Buying a new car is not as bad as many people suggest and, in many cases, can be a better investment than buying a second-hand vehicle.
Most people have heard that the moment you drive a new car off the showroom floor, it loses 10% of its value.
This belief is so pervasive that it is widely accepted that a new car is a worse investment than buying a used vehicle.
Add to that the benefit that used cars are more affordable than new cars, and it is easy to see why the second-hand car market is so large.
Many buyers do not consider that a new car typically comes with a full service plan and a comprehensive manufacturing warranty.
Apart from featuring the latest technology, better fuel efficiency, and higher safety standards, new cars also reduce risk.
With a new car, you know exactly what you are getting, whereas used cars could often have unnoticed problems that could show after purchase.
It raises the question of whether buying a new or used car is better from a financial perspective.
To answer this question, Daily Investor analyses pricing data for the popular Toyota Fortuner 2.8 GD6 4×4 automatic which costs R855,100 new.
We considered second-hand Fortuners with different mileages at different ages up to 9 years old to track the trend in vehicle value depreciation.
The data shows that the Fortuner held its value well and lost very little in the first two years.
An interesting observation is that the normal trend of exponential value decay is not seen as time progresses.
In fact, a Fortuner’s value deprecation accelerates as time progresses, according to the data.
It suggests that it makes more sense to buy a new vehicle instead of buying a second-hand car to preserve value.
It should be noted that the pricing trends will differ according to car make and model.