When new cars are cheaper than used

According to research by What Car, you could buy a new car for hundreds of pounds less than a one-year old vehicle, if you do your homework.

Most car buyers assume new models are always more expensive thanks to the sharp drop in value when a car is driven off the forecourt, so they think their budget will only ever stretch to a used vehicle.

However, What Car research shows this isn't always the case. The range of attractive finance deals and low-cost or interest-free loans currently offered by manufacturers and dealers means buying new can sometimes be the cheaper alternative.

The study analysed deposit amounts, monthly finance payments or personal loan repayments, excise duty, warranty and MoT test costs and depreciation across a range of cars and found that used car ownership cost more in 50% of cases.

Don't take it for granted that a used car is automatically going to offer you the best value

For example, a new Skoda Citigo, with its list price of £9490, would cost a buyer £5029 over three and a half years. A one-year old version priced at £8598 would cost £6246 over the same period. That means the new car will save you £1217.

What Car? consumer editor Emma Butcher said: "Our research turns the traditional assumption about car buying on its head.

"Don't take it for granted that a used car is automatically going to offer you the best value. The combination of low interest rates and car maker incentives can make a new car a better buy. Do your homework and you may just surprise yourself."

New car buyers can compare the latest hot deals on brand new cars at whatcar.com/dealsoftheweek.

What Car?'s research was based on new car buyers using a standard Hire Purchase finance agreement or a Personal Contract Purchase (PCP), in which buyers pay a deposit and then a monthly amount over an agreed period, typically three or four years.

At the end of the period, they have the option to buy the car outright by making a lump sum payment or selling it back to the dealer to buy another new car under a new PCP agreement.Using a PCP to buy a car is not always cheaper; drivers looking for a VW Golf 1.4 TSI 122 SE 5dr can save £2846 over three years if they buy a one-year old version, once finance package payments, deposits and other costs have been taken into account.

Nonetheless, across the basket of cars studied by What Car, manufacturer finance arrangements saved an average of £1038 in interest charges when compared with high street loans.