Is It Better To Buy A Used Luxury Car Or A New Car?

One of the great ‘moral dilemmas’ when it comes to car purchasing is whether or not is better to buy a used luxury car, or a similarly priced new car.

For example, for the same price as a used BMW you might be able to buy a brand new Toyota Corolla.

But is that the correct approach?

In this (admittedly unscientific) article we are going to share our views on the pros and cons of buying used luxury or affordable new.

Please note that this is just our own advice, based on our own experiences. Your mileage may vary when it comes to what is the right choice for your needs!

As always, we welcome your input and feedback – you can leave a comment at the end of this article and start the discussion. We would love to hear your experience when it comes to buying new versus buying used.

Some Real World Examples

Let’s start with some examples, to show you the concept in more detail and help “frame” the content in this article.

Let’s look at two distinct classes of car – the hatchback (admittedly not the most popular class of car for our American readers, as far as we are aware) and the SUV/Crossover.

We are using the ‘asking prices’ of cars on TradeMe (NZ’s most popular marketplace for vehicles and other items) as well as list prices on dealer websites. This comparison doesn’t factor in any negotiation, finance deals etc – just the cash asking/list price.

In our local market – New Zealand – a luxurious hatchback would be something like a Mercedes-Benz A250. These are a great blend of high end features, sporting performance and one of the most desirable badges in the business.

While an A250 is probably not big enough to be a sole family car, it is exactly the sort of car that might work well in a two vehicle household (or for a single person, young couple or small family).

A budget of ~$30,000 NZD would get you into a 2013 A250 like this:

Or this:

But what about if you wanted a new car for similar money?

You’ve actually got quite a few options. If you’re after a sporting hatch, then the Suzuki Swift Sport is comparably priced for a brand new car:

You could even get into the top-of-the-line Kia Rio GT-Line:

2013 is the best part of 10 years ago, and car technology has improved substantially since then. This is why you need to think long and hard about which of the two options is right for you!

On the Crossover/SUV side of things, let’s imagine you have a total budget of $50,000 NZD.

For this sort of money you could pick up a very tasteful Audi Q7 with the impressive 4.2 TDI V8, and have a truly impressive SUV on your driveway:

You could even get into a Range Rover Sport for that kind of money:

Even an older Porsche Cayenne is an option:

For around $50K NZD, there are clearly many options when it comes to used (~10 year old) luxury SUVs. The Q7, Range Rover and Cayenne are all superb cars in their own right.

On the new side you have a plethora of options to pick from, such as:

Mazda’s ever-popular CX-5:

The Kia Sportage is another option (although at the time of writing stock of these in NZ is so poor they are actually not available for order brand new – but here’s a nearly-new example at a decent discount off the original purchase price)

Or even an electric MG SUV (with the best part of $10,000 in change after taking off the government EV rebate that we have here in New Zealand)

So what is the right option for our hypothetical buyer in one of the situations above?

What Problem Are You Trying To Solve?

The first point to consider is to ask yourself the question “what problem am I trying to solve?”

This is a great question to ask to help you understand what you really need in a car purchase.

Is the problem you are trying to solve that you have always wanted a ‘special’ car that makes you feel a million bucks when you take it out for a drive?

If so, a used luxury car might be a perfectly good option.

Let’s face it, the Audi Q7 above is almost certainly going to feel more special and have more of a “sense of occasion” than a Kia Sportage.

On the other hand, if the problem you are trying to solve is needing utilitarian transport – and all the added luxury, comfort, features etc is just an added bonus above the fundamentals of transportation – then you are probably better off with the new car. If your Kia Sportage does go wrong, it’s almost certainly going to cost you far less to fix (or will even be covered by warranty) than on the Audi.

Asking yourself what problem you are needing to solve is a great way to help you zero in on what actually matters in your next car purchase. Based on the answer to this question, you’ll have a better idea of whether you need a “normal” new car or you can risk buying something older

Brand Focus – What Does A Badge Mean To You?

Another question to ask yourself is how much do you care about the brand of car you drive?

I have a good friend who only drives Mercedes-Benz cars. To him, anything else is inferior and he wouldn’t countenance driving something so humble as even a BMW or Audi (the only exception is his crummy old Subaru ski wagon for winter use only).

If he were on the market today for a car, there is no chance he would buy a comparably priced new car – he would rather buy whatever Mercedes-Benz his budget allows. He genuinely struggles to understand why anybody wants anything other than a Merc.

If you are a “brand snob” (and in our view there is nothing wrong with this if that is what you value) then you are probably going to have to look at buying the used luxury option.

On the other end of the spectrum you have people who don’t care at all about the brand of car they drive – or who are at the very least indifferent to brand. If this is you, then you have so much more choice in terms of the car you drive.

Once again this is a subjective measure; only you can decide what a badge is worth.

Safety Tech & Features Generally Favor New Cars

Two important points to consider when car shopping are safety (particularly if your car is going to be a daily driver/family conveyance) and other features, e.g. navigation, infotainment etc.

This is where it is very important to do a thorough comparison of the potential new buy you are looking at, versus the older car.

In terms of safety, it’s fairly likely that any new car is going to score better in terms of safety – at least as measured on modern safety tests that dictate features such as blind spot monitoring, auto-braking etc – than your potential used luxury buy. However, it does still pay to check safety ratings and ensure that you are getting the safety tech you need.

If you are buying a classic car as an occasional use toy/weekend warrior, then you might not care so much about safety features. That is your call – we provide some more insight in our guide on whether or not you can daily drive a classic car.

