New vs used car: what you need to know before buying

What are the benefits of buying a new car?

Safety, comfort and running costs are all benefits of purchasing a brand-new car, but the new-car warranty is far and away the greatest advantage of buying new rather than used.

A new car will come with a comprehensive three-year warranty, at the very least. Most new cars are covered for five years, and some are covered for seven or 10 years (though sometimes with conditions, such as servicing through an authorised dealer). Check out the warranty details for 70 brands covered in RACV’s comprehensive new car warranty guide. 

Then there’s vehicle safety. A car that was awarded a maximum five-star safety rating from the Australasian New Car Assessment Program (ANCAP) six years ago just isn’t as safe as a new car rated five stars in the current year, according to the independent crash test authority. In fact, ANCAP resets the ratings to ‘untested’ for each model of car once it’s older than six years, such is the difference in safety after that length of time. See our list of the safest new cars ANCAP tested in 2025.

Active safety features such as autonomous emergency braking (AEB) are mandatory on all new cars sold in Australia since March 2025. Before that, many cars were sold from new without the advanced safety feature fitted. So, buying new is certainly the safer choice.

What about vehicle comfort and other tech features? Car manufacturers have taken huge strides introducing sophisticated new infotainment technology at ever lower prices to enhance the driving and ownership experience for motorists. To illustrate, wireless smartphone mirroring and charging is increasingly common in new cars but was a rarity six years ago.

Electric vehicles, hybrids and plug-in hybrids were uncommon six years ago, but that’s no longer the case in Australia’s new-car market. These vehicles are becoming more affordable, and they can save drivers money with lower running costs. Even a traditional hybrid SUV like the Toyota RAV4 can improve on the fuel consumption of its petrol-only counterpart by two or three litres for every 100km travelled.

Finally, the new car is a known quantity. Buyers can be confident that the car has never missed a service, been in accident or had repairs undertaken.

Research and compare new and used hybrid and plug-in hybrid cars on sale today

Pros of buying a new car

• Factory warranty for added peace of mind
• Latest comfort and technology features
• Up-to-date safety equipment as standard
• No previous ownership history
• More choice across hybrid and electric vehicles

Cons of buying a new car

• Higher cost to buy
• Greater depreciation over the first three years

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Is it better to buy a used car?

Affordability is the chief advantage of buying a used car rather than a new car.

The used-car buyer will typically save thousands of dollars on the purchase price – sometimes making the difference between financing the purchase via a car loan or paying cash. Specific used car loans are available to finance purchases, sometimes at a higher rate than a new car loan.

The balance of a new-car warranty can usually be transferred to the next owner, so the used-car buyer will benefit from the unexpired months or years of the factory warranty – for the both the car and, if it’s an EV or hybrid car, the high-voltage battery (often subject to different timeframes and conditions).

Even a car up to six years old may be covered by the final year (or more) of the new-car warranty for popular brands like Kia, Mitsubishi, GWM, MG, Chery and Tesla. Others include Skoda, Geely, GAC, Foton, Jaecoo, Omoda, Deepal, KGM (SsangYong) and Mahindra.

Even if the factory warranty has expired, the used car is protected by a three-month statutory warranty from the dealer – provided the car is not a commercial vehicle, has travelled no further than 160,000km and is less than 10 years old.

The lower purchase price for a used car usually offsets any minor repairs required outside the warranty period. Major mechanical issues that are classified as defects (that is, something other than normal wear and tear) are more likely to occur during the warranty period rather than later.

The buyer of a used car would have to be very unlucky indeed to experience a major component failure not covered by warranty. It can happen, however, and if the failure occurs shortly after the warranty ends, the buyer may be able to compel the dealer who sold the car to fix the problem under Australian Consumer Law.

For buyers contemplating a used car, there’s another question begging: Does the money saved justify fewer safety and technology features?

The answer will vary according to the aspirations and experience of the individual car buyer. As a general rule, buyers should always choose the safest car they can afford.

If money is a significant concern, insurers often charge lower premiums for older cars. As the used car ages, its market value declines, usually representing a lower liability for the insurer in the event of a total loss – the car written off after a crash.

Perhaps the buyer doesn’t need wireless Apple CarPlay or Android Auto, satellite navigation or heated seats. If the used car offers only those features the buyer wants and gets two thumbs up after a comprehensive inspection such as those undertaken by RACV, it could be a compelling, budget-friendly buy.

Buying a used car privately is a different experience and can involve extra hassle, as buyers miss out on dealer protections such as statutory warranty and may need to organise their own safety checks, inspections and paperwork.

