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Why a new car could save you money and April's top car loans

Why a new car could save you money and April's top car loans

It’s no secret that used cars are a hot commodity in the car loan market right now, which is good news for sellers but less-than ideal for buyers.

According to the latest Datium Insights-Moody’s Analytics Price Index for March, wholesale used-vehicle prices are 37 per cent higher than a pre-pandemic high set in February 2020.

Prices grew 5 per cent in the first quarter of the year. While this was the slowest quarterly increase over the past four quarters, it’s still faster quarterly growth than previous figures recorded over the last decade.

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Source: Datium Insights, Moody’s Analytics

There are a range of factors influencing this increase, including constrained new-vehicle supply, which has remained an issue in Australia. It is now “commonplace” to order a new vehicle and wait for it to be delivered.

Before you hop in the drivers’ seat, it may be worth exploring the pros and cons of the affordability of both used and new cars. This may help you to better choose the right kind of car loan for your financial situation this April.

Is a new car more affordable than a used car right now?

Short answer is that it depends on the buyer, their personal financial situation, and the car they’re interested in.

But there are a range of factors to take into consideration when assessing which vehicle type is more affordable, including:

  • Warranty – typically offered with new cars only and may save driver by covering the costs of defects and issues pre-100,000kms or in the first three years.
  • Fuel efficiency – generally speaking, newer vehicles may offer more fuel-efficient models.
  • Capped-price servicing – a newer vehicle may come with capped-price servicing, an option typically not seen in the used car market.
  • Depreciation – the biggest advantage of a used car generally is the vehicle will be more affordable than if you purchased the newest model from a dealership. A new car may begin to significantly lose its value in the first few years. But this depends on the make, model, and the used car market.
  • Lack of supply - If timing and urgency is a factor in purchasing a car, new vehicles have been dealing with supply issues in Australia. Global auto production has been stalled due to a shortage of a key component of modern automobiles. If you’re looking to drive away with a car ASAP, it may be worth opting for a used vehicle.

If timing is a concern or prices are still unaffordable, it may not be worth hurting your finances for a new vehicle. But, before you decide that a new car is out of your price range, it may be worth assessing the used car market against new vehicle prices at a dealership or online.

And, if you’re considering taking out a car loan to finance your purchase and there’s only a few hundred or thousands of dollars separating you from a new vehicle, it may be worth calculating the loan repayments on both used and new models. If you can nab a competitive new car loan, the repayment differences may be small enough to justify the new buy.

You may be wondering where you can find a competitive car loan that does just that, and this is where RateCity’s leaderboards come in.

We’ve done the hard work for you by ranking some of the most competitive car loans in the marketplace with our Real Time RatingsTM system.

Unlike other rating systems that grade their products once or twice a year, Real Time RatingsTM results are calculated in real time. This means you get the most up-to-date rating for your comparison. Each car loan is given a score out of five stars, based on loan costs and flexibility.

(Rankings are correct at the time of publishing. Please note lenders may trade places on the list as interest rates and fees change and RateCity’s tracker reflects these movements.)

Used car loans

New car loans

Green car loans

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This article was reviewed by Personal Finance Editor Georgia Brown before it was published as part of RateCity's Fact Check process.

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