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New or Used: 5 questions you need to ask yourself when getting a car

6/8/2017

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woman holding toy car and car keys
Secrets that car dealers don’t want you to know
1. How much am I willing to spend?

First things first, your budget is almost always the number one factor why you’d even consider buying a used car.

Here’s a tip: Buying a BMW or a Benz? Go for a two-year-old model and you’ll be able to save a significant amount of money. Not only are luxury cars not a headache to maintain because of their premium parts, they still usually look good and are still worth a significant amount of money when you sell it.
 
Another tip: Don’t stick with your local dealerships / used car dealers. Try shopping around and look for dealers with promos or good prices on used cars.
 
Most car dealerships need to catch up on their monthly sales quotas, so promos are their go-to incentive to get more people to buy through financing plans, usually in-house. Another note, we recommend you look elsewhere instead of in-house financing-- go to banks instead. They offer lower interest rates instead of in-house plans.
 
With used cars, some dealers might just want to get a car off their hands and bring the price way down just to do that.
 
Take the time and you’ll be able to save a lot of money.


2. What am I using it for?

Am I buying a car to use for my business? Or am I buying something to use as my family’s everyday car?
​
Want to buy something you’ll be using and passing on to your kids? Get a brand new car. You’ll be sure that it gets even past 5 years for you and your family to enjoy.
 
Just buying something to get yourself from point A to point B? Depends if you want something reliable (new car) or something that just gets the job done (used car).
 
But when buying something for your business, you have three options: Buy, Finance, or Lease. We’re against buying because it ties down your business from a cash flow standpoint and limits your ability to grow the business. Instead, choose between financing or leasing a vehicle, regardless if you’re buying a new car or a used car.
 
If you choose to go with financing a car, you’ll be able to get more deals and promos to come with your car. And at the end of the payment term, you’ll be happy to call your car as your own. Look for financing deals at the end of every quarter, every year, or at the end of the model year for good promos or financing deals from dealerships.
 
If you can’t find any good deals being offered when you need them, go for the lease option instead. You'll usually have a smaller upfront payment and smaller monthly payments, as well as have the ability to switch cars whenever you need to. Just remember not to fall in love with your vehicle as you’ll have to give it back after the lease period.

3. Can I handle the headache of constant maintenance?

Between a new car and a used car, there’s no contest here.
 
If you want the purchase with the least headache, go for a new car. Not only are you in control of its repair history and first kilometers, you’re able to receive maintenance (sometimes free for the first few kilometers) straight from the car dealer. You’re also able to enjoy the comfort of not worrying because of warranties that come with the new car.
 
You won’t get any of those pleasures when you buy a used car, especially when buying from someone you don’t know. You’ll need to inspect every nook and cranny of a used car to make sure you’re getting a good deal out of it. Will it break down every 10kms? How’s the interior? Does it smell like an oil leak every time you start the engine?
 
For used car buyers, DO YOUR RESEARCH. Check the car’s insides and outs like how you would research where to go to in your coming summer vacation. Go on car forums like Tsikot, talk to real owners, or maybe even chat up some technicians that work on your prospective cars every day to see what problems it usually encounters.

4. How can I cover it with insurance?

This is where it gets tricky, mostly for used cars.
 
If you’re buying a used car, ideally, buy one that is not over 5 years old.  Always take note that there’s a limit to the age of cars for it to be insurable. Most insurance companies cap it at 10 years old. For some, at 7 years old.  
 
Think twice going for heavily modified cars-- from an insurance standpoint, most companies will be hesitant as many of the modifications might void your insurance coverage.
 
A few notes to add:
  • To give you an idea if you’re getting a good deal out of your used car, check the fair market value (FMV) of the vehicle according to its insurance industry standard.  You can find this out by contacting your insurance agent.  

    From the info from your agent on the car’s FMV, insurance coverage can increase or decrease. It can also give you a ballpark figure of how much the car is actually worth.


  • For imported vehicles, you’ll have more documents to prepare such as the importation documents.  For the FMV of vehicles not available for sale in the Philippines, it’s up to the insurer to do a research to determine its FMV.

  • When insuring vintage cars, this will be on a case to case basis with insurance companies.  Alternative insurance solutions may be available with the insurance company if they decline to insure this under a comprehensive insurance plan. (For example, if you only have the car on display in your garage, insurance agencies can have the car covered as part of your house.)

  • When insuring used vehicles, prepare a clear copy of the Official Receipt and Certificate of Registration (OR/CR) and photos of all sides of the car.
 
As with buying a new car, try to talk yourself out of getting insurance in-house from the car dealers. It’s always cheaper to get insurance from outside.

5. How much can I sell it for?

Always consider the possibility of you selling your car. Maybe you’re moving on to a new car or just need money for an emergency; the need to sell your car when the need arises is something that could happen at any moment.
 
New cars obviously cost more when you sell it as compared to used ones.
 

New cars usually come with less kilometers, warranty, and insurance coverage, not to mention an up to date design. The more perks you have and the less repairs needed to do with the car, the better your chance at selling your car at a good price.
 
But always remember that cars depreciate fast. What could be worth P1 million when it came out could be just worth P500,000 the following year, depending on its market value and the brand of the car. Remember, a BMW is valued more than a Toyota when it comes to aftermarket prices.
 
Still, this is much better as compared to selling a used car.

Need a buddy to help you out with buying your new car?​
Give us a call!
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