘worth’?
Worth is very simple. Don’t let anybody tell you it has anything to do with the market, or value, or financial stuff - no.
Worth is simply what you are prepared to pay for a thing. Anything. What something is worth is merely the price you're prepared to pay for something in its existing condition. It can be anything, from a vintage gaming console, old comic books, jewellery, a collectable action figure, a car (vintage, classic or late model).
You determine worth. Not some Carsales app, not Redbook, not the classifieds or even some pricing expert. Worth is all about how much you’re willing to spend to have that thing. Done.
Now, if you think this used family car is worth exactly what the seller is asking, and you don’t want to negotiate to save yourself a couple of grand, be my guest. Do the right thing and pay what they’re asking.
But if you do want to keep that extra 2000 or 3000, then tell the seller what you think it’s really worth - to you - and, most importantly, BE PREPARED TO WALK.
Let them digest your offer once your put it to them. They’ll usually want to consult their partner or family, particularly if it’s being sold for someone elderly. Now, this is the point you need to listen carefully to how they respond.
If you get a flat ‘No, we’re not budging on the price’, and you're desperate, and if it feels right, you can suggest a compromise. But only if it’s certain to work.
Otherwise, you need to restate your offer and why you think the worth isn’t matching their expectations, even reminding them that you’re not buying based on their sentiment, only its worth, and call it. Tell them it’s your final offer, and you’re happy for them to call you if they change their minds. Then politely walk away. The used Kia Sportage I used most days was bought in exactly this way; she thought it was worth what she was asking, I gave her five good reasons it was worth two grand less, gave her my offer and began to close down the conversation before giving her one last chance to reconsider.
(I also knew she was under time pressure to sell it due to personal circumstances.) It was a deal.
If you do this, and they call you, you win. If not, then you didn’t overspend on a vehicle asking too much, and you won’t be disappointed because you kept your promise to yourself about making the rules. You didn’t cave in, you didn’t have your worth exploited, and nor did you take advantage of someone else. Keep looking, and repeat.
Caveat: this dynamic changes if your current car is on its last legs and is haemorrhaging money. You may need to have greater flexibility if this is the best vehicle you can find for the price and raising your price slightly might get them over the line. You need to make this assessment for yourself, I can only advise you so far.
Another piece of advice I want you to remember is to not give the seller (being they private or dealer) any free ammunition by mentioning the pandemic or the global supply shortage. Just keep it straight and be there buying that vehicle as normal; let them mention those problems on their accord. And rebut them by saying it’s only a problem if they let it be a problem, and that you’re here trying to buy that car from them at what price you can afford. They have the power to accept that offer and get it sold right now.
Buying a used car from a dealership, is a unique blend of difficulty, which means you need to apply the same tactics I’ve just outlined in ‘Used Cars’ and equally add in the right amount of weaponry I'm about to give you for buying new from a dealer.
New cars
Now, new cars are much simpler to negotiate for. Firstly, dealers are expecting negotiation. In fact, they’re the riot police when it comes to negotiating a sale: you want it as cheap as possible But, and they’re rigorously trained to counter every move you have, almost every move. And right now, a bit like Agent Smith in the original Matrix, dealerships are the gatekeepers. They are guarding all the doors, they are guarding all the keys. (Thanks to supply shortages and high demand; you have minimal weapons to deploy against them.)
They're not at the boss level you’re about to drop on them. You are The One. Are you ready?
This is at the stage you’re confirmed about which vehicle you want, and you’re buying one in stock, having done the test drive, locking in your budget and you’re at the buying phase.
You’ve also looked at the asking retail price or RRP (recommended retail price), and you’ve figured out what a 15 per cent
Walk into the dealership, speak politely with the sales staff about the vehicle you’re interested in, yada yada yada, you’ll tell him why you like it etc. Double check they have it in stock… then tell him or her exactly what you're prepared to pay for that vehicle.
If they take the deal, that’s a great victory for you. But if they aren’t willing to consider your offer, give them your mobile number, tell them your offer is valid until you find another dealer who is will to accept your price, and politely walk out the door.
Knowing a sale is walking out the door is not a good look for the dealer, especially because having that vehicle on his showroom floor, in the forecourt, or sitting idle in the holding yard, it costs the dealer money.
