We all know that a used or demo model can be a lot cheaper than a brand-new car. But we wanted to see how much you could save in the short and long term if you bought a used car or demo model instead of new and invested the difference in instalments. You’ll be amazed at what we found!

What cars cost

We started by looking at purchase prices and instalments for the same car make for a new, demo and used model to find out the cost difference over 6 years. Details of the car and finance calculations are in the notes.

These are the monthly instalments for each option, and the total paid at the end of the loan.

ModelPurchase priceMonthly instalmentTotal paid after 6 years
New252 4004 530326 160
2019 Demo245 8004 418318 096
2018 Demo199 9003 613260 136
2017 Demo174 9953 169228 168

So, we know it is cheaper to buy a less expensive model, but how much difference could that make to your savings in the long term?

We asked: what if you buy an older model and invest the difference between a new car instalment and the demo and used car options every month for the six years of the loan repayment?

If you earn a return of 8% per year, here’s the lump sum amount you would have after six years.

ModelTotal saved after 6 years
2019 Demo10 281
2018 Used84 181
2017 Demo124 941

So, if you buy a used or demo model instead of new, and you invest the difference, in 6 years, you could have a very healthy balance in your savings account!

Top tip:
If you are wary of buying a used car, have a technical inspection completed by DEKRA, which will give you a full assessment of the car. The inspection costs R2 365 and takes 3 hours. Demo models are usually checked and serviced before resale by the various dealers.

What if you invest the lump sum for another 24 years?
We were so impressed by the numbers that we took it a step further and asked how much would the amount already saved be worth if you invested it as a lump sum and didn’t contribute anything further for another 24 years, again assuming an 8% return.

ModelInvestment amount after 30 years
2019 Demo65 193
2018 Used533 806
2017 Demo792 273

Now, you might have to pay tax on your investment amount if your investment earned dividends, and capital gains tax (CGT) when you take the money out of your investment account. But you would still have saved a substantial amount.

The end result

If you buy a demo instead of a new car and invest the difference between the premiums over an extended period, you can save over R700 000! That’s a great sum to take a dream trip or put towards your retirement.

Final thoughts

We’re all looking to cut costs and save money. If you can afford to buy a new car, think about taking a demo or used model and investing the difference in the instalments. Your finances will benefit in the long term.

More details on our calculations

  • The car: VW Polo Trendline.
  • New car price: From the VW website, no additional extras.
  • Demo models: From usedcardeals.co.za and McCarthy. We confirmed with the dealers that the cars were available.
  • Used car: Mastercars.
  • Finance calculator: Wesbank’s vehicle finance calculator.
  • Finance assumptions: 10% deposit paid upfront, no balloon payments, repayment period 72 months (6 years), 12% interest.
  • Insurance: Not included in the calculations.
  • All amounts are in rands, rounded up.
  • Capital Gains Tax (CGT) may apply to investment gains. The amount will depend on your gain (how much your investment increased from when you first invested it) and individual tax rate