The time of getting yourself a car has arrived, depending on your budget and the kind of car you have always wanted, you are now trying to decide whether to put your money into a new or a used car. While buying an old car can save you thousands upfront, buying a new car has its advantages.

However, before you are enticed by the feel of a new car, start by evaluating how much you will be saving by buying a used car instead. The average person in Kenya owns about 6cars in their life time, if each of these cars are about 3year old, you can calculate how much you will be able to save on each car purchase.

How Depreciation can save you money

Depreciation has been used in negative light but when it comes to buying a car, it is the real money saver. Understanding how car depreciation work equals to figuring out car buying’s secrets. A car loses 20% of its value the moment you buy it, after a year of mileage, wear and tear, it loses about 10%, and this is barely noticeable until the day you decide to trade in or sell your car.

Let’s take a look at two similar vehicles, a new car and a used car.

New Car Depreciation– A new car loses around 30% of its value after one year. If you bought the car at Ksh 3m and sold it 3 years later for Ksh 1.5m, the car will cost you Ksh 1.5m in depreciation.

Old Car Depreciation– On the other hand, if you had bought the same car but three years old at Ksh 1.5m, you can sell the same car after a 3 year period for Ksh 1m at a deprecation cost of Ksh 500000.

Driving a new car feels terrific but it will cost more in the long run. Of course there are stigmas surrounding buying used cars but that shouldn’t stop you from saving a huge amount of money.

Advantages of buying used cars

Vehicles are now more dependable than ever before in two ways;

Maintenance– One can drive today’s cars for longer periods in between regular maintenance like oil change, brake jobs or tire rotation. Tires and brake pads last longer in today’s car than earlier versions.

Reliability– Today’s cars can deliver up to 100,000miles without requiring any major repairs hence you will not be buying someone’s problem according to common misconceptions.

Lower car insurance rates– A car’s value determines the insurance rates especially collision and comprehensive coverage, the less the car’s worth, the less it will cost to insure.

Cheaper Registration– The cost of registry renewals/ registering a used car lowers each year.

Less stress– We all spend more time paying attention to a new car, the first dent on a new car is likely to give you more headache compared to a dent in an old car

Get a Luxury car– Buying a used car saves you enough more to buy a more luxurious car than a cheaper new one.

Advantages of buying a new car

Buying used cars has one great benefit of saving you money, however buying a new car has its perks.

Better financing options– Auto and Logbook loans lenders offers better interest rates on new car loans or car buying incentives like Import Duty Financing.

Shopping is easier– Compared to buying used cars, new-car shopping is easier. All new cars are assumed to be in perfect condition and do not require being taken to a mechanic.

Advanced Features– New cars has enhanced technology for better performance, safety, and comfort, a feature obviously that lucks in old cars.

Prestige– New cars gains you respect and envy from peers, it is hard boasting of buying an old vehicle.

Peace of Mind- A new car comes with a warranty of up to 3 years or 30000 miles, it’s also more reliable than a used one.

So, New or Used

There are times when purchasing an old vehicle will not cost more than buying a 2 year old vehicle. This is because not all car brands depreciate at the same speed. Some brands maintain their value well for longer periods of time.

Depreciation can be your dirty little car buying secret. If going for a used car, go for one that can hold its value, this will minimize any effects. If you are not still sure, use a car loan calculator to see the difference if you choose to buy a new one instead.

Millennials generally are an optimistic group, while this is a good way to live life, being overconfident sometimes can be costly. Compared with older drivers, 35% of millennial aged 20-30 do not have car insurance.

When it comes to car Insurance, being a terrific driver is not enough, something is bound to happen to your car that may have nothing to do with your skills as a driver, and as such you need to be prepared.

To avoid chances of ending up in financial hardships, car insurance is critical. Read on to know what kind of coverage you will require.

Collision Coverage

Accidents happen on the daily more so during the festive seasons and these are the ones that are reported. Accidents are costly to drivers with collision claims costing approximately half a million, paying such a hefty amount from your pocket is draining.

Car Insurance is not a fun way to spend money but it does comes in handy in such instances. Auto Insurance may not as fulfilling or exciting as getting the latest phone in the market or vacationing in a beach yet, it has been made a legal requirement in many countries for a reason.

Uninsured Motorist coverage

In case your car is hit by someone without an auto insurance, the uninsured motorist coverage will cover your car repair costs, medical bills, funeral expenses in the worst case scenario and any pain and suffering costs.

Body Injury Liability Coverage

As the name indicates, this auto insurance will cover expenses like legal fees, medical bills, rehabilitation cost, funeral costs and any other expenses occurring as a result of an accident that causes injury to you or your passenger as well as the driver and passengers in other vehicles or pedestrians.

Property Damage Coverage

The property damage liability coverage protects one in case of an accident that harms or destroys people’s property for instance a fence, it will help pay for the repairs or replacement if need be. This however might not cover the damage to your own car and you will require the Collision coverage.

Comprehensive Coverage

Comprehensive coverage does not mean it covers everything, it however covers damages to your car that are not as a result of collision for instance vandalism, theft, natural disasters, riots, fire, damages by animal and falling objects among many others. Comprehensive covers also pays for theft of your car or any of its part.

Insurance rates for new vs. old cars

Unlike the popular belief, new cars are not more expensive to insure than old ones. Advanced Safety features in new cars ensures that damage if any will be minimal hence low rates unlike old cars that might cost more to fix. Auto insurance are mostly determined by the expected amount of damage to your car.

Car Insurance during Leasing

When leasing a car, dealers may require you to get gap insurance in case the car is stolen or involved in any accident. Gap insurance covers the difference between the value of the vehicle and the amount you owe on the lease, some lenders already have this kind of insurance, be sure to go through your lease contract carefully.

What contributes to Car Insurance Rates?

Deductible– This is the amount you pay out of your own pocket in the event of an accident. The higher the deductible the lower the car insurance.

Gender– Men pay more than women

Age– The younger the driver the higher the rates

Demographics– City residents are more likely to get in accidents than rural areas, same as areas with more people.

Violations– Moving violations like speeding can also increase your rates, obey the law to keep your rates low

Claims– The number of claims you file increase your rates, the higher accident prone you are, the more you will pay.

Type of vehicle– Sports car insurance cost more than sedans. The more expensive the car, the more you pay.

Tips for lower Auto Insurance

Avoid gaps in coverage– Ensure you are covered at all times even when you are changing policies.

Compare rates for different cars- Compare premiums from different car insurance when shopping for a new car.

Claim your discounts– You are eligible for discount depending on your insurer if your car has advanced safety features, anti-theft or anti-locks brakes.

Auto insurance is a must have with many types of coverage being mandatory in certain countries. Besides legal reasons, car insurance protects you against financial hardship in the event of theft, damages and injury to others and yourself. While car insurance is of utmost importance be on the look out to avoid for paying for coverage you might not need or use.

Shop around to get the best auto insurance company that can offer you a reliable deal. Based on your financial status and the age of the car, you can get quotes from different car insurance companies to compare their policies.