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New car, or used?

With a still-uncertain economy, value has never been more important especially when it comes to personal transportation. So, come replacement time, is it worth considering a used car instead of a brand new one?

“There are lots of reasons to choose one over the other,” says Mississauga-based Chartered Accountant Perry Lo.
“New cars are more complex today and can be more expensive to maintain, but you don’t want to be buying someone else’s problem, either.”

“Sometimes, a deal only looks good on the surface,” says Chartered Accountant John Lokker, Chairman & CEO of National Traffic Services in Brampton. “With both new and used cars, you generally get what you pay for. If a deal seems too good to be true, it usually is.”

Here are some important tips that Lokker and Lo suggest you keep in mind as you shop for a new car, even if – especially if – that “new” car is just “new to you”.

Conduct your own research – Whether you’re considering new or used, get reliable information you can trust. Consumer Reports (www.consumerreports.org) rates cars on a number of variables and publishes independent findings. Lokker also recommends you check out the Vehicle Licensing section of the Ministry of Transportation’s website (www.mto. gov.on.ca) for some good used-car buying tips, like how to avoid buying a damaged or stolen vehicle.

New cars are more efficient – New regulations mean many newer vehicles use less gas. Good for the environment everywhere and good for us at the pumps.

New cars are cheaper to insure – Dollar for dollar, new cars tend to win out. More safety features and more reliable vehicles mean less risk to the insurer. New cars are usually favoured by financers, too, who may be reluctant to loan money for a used one.

New cars have warranties – “These are a minimum of three years now,” says Lo. Many manufacturers offer better than that. Consider that used cars need more repairs and more upkeep, like wiper blades and tires. Add in the value of things like roadside assistance – a safety service that many manufacturers now include with new vehicles for at least a while – and the new-car price starts looking better, value-wise.

The less you pay, the less you get – “Nowhere more than with a used car,” says Lokker. If the price is low there’s probably a reason why, and even good research won’t tell you everything. “The reliability information is always based on the average for that make and model under ideal conditions,” he says. “You could have a junker, and not really know.”

Know what you can really afford – Really check out the manufacturers’ websites of the cars you are interested in. They can provide you with lots of information about recommended maintenance, tire wear, mileage in colder climates and other factors that can cost money.

Deduct what applies to work – Whether new or used, buying or leasing, you can deduct up to 30 per cent of the vehicle’s cost to a maximum of $30,000 a year. And all related expenses, too, providing you’re using it to earn a living, Lokker advises. That doesn’t include commuting to work, however, and remember that the Canada Revenue Agency expects you to keep a log of your business-related auto use.

The 30 per cent depreciation and operating costs are prorated based on business versus personal use and the number of kilometres driven.
Look for “certified pre-owned” – “A used car from a reputable new car dealership is more likely to be backed-up by the vendor,” Lo says. Especially if it is “certified pre-owned” which refers to a specific and thorough inspection process that a used car is put through before the vendor sells it.

Rethink border shopping – With the higher Canadian dollar, some may be tempted to slip across to the U.S. to do their new or used car shopping. Lo suggests you reconsider. The vehicle records likely won’t be complete and that can affect warranties and insurance.

Insist on getting a Used Vehicle Information Package – Provided by the seller, this will tell you if the vehicle has been in an accident or if there’s a problem with the VIN number, such as the possibility the vehicle is stolen or has a lien against it.

Posted: Nov 2, 2011

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