Buying a Used Car

Buying a Used car? Find out about the 'Goldilocks' age - not too old, not too new: just right (and why this is so)

Need to Know

  • Buying a used car at the right time in its life can save you heaps.
  • Depreciation is one of the biggest costs involved in owning a car.
  • A two-year-old used car generally represents the ideal age, and excellent value – you get many of the benefits of a new car, at a significant discount around 30 per cent (compared with the new price). 

Would you buy a used car from this man (above)? Maybe you should - if it's the right age and you can establish its bona-fidesBuying a used car on or around its second birthday makes excellent sense. The high cost of depreciation when new means its value will have dropped by about one third, compared to the price the owner paid for it new.

Buying a used car at two year of age means the first owner effectively funded the 33-odd per cent drop in its value. It’s a classic ‘good news/bad news’ story – good news for you if you’re prepared to own a slightly used car; bad news for the first owner, funding your discount.

Depreciation is a major hidden cost, which often is more expensive than the fuel – especially for low-kilometre drivers.

A two-year-old car will still have a year’s warranty on it (at least: the average new car warranty is three years and 100,000km although some brands offer five years and unlimited kilometres). That’s very reassuring to most buyers.

Buying a two-year-old used car will often involve picking up the same model that’s currently on sale new. That means it’s current in terms of technology (safety tech, emissions tech, etc.) and still current in terms of fashion (if that’s the sort of thing you care about, and plenty of people do). And (since the average distance driven in Australia annually is about 15,000km) you’re likely to find yourself buying a used car with just 30,000km on the clock. That’s hardly worn out. (You’d have to figure on the car lasting at least 180,000-200,000km.) So there’s plenty of life left in it.

But even if you don’t plan on owning the car until the end of its life it makes good sense to think about buying a used car at the age of two years. If you own it just for two more years the depreciation will be a lot less than in the first two years of its life.