Ask an expert

My husband and I can't agree on whether to buy a new car or a used car.

We have cash so wouldn't have to finance,and are looking at buying a new Subaru Impreza 2.0R Sport.

We have always been told that when buying new you will lose money as soon as you drive off the lot - but, in your opinion, is this loss outweighed by the new car warranty, the fact that you know the car's history etc?

Alex

From the "Ask Jack" archives - 14 December 2009

Yes almost all new cars will lose value once taken out of the showroom. The exception may be a luxury type vehicle that is in high demand and in short supply.

The amount of depreciation can depend greatly on the selling philosophy of the particular new vehicle distributor and the dealer representing the brand.

For example, if the dealership is open to discounting the retail price to close a sale, then you have to hope you received the best deal.

If somebody else negotiated a better discount than you, your vehicle has suddenly been depreciated below what that particular vehicle sold for new. This can mean several thousand dollars wiped off the resale value of your vehicle instantly.

If you were to sell the vehicle in three years, then the depreciation is going to be high. If you intend keeping the car for say 6 - 7 years then who knows what it will be worth so the depreciation is not so much of a problem.

For some buyers getting the biggest discount is the key which really drives the depreciation down for all owners of that make and model.

In recent times there have been distributors who have introduced a fixed price or no discount policy to help slow down the depreciation. Honda is the main player in this market and they stick very firmly to this policy. They believe the set retail price of their range of vehicles represents good value for money and everyone should pay the same.

Does it hurt their sales?, well every manufacturer plays in the particular market of their choice, some play the numbers game while others are happy to sell a targeted number of cars with a guaranteed return and the chance of lower depreciation.

I think Subaru sit in the middle. They are not a huge volume player in the new car market so cannot afford to give away too much, however I think they would be reluctant to let people walk if a small discount was to make a sale.

Your comment on the service history and new car warranty are very valid.

I don't want to take sides here but at the end of the day it's nice to have something new if you can afford it. It's what a lot of people strive for in their lives

The Subaru is a great car, you won't be disappointed just make sure it suits your needs and that it will stay in the family for a few years after purchase.