 Whether you’re looking to buy your first car or would like to brush up on your options, this article should give you an idea of the benefits and drawbacks of both. There are two main costs that you should consider when deciding to purchase a car:
1. Initial Cost New cars are often more expensive on this front, depending on make and model. You also have less bargaining power as negotiating on price is often harder at a dealership. Since Covid, used car prices have increased due to delays in the new car market, but these are projected to decrease shortly as supply is reinstated. 2. Ongoing Costs There are many ongoing expenses to consider when deciding which car to purchase.
The ongoing costs will change depending on your situation. We’ve provided a few points below. Car Deprecation You may be familiar with the adage that a new car loses 10% once you drive it off the lot. This is referring to the value of your car, or put simply, how much you can sell the car for after you’ve purchased it. New cars have a steeper initial depreciation then old cars, but both will lose value over time. The amount that your car depreciates depends on:
Loans Interest rates for new cars are usually lower than those for used cars. The average interest rate for a new car is 7.18% while the average rate for a used car is 11.93%. When considering if you should get a loan, it’s important to know if you can afford it. Even though new cars tend to have lower interest rates, they generally have a higher value and therefore a larger loan to pay off. Insurance The value of your car and the amount of coverage you’d like to have will impact the cost of your insurance. As newer cars are usually more expensive, insurance costs will also rise. But there are also benefits to insuring new cars, namely new for old policies. Electric Cars If you’re thinking of purchasing an electric vehicle (EV) there are a few things to consider:
Purchasing an electric vehicle could provide you multiple exemptions:
The Vehicle Emissions Star Rating is a good way to compare petrol cars and EV’s. Salary Sacrifice Salary packaging a car allows you to pay off your car with pre-tax income. While this can be a powerful tax-saving strategy, it's very important to note that the benefits are often suited to employees in hospitals or not-for-profit organisations with a fringe benefit tax (FBT) exemption. To find out more about tax savings on Electric Vehicles, you can read our article on the topic. If you work in a hospital or not-for-profit, you can read more here. There is no right or wrong answer, and each person will benefit differently. If you’d like to discuss if salary packaging or FBT exemptions may be beneficial to you, please feel free to reach out to the office. Comments are closed.
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