Doing this right now, in 2021, will be much harder because of stock shortages across the industry, which is why it’s important to follow these steps even more closely, especially when it comes to vehicles in stock.
Hint: You might want to consider looking at new vehicles which aren’t quite as popular, if possible. Think about it: SUVs are the most popular kind of new vehicle on sale for the last few years, and this continues today. But if you can shift your desires to a vehicle type that is slightly less popular, you tip the odds more in your favour because the likelihood of stock being sold (demand) reduces. Consider a small hatchback or sedan rather than a highly popular small or medium SUV. THe hatch/sedan will have the same amount of cabin space and boot space, and it’ll be just as safe, it’ll be better on fuel (because it’s lighter/smaller) and it’ll handle, accelerate and brake better for the same reasons (and because it has a lower centre of gravity).
And you’ll have a better chance of getting the sale across the line, you’ll spend less in the overall price anyway because small cars cost less to make (less raw materials, quicker production time), and because they’re still a large volume product, there’ll still be stock, and the demand won’t be quite as high. And you know what? You can still carry bags of concrete, potting mix, child restraints, bikes and scooters, toys and bags and all the shopping - it all fits, just with a little more planning. Heck, you can even have a towbar fitted and tow a small 6x4 trailer, if needs be.
It’s also very important, again, to make sure you don’t ever mention the whole supply shortage and global pandemic thing. This is a point of leverage the dealer wants to use, so don’t hand it to them on a silver platter. Let that be something they have to use, to which you can fairly safely disregard if you’re buying a vehicle in stock right now.
Model choice: slightly older can be better
Sometimes, when a carmaker updates a model, or replaces it with a whole new generation, things change.
Those changes are, generally speaking, much better overall, which is another reason why a new car is more expensive than a used car. Newer models are also safer, especially in a crash.
But along the way, as markets and consumers change, so too can the details which go into a certain feature set in that vehicle's newer model.
It can be little things like design layout, or buttons. Or it can be properly good, useful features.
Examples like the tumble function of the row two seats in the last Kia Carnival, or the manual park brake in a new sports car. Maybe you would prefer the full size spare in the older version (not the space saver, or worse: goo). Or the older bigger boot on the previous model has now been lost to something more frivolous like a sexier sloped rear roof.
There can also be more fundamental changes to a model when it gets replaced by a new version, such as engines and transmissions. The most common occurence these days is the demise of the manual gearbox. In many cases, the manual gearbox is completely dead and cannot be bought in a new car model range, not even in the cheapest, nastiest base model. So, if you specifically want a manual, late-model car, you might need to consider getting a low-mileage previous or outgoing version, instead of the newer model. But, you need to be warned: buying the old version in manual, simply for some subjective reason, could leave you fruitlessly looking for spare parts in a few years time, or spending more for them. And besides, a good automatic is generally much, much better at changing gears than you anyway.
Same goes for engines. Carmakers often drop old engines in favour of newer powerplants which are more efficient, more economical, cleaner, lighter and more powerful. But you will, typically, spend more to have that newer engine.
And it’s worth noting that how quickly you buy a new model can be a bit foolish if the sparkling, polished, reborn model you’re buying turns out to be plagued with reliability issues. Consider waiting about six months after a new model arrives before buying it, and look out for any early signs of major design problems with that vehicle which didn’t get solved before the carmaker put it into production.
CONCLUSION
Buying a new car is fraught with uncertainty right now, but buying a used car is always a tricky undertaking, even at the best of times.
The important thing to remember is that buying a car is, usually, an expensive journey regardless of what’s going on in the world around you. In the grand scheme of things, having a vehicle under you that is safe, reliable and fit-for-purpose is the most crucial aspect to all of this. If you go through it all and end up with a shitbox, that’s a lose-lose situation you don’t wanna be in.
So be patient. Then be even more patient. And do your research. Ask questions. There are not bad questions to ask if you’re unsure.
Ultimately, you’re the consumer, it’s your money, which means you have the power. It’s a power that allows you to not actually do anything. Don’t ever feel pressured to buy, either by the sales guy, your friends or family, and especially not from yourself. It can be tempting to just buy whatever because you’ve done lots of hard work and you want it over with. But try to be your best advocate here - spending tens of thousands on a car is not like going to the supermarket.
Take your time, be diligent, buy with confidence, and if you’re not confident, it doesn’t hurt to wait for the dust to settle.