Should You Buy New or Used Car in This Time of Pandemic?

As the global pandemic reaches record cases every day, it is safe to say living with Covid-19 is the new normal. We have had to change our routines to incorporate all the changes this pandemic brings with itself, being careful in public places and transport along with never compromising on personal health and safety. Besides personal changes, the pandemic has also changed the buying patterns of the car-buying public. CARS24 did a research study to try to understand these new patterns.

Also Read: 6 Big Benefits of Buying a Used Car

Firstly, the general public has decided to forego all public transport for their private vehicles out of fear of community spread. Many have shown an increased interest in buying cars in the next six months, particularly pre-owned ones. This increase in car buying is largely correlated to the public wishing a safer method of transport for the family. However, due to the Covid-19 induced lockdown, things haven’t been easy.

Due to Covid-19 and the ensuing lockdown, the entire world has witnessed an economic slowdown, India included. Even if buying a car is the safest option, it is not exactly cheap. The cheapest new car in India costs upwards of 3 lakhs, which is why we’re seeing an increased demand for used cars. A well-maintained used car costs upwards of 1 lakh while a 2-3 year old pre-owned car can be had as lows as 2.5 lakh. These cars are more than capable of satisfying the needs for physical and economic safety.

22.5% of car buyers who were planning to buy a brand-new car in 2020 are likely to switch to pre-owned vehicles. An increased percentage of people are opting for used cars over the last few years, and the ratio of pre-owned to new car transactions has increased from 1.25 to 1.5 in the last 5 years. Annual pre-owned car transactions currently stand at 4.8 million, compared to 3.3 million new car transactions in FY 2019-20.

Buying a used car is an economically more sound decision if the fundamental issues of transparent pricing & assured quality are taken care of. The depreciation curve of most vehicles suggests that the value sees a significantly faster depreciation in the first few years, after which the depreciation rate drops. An average car drops 40% of its on-road price in the first 3 years, compared to 25% of on-road price in the next 3 years.

It is very evident to see that used cars gaining more traction with the general public. CARS24, a trusted platform of pre-owned vehicles, has seen 60%+ of their seller traffic and 100% of buyer traffic is back to the pre-COVID numbers. Pricing of used cars has stayed the same as it was during pre-Covid, validating the demand for them currently.

Is it a good time to buy a car?

How does one choose between a new car and a used car keeping the current financial uncertainty in mind? Doing some basic math to compare the economics of buying a new car vs buying a 3-year-old pre-owned car, all of this for a period of 5 years when the car is assumed to be resold.

After accounting for factors like loan interest, resale value, cost of insurance, maintenance, mileage,  other miscellaneous expenses like parking/cleaning, etc the cost/km of owning a new car for 5 years is INR 21/- vs INR 15.5/- for a 3-year-old pre-owned car. There are also going to be additional personal factors when making this decision, like being a driving enthusiast, tolerance for cab hygiene, wait time, public transport, and more recently fear of infection in shared transport.

Furthermore, the cost of ownership for a pre-owned or used vehicle is way lesser compared to a new one. This is mainly due to the high depreciation rate, RTO and registration fee, registration fees and RTO, higher taxes, and more expensive car insurance policies.

For comparison, the cost of ownership of a new hatchback for 5 years costs around Rs 9.60 lakh compared to Rs 7 lakh or lesser for a pre-owned one. This price range increases accordingly to the higher the car’s segment is, especially luxury ones. It must be noted here that the above has been based on the assumption of lower mileage, higher maintenance cost, and higher interest rate for the pre-owned car.

Are you planning to purchase a used car? If so, it needs to be mentioned here that IndianAuto, our sister concern, offers a wide range of used car classifieds from almost every city across the country. These classifieds offer full details of the car on sale along with even providing many high-quality pictures. Finally, the website has a highly user-friendly interface that allows you to quickly set filters and get the most relevant results.