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Pros of buying a used car

• More affordable than a new car
• Likely to retain value better in the second owner’s term
• Residue of factory warranty coverage for recent models
• Statutory warranty applies to a used car sold after the expiry of the factory warranty
• Offers many comfort and convenience features found in new cars (depending on age)
• Comparable safety for recent used car models

Cons of buying a used car

• Maintenance may have been neglected
• Car may have been crashed, possibly on multiple occasions
• Statutory warranty running out too soon leaves buyer to pay costly repairs if they arise
• Safety features may be lacking
• Buyer may soon regret purchasing a car without the latest technology

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What is a demo (demonstrator) vehicle for sale?

Demonstrators, or ‘demos’, are cars that are registered by the new-car dealer for buyers to take on a test drive.

After the demonstrator’s odometer has racked up a few hundred kilometres or more, the dealer will put the car up for sale. Naturally, since the demonstrator has been registered and driven on public roads, it must be sold as a used car.

Some dealers have been known to ‘pre-register’ cars and sell them as demonstrators to boost their new-car sales performance on paper – a boon for car buyers. These cars, registered as demonstrators, are often sold with just delivery kilometres recorded – possibly under 20km. Buyers take home a ‘used car’ that essentially offers everything the new car does, even down to the full factory warranty term – less a few weeks, perhaps.

One concern with buying a demonstrator is the sneaking suspicion it has been driven roughly by test drivers and dealer staff. A demonstrator is likely to have endured a harder life than most new cars experience within the first months after leaving the factory.

But the reality of the situation is this: Most modern cars can withstand rough treatment behind the wheel now and again, without significant detriment to the car’s long-term reliability. And the factory warranty will protect the buyer long after the demonstrator’s test-driving days are over.

So, a demonstrator is very likely to be the best option for many buyers. There’s a saving of thousands, the new-car smell lingers on, and they may still be applicable for a new car loan for financing.

RACV new car loans are eligible for vehicles from 2024 onwards, making most demo cars eligible.

Pros of buying a demonstrator car

• Most of the new vehicle warranty will be in place
• On-road costs paid by the dealer, retail price reduction
• Reduced risk of mechanical abuse
• Carries a new car’s safety and luxury features without the same cost

Cons of buying a demonstrator car

• Often not the sensationally low price the buyer expects for a car that is ‘used’
• May have been driven without much mechanical sympathy

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How to choose between a used car or a new car

New vs used: key points for car buyers

Some buyers can’t help but be seduced by all the trappings of a brand-new car – the longer warranty, enhanced safety, improved comfort and technology features, and possibly more satisfying performance and driving dynamics.

Those buyers willingly pay the higher purchase price for the comfort of knowing their new car shouldn’t let them down, mechanically. Depreciation means less to them if they’re buying the new car for a long-term period.

Other buyers will choose a used car entirely for the lower price, saving money and reducing their exposure to depreciation in subsequent years, both of which count for more than having the latest technology at their fingertips.

Both new and used cars can be financed, giving car buyers more options to purchase.

More: How much should you spend on a car?

New vs used: FAQs

Is it better to buy a used car or a new car?

New cars cost more, but compensation typically comes in the form of modern technology, a better warranty and a clean-slate history. Used cars are more affordable, provided the buyer has the car checked for potential mechanical problems.

How much can I expect to save when buying a used car?

Numerous factors will determine the cost of a used car, including its age, the distance travelled over its operating life, whether it’s a volume seller or a prestige model, or whether it’s collectable. As a guide, a buyer can save up to 20 per cent from the new-car price for a car that is 12 months old. After that, depreciation settles down to around 10-15 per cent for the next two or three years. Depreciation can vary greatly between different makes, models and powertrains, so it’s worth tracking market prices.

How much cheaper is a demonstrator than a new car?

The buyer can pick up an entry-level light hatch as a demonstrator costing $2000 or more below the on-road price of a new car in the same specification. As the buyer sets their sights higher, so the price difference widens. An upmarket SUV in the $40,000 range might be discounted by $4000 or more for a demonstrator.

What if I want a new car, but can’t afford it?

Always set a limit for a car purchase when paying cash, whether the car is used or new. If the buyer can easily accommodate loan repayments in a monthly budget, finance is a realistic option.

What are the pitfalls of buying a used car?

A buyer needs to be wary of buying a used car that has led a hard life. The statutory warranty from a dealer only lasts three months or 5000km, and an engine that fails unexpectedly, outside the warranty, could cost $20,000 to rebuild or replace. Always have a used car inspected by RACV before handing over cash for the purchase.

Is now a good time to buy a used car?

Yes, for many buyers, now can be a good time to buy a used car, particularly if affordability is a priority with a budget of $30,000 or less. Used car prices have stabilised and fallen compared to recent peaks, and supply has improved. Buyers also have more choice across popular models and powertrains (particularly EV and hybrid), and the arrival of new car brands in Australia. The key is to focus on used cars with a full service history, remaining factory warranty where possible, and to have the car inspected before purchase to reduce risk.