A while ago (a long while as a matter of fact), I received an email from a reader who asked an interesting question. In Brunei, we know having a car is simply a must for the most part because of poor quality public transport. And as we know, most people would readily go into debt just to get that car of their dreams. So this reader posed the question: “Old car vs New Car, which one is good for the long term?” They were wondering what would be the advantages and disadvantages of having an old car vs new car.
Old car vs new car: Is it even comparable?
In short: yes, we can compare them by price and upkeep. Cars are what we call depreciating assets: meaning the moment your shiny new Lambo hits the road, the price tag is slashed. And over the next few years, the price falls further by around 20-25% per year! Still, most people would love to own a new car if given the choice, I believe; although there are those who advocate driving one for as long as it can run!
Old Car Advantage
- If you’ve owned this car since the beginning, your loan is paid off latest by the 7th year.
- If the car is well taken cared of, it should work fine for getting around.
- Your car could become a classic one day. But really depends on make and model.
Old Car Disadvantage
- Car parts are due for changes (but that’s normal because of wear and tear).
- Parts may be hard to come by or expensive if they stop manufacturing them.
- After the 7th year, car insurance get “loaded” by a percentage. This means your comprehensive insurance coverage actually becomes more expensive!
- Many people opt for downgrading to Third Party insurance because comprehensive becomes quite expensive.
New Car Advantage
- Everything new! Nothing to worry about for about 2 years other than general maintenance.
- Warranty covers a lot of faults.
- Replacement parts should be available in the market for a while.
- Some car insurance gets cheaper over the years because of no-claim benefit (until 8th year: see above).
New Car Disadvantage
- Need a large sum or loan to finance.
- If opting for loan, you’re going into debt for a depreciating asset. Over the years, the car will be worth less than your debt.
- No guarantee it can last until old age; it depends on a lot of factors.
Cars are a necessity in Brunei, there’s no doubt about it. While most people would love the chance at a new car, a lot of us would be quite content with a good one even if it was a aged a little. Regardless, the pros and cons of an old car vs new car shouldn’t be overlooked if you have the luxury of choice when getting (or maybe forced to get?) a car.
Honestly speaking though, if you were going for long term, a new car would likely last longer. On the other hand, this also costs you the most in the long run.
I think I’m pretty smart on what I spend my money on. I still don’t have a new car, I drive my old car that I’ve had forever. But I bought a house in downtown Chicago.
– Chris O’Donnell