by Venus Zoleta, on category "Car Insurance"
April 2, 2018
Prices of brand-new cars in the Philippines have gone up in 2018, following the higher excise taxes imposed by the TRAIN or tax reform law. It’s now harder to afford a new car than a few years back.
Because of this, second-hand car dealers are expecting more Pinoys to turn to the used car market, at least for the next three to four years. It makes sense—with a limited budget, your choices could as well be limited to the affordable options. Used cars are obviously the cheaper alternative to new cars.
Is a second-hand car really a wiser purchase than a brand-new one? Or is it the other way around? The right choice varies from one car buyer to another.
Checking out second-hand cars for sale in the Philippines? A used or pre-owned vehicle is the better option for these situations.
If you have a specific vehicle year, make, and model in mind but its brand-new version doesn’t fit your budget, go for the next best thing: a pre-owned unit sold at a much lower price.
Buying a second-hand car typically saves you around 10% to 70% of a vehicle’s original price, depending on factors such as age, mileage, and condition. If your budget permits it, you can even upgrade to a better model.
Hate to pay interest plus monthly installments on a car loan? If you can pay the full amount of a second-hand car in cash, then go for it! You’ll get to save more that way with a used car vs. a new car, as long as the unit is in a very good condition.
Take the Philippines’ top-selling model, Toyota Vios, as an example. Today, a brand-new 2017 Vios (1.3 Base M/T model) costs PHP 629,000. Used car prices for the same model (based on latest Carmudi figures) are much lower, especially the older models.
Buying a brand-new car isn’t an option if you want to drive home a particular classic or discontinued model. For instance, you can find a car as old as a 1968 Volkswagen Beetle in the used car market for PHP 100,000 or less. In contrast, a new 2017 Beetle costs around PHP 1.6 million.
Vintage car enthusiasts, in particular, are the ones who benefit most from buying used cars.
It costs less to insure a used car than a new car. Car insurance companies consider a vehicle’s age and fair market value when computing insurance premiums. The higher the value of a car, the more expensive it is to repair the unit after a collision.
But some insurance providers don’t accept applications for vehicles older than 10 years, so consider that when buying a second-hand car.
Looking for an affordable car insurance plan? Compare insurance rates from different car insurance companies in the Philippines with the help of MoneyMax.ph.
When you buy a new vehicle, it loses 20% to 30% of its value as soon as you drive it off the dealership. In the first three years of owning the car, it may depreciate further by up to 50%.
Used cars depreciate less than brand-new cars. That’s the greatest benefit of a second-hand car purchase—the previous owner of the car has taken the largest depreciation hit.
While you, the new owner of the used car, will enjoy a low cost-to-resale ratio. This means you can sell the second-hand car later for almost the same amount you paid for it, as long as you keep it well-maintained. If you have it customized, fixed, or upgraded with new features, you may even resell it for a higher price.
Many buyers still favor new vehicles despite the higher prices simply because these units have never been used. Here are other reasons to purchase a brand-new car.
Although a full upfront payment on a vehicle can save a buyer from paying interest, getting an auto loan can help make financing a car easier through monthly amortizations. If you plan to buy a car through an auto loan, you can cut down the interest payment and get a longer repayment term by choosing a brand-new vehicle.
Interest rates for new cars are lower than those for second-hand units. For example, BPI auto loan interest rates for brand-new cars range from 4.10% (12-month loan term) to 27.28% (60-month term). Pre-owned cars come with higher interest rates at 6.57% (12 months) to 44.17% (60 months).
BDO offers longer loan terms for brand-new vehicles (six years for personal use / three years for business use) than for used cars (four years for personal use / two years for business use).
It takes a lot more time and effort to buy a second-hand vehicle, from researching your options up to making the purchase. No salesperson can assist you, so you’ve got to do all the legwork by yourself.
On the other hand, purchasing a brand-new car is a breeze. Once you’ve picked a specific model, all you have to do is visit a showroom and talk to a sales rep. This saves you time and energy throughout the car purchase process, which is especially helpful when you need a car right away.
The biggest advantage of buying a brand-spanking-new car? Zero defect (in most instances). And if there’s any, the new car is covered by the manufacturer’s warranty.
With a used car, expect to make more frequent trips to the auto repair shop, as old car parts tend to break down faster than new ones. That could be a big hassle if that’s the only car you have, and you drive it to work every day.
Newer models generally have better fuel mileage than older models. So if you’re trying to reduce your fuel costs, it’s easier to achieve that with a brand-new car.
However, some older models are fuel efficient, according to Consumer Reports. If your desired model belongs to the list, check if a second-hand unit is on sale.
Want to keep driving your car for years until it reaches the end of its service life? Then the car’s resale value in the future won’t matter to you as much as someone who plans to sell his car later.
Cars depreciate over time, and there’s no stopping it. But if you simply want a reliable car that can last you for years, then buying a brand-new one makes more sense.