In terms of non safety features, such as infotainment, this is where a thorough, hands-on comparison is important. It’s also critical to decide what features you can’t live without, and make sure that the car you do buy has what you really need.

This is where you need to go test drive your different options and get a feel for which one(s) really has the features you want and need.

Also remember that not all features are created equally. For example, your older luxury potential buy might well have a satellite navigation system built in – but how usable is it on a daily basis and can it be updated to the latest maps for your region? Even a basic new economy car will probably have a superior satellite navigation system.

On the other hand, sometimes the older car can have superior features (at least for what you need). Recently a family member purchased a mid 2000s Volvo V70 as a new daily driver. The stereo in this car sounds superb – far better than many modern cars, and for someone who values a nice sounding stereo this was a big plus.

On the potential used buy it is important to actually check that all of the features work as intended before you commit to purchasing. For example, if there are heated seats in your 10 year old luxury SUV, do they actually work? If a feature were to fail, is it covered by any kind of dealer or extended warranty? If you buy privately, could you afford to fix the issue or be happy to live without it?

Also bear in mind that it can be possible to retrofit some features to a car. My 2006 Volkswagen Touareg didn’t have a reversing camera from the factory, but a local car audio specialist fitted an excellent reverse camera at the same time as installing a new bluetooth stereo system.

Long story short, make sure you decide what features are “mission critical” and then shop accordingly, and test thoroughly.

It is worth noting that tech/features in even budget new cars surpasses what is often found in older luxury cars (at least on paper).

What Is Your Tolerance For Unreliability? What Is Your Budget For Running Costs?

One of the most important points to consider when weighing up used luxury versus a new “normal” car is your tolerance for unreliability.

As a rule, new cars are just so much more reliable than older cars. Yes, there are exceptions to the rule, but a new car today is likely to be far more reliable than your luxury car was new 10 or 15 or 20 years ago (and that is before you add the many miles and potential maintenance shortfalls etc).

If you have a low tolerance for unreliability – I.e. you really need to have a reliable car for work, dropping the kids off at school etc and you can’t tolerate much going wrong as it might throw your week into chaos while trying to get it fixed – then you are almost certainly better off with a new car.

On the other hand, if you don’t rely 100% on your car for transport to work or school, or if you have another vehicle available if something does go wrong, then a used luxury or performance car might be a perfectly fine option for you.

A rule of thumb is if an unexpected breakdown will be disastrous for you – either financially or in terms of the hassle and disruption caused – then go for the new car. If an unexpected breakdown is more of an inconvenience, then the luxury car might be a good option.

It is also important to look at expected running costs with regards to fuel economy and routine maintenance.

Newer cars tend to be far more economical, so if fuel economy/MPG is a key consideration then you should definitely look to the new option.

Using my super-thirsty Touareg as an example, I calculated that if I drove my car everywhere I go in the average week (I normally bike most places due to living in a cycle friendly area, and then use my car on the weekends – but when my bike was in for repairs I really noticed the extra fuel costs) my weekly fuel bill would be more than the weekly finance payment on a brand new MG ZS electric SUV. Considering that an electric car costs peanuts to charge up, that trade is seriously tempting! Obviously that doesn’t factor in depreciation, but in terms of the impact on my weekly cashflow it would be better for me to trade in the Touareg on the MG ZS EV if I drove enough to warrant it.

Newer cars from “mainstream” brands like Toyota, Honda, KIA etc tend to also have less expensive routine maintenance. Dealers will often bundle a service plan with a new car purchase, and you might even get free servicing for a period of time.

Basically, make sure you do your maths before deciding between a used car or a new car! How much leeway do you have in your repairs/maintenance/running costs budget? If you need to keep things to a set figure, a new car might be the better option.

Conclusion – Are You Better To Buy A Used Car Or New Car?

Is it better to buy a used luxury car, or an equivalently-priced new car?

Ultimately, this comes down to personal requirements and preference.

If you are shopping for a ‘do it all’ family car, for example, then you are probably better off with a new car.

Similarly, if reliability and economy are key concerns, then go for the new option. New cars tend to be more reliable, and are almost invariably more economical (especially in this day and age of smaller turbocharged engines, hybrid drivetrains and the inexorable march towards electrification).

On the other hand, if you value brand and appearances, or if you are buying something you want (and it isn’t such an issue if the car has problems from time to time) then you might be better off with the used luxury option as you can get more “prestige per dollar”.

For car enthusiasts (like the majority of readers of this site) a car is more than just utilitarian transport, and so there is always a great temptation to buy something that little bit more quirky, complex and potentially troublesome in exchange for having an interesting car. There is nothing at all wrong with this approach.

Equally, there is nothing wrong with choosing a more mundane, normal new car that ticks all of the boxes for you in terms of doing what it needs to do. In fact, if you don’t place much value on the brand/prestige of a car, or you see a car as nothing more than transport, then you are almost certainly better off buying a new car.

To re-iterate, this article isn’t financial advice and shouldn’t be taken as such – it is for entertainment value only, and if you rush off and buy a second hand V8 BMW X5 (instead of the Subaru Forester you should have bought) and wind up with a massive repair bill, don’t come chasing us. Also bear in mind that in this article we didn’t really get into the topic of how much car you should be buying, e.g. does the hypothetical $30,000 car buyer from the introduction really need to spend all that budget? Or could they get by with a $5000 private sale old hatchback? That isn’t for us to decide – we just wanted to have some fun and give our take on the new vs used argument.

What do you think about buying a used luxury/premium car versus an equivalently priced new car? Leave a comment below to get the discussion started!