Dear Drive…. Am I better to buy a new car or a used one?

Dear Drive… Where we answer reader, viewer, and listener questions. Something on your mind? Call us on the radio show or email us at [email protected]

Katie sent us an email and asked:

I am shopping for a new small car with a budget of around $20,000. Am I better off with a new MG 3 or looking at a second-hand Kia Rio or Toyota Yaris?

While never not relevant, this question is particularly pertinent to the current market. New and used cars are closely matched in price, and in many cases volume, but which one presents the smarter buy?

Let’s start with the benefits of buying new.

Taking delivery of a brand new car means that you have the full use of warranty (in Katie’s MG 3 example this is seven years), capped price service schedules, and the overall peace of mind in knowing that you are the first person to own that car.

The bottom line, there are no surprises.

You know the car hasn’t been in an accident, or been flood-damaged, or hides any concerning secrets.

Plus, in most cases, you get to pick the colour and specify it just how you want!

Remember too, that second-hand prices don’t generally include on-road costs (especially if buying privately) which will add a few thousand on top of the advertised price.

Car Year Price when new Warranty used Warranty left Service costs so far
MG3 MY22 $18,990 D/A 0 7 years $0
Kia Rio MY20 $19,590 +ORC 2 years 5 years $739
Toyota Yaris MY20 $23,630 +ORC 2 years 3 years $410

The Toyota has only a five-year warranty to start, so it is down to three. The Rio started with seven so will have five remaining.

Looking at basic costs, the new MG will cost $1380 to service over the next five years, compared to $2157 on the Rio (not counting the $739 spent by the previous owner) where the Yaris is very well priced during its remaining capped-service program at $615, but it steps up afterward for a total of $1581.

Note that the Yaris and Rio both have 12-month or 15,000km service intervals.

Car ODO Year 1 Year 2 Year 3 Year 4 Year 5 Total Warranty left
MG 3 0km $243 $285 $279 $330 $243 $1380 2 years
Kia Rio 30,000km $323 $623 $303 $586 $322 $2157 0 years
Toyota Yaris 30,000km $205 $205 $205 $552 $414 $1581 Ends yr 3

Noting too that at this time the Yaris will have been out of warranty for two years and the Kia’s will be ending. The new MG will have two years left.

This is not to say a second-hand car is a bad decision.

In our example, the Kia is slightly larger and has a bigger boot (325L vs 307 in the MG 3) where the Yaris has renowned Toyota build quality and efficiency.

While both are good cars, buying a two-year-old compact car at the moment has the entry price close to that of its new price. Great for sellers, but not so much for bargain buyers. That said, the new MG 3 will drop in value over five years comparatively more than the other two, who have both (in theory) worn the peak of their depreciation.

Furthermore, the added attraction of buying second-hand is that a used car is ‘real’ and tangible, where in many cases a new one is simply an order which may be subject to delays.

Assuming though that you can get yourself a brand new MG 3 and that the second-hand Kia and Toyota are fairly priced, we’d still recommend the new car, mainly for the extra value that the fresh warranty and service program carries.

Plus, you can’t beat a new car smell!

Have a question about your next set of wheels or just need some car advice? No query is too big, small or obscure! Call in to the radio show (Trent on 2GB Sydney 1:30 pm Monday and 9:00 pm Wednesday, 5AA South Australia 1:30 pm Tuesday, and James on 3AW Melbourne 9:00 pm each Thursday), or contact us by email here: [email protected]

James Ward

James has been part of the digital publishing landscape in Australia since 2002 and has worked within the automotive industry since 2007. He joined CarAdvice in 2013, left in 2017 to work with BMW and then returned at the end of 2019 to spearhead the content direction of Drive.

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