Should I Buy a New or Used Car? (Australia 2026)

Let’s talk about the biggest cost of car ownership: depreciation. When you drive off a dealership lot in 2026, you are essentially buying a depreciating asset. Most new cars lose between 20% and 30% of their value in the very first year alone. This initial drop is massive and often overlooked when calculating the true cost of ownership. When you compare a brand-new $50,000 sedan to a 3-year-old equivalent, the initial difference is huge, but the hidden costs of that new car—including the accelerated drop in value—can quickly make the used option the smarter financial play. Always factor in the residual value when doing your maths. Before committing, use our Total Cost of Ownership calculator to see how depreciation impacts your budget over five years.

To make this concrete, consider a scenario: a brand-new $50,000 SUV versus a reliable 3-year-old model priced around $25,000. While the initial outlay for the new car is higher, the used option saves you tens of thousands upfront. However, the new car offers peace of mind with its full manufacturer warranty and lower interest rates on a new car loan. On the other hand, the 3-year-old car has already absorbed the steepest depreciation hit, making its cost per year much lower. The deciding factors come down to your driving habits and your tolerance for risk. If budget is tight, the savings are clear. If you need the absolute latest features and manufacturer peace of mind, the premium is for that reassurance.

If you are considering an Electric Vehicle (EV), the conversation shifts dramatically. For those who can structure a novated lease, the Federal Tax Benefit (FBT) exemption can make a new EV incredibly attractive, offsetting the high initial purchase price. However, this only makes sense if you plan to keep the car for 10 years or more, maximizing the benefit of the lease and minimising your annual depreciation loss. If you are committed to a new EV and want to compare potential financing costs, check out our current new car loan rates guide. Conversely, if you are buying a used vehicle, ensure the battery warranty is robust, as this is the most critical component of any modern EV.

For most Australian commuters, the 'sweet spot' is the 2-to-3-year-old ex-lease car. These vehicles have benefited from the worst of the depreciation curve, meaning they are priced significantly lower than their new counterparts, but they still offer modern technology and are typically well-maintained by their previous owner. They are often reliable, have excellent remaining warranties (or can be covered by third-party insurance), and save you the bulk of the depreciation hit. When shopping for these, always check the service history and the mileage. If you are unsure how to assess the value of a used vehicle, we have a detailed guide on buying ex-lease cars that can help you negotiate the best deal.

Q: Are used cars always cheaper to insure?

A: Not necessarily. Insurance costs depend heavily on the model, your driving record, and where you live, not just the age. However, older cars often have fewer expensive technology packages, which can sometimes lower premiums. Always get multiple quotes for any model you consider.

Q: What should I look out for when buying a 5-year-old car?

A: Check the suspension components, transmission fluid, and the service history rigorously. Ask the seller for a full service record from an independent mechanic, not just the dealer.

Q: Does the colour of the car affect its resale value?

A: While there’s no hard rule, neutral colours (like black, white, silver, and grey) generally maintain better resale value across the Australian market compared to highly vibrant or specialty colours.