Cars – something I’m quite passionate about, and something I’ve probably spent way too much money on in my lifetime already.  I mention that as a way of saying – I get it.  Cars can be cool, they can be fund – something nice and new shiny, it can make you feel pretty special – for a little while anyway.  If you’ve ever bought a car, regardless of what it is and what it cost you, there is usually that sense of – yeah, this is mine… oh look, I didn’t know it had this button!

I’m often confronted with clients wanting to buy a new car.  Happens all the time.  In Australia, we buy over 1 million new cars every year.  That’s a lot of cars.  And the worst thing about it?  10-30% of the value of every single one of those vanishes into thin air the moment you drive it out the door.  Give it 3 years, and you’ve potentially lost have it’s value.  What I’m getting at is that there are “new” cars, and then there is a new car.  Very different concept.

If you could measure the enjoyment that people get from either driving a car new off the showroom floor versus buying a car second hand, you would be surprised that they rank quite closely.  Further, that new car feeling fades at a similar rate regardless if you’ve got a near new or a brand new car.  So, if the enjoyment factor is similar, and the rate of which the “new” feeling fades is similar, what value is there in buying a brand new off the showroom floor?

There are only few things that I can think of.  There is the “new car feeling” which is that new car smell.  My parents only ever purchased a new car once, and I can remember that smell.  It was special, and as a kid, you had no idea the difference new vs old – so it was all very exciting.  There is the peace of mind of buying a new car and not buying “someone else’s problem”.  How do you know if the used car is any good?  Has it been treated well?  Will it last as long?  And finally, there is the attitude of buying new.  Some people like new homes, some people like new everything and the thought of buying a used car just doesn’t cut it.

So what should you do?  You have to weigh up the differences.  For example, a 2012 Mercedes E350 was around $140,000 on road when it was brand new.  Today, it costs around $50-60,000.  It’s four years old.  The prepayments on the lease are just over a third of what they would have been before, or if you’re paying outright, you’re around $90,000 better off.  Is the car just as good as it was when it was new?  No, it’s been used.  But if you’re desperate for that “new car smell” – well on this particular car that’s an $80-90,000 pleasure.

So how about this, buy the 4 year old Merc, and splash out on a $20,000 holiday someone that smell’s really nice – you’ll still be ahead.