Why You Should Never Buy Another New Car
Buying a new car can be a remarkably fun experience for many people and is often a milestone on the path to being a “success” in life as well.
When the new car smell wears off, however, owners are often left with a frightening realization: that they have a new mountain of debt to pay off, and their car is rapidly declining in value. In fact, a recent study found that this is the #1 regret of car buyers (granted, it was conducted on behalf of CarMax, who sell used cars). Sometimes, this reality doesn’t kick in for years when it comes time to trade the car in for a new one and the dealer offers a few thousand dollars as consolation. If you aren’t on top of your personal finances to find out where your money is going, it is very possible that this realization could slip by you for decades.
The fact is buying a new car just doesn’t have the same value that it used to. Modern cars are more reliable than ever, which means that worries of inheriting someone else’s nightmare should no longer hold you back from buying used.
If you’re still afraid of the downside, consider the huge upside, which is of course the cost savings. As soon as you drive a car off the lot, its value can drop by 20%. Add to that the 15% per year depreciation, and you are looking at an instant 35% discount by buying a car that is just one year old. On a $25,000 car, that means $8,750!
The car will still be covered by the full manufacturer warranty typically for another 2 to 4 years, so you don’t even need to be concerned about the reliability any more than you would with a brand new car. Once you factor in the additional interest and dealer fees, buying a brand new car and selling it after 3 years can easily be twice as expensive as buying a car that’s a year old, with no difference in styling, features, performance or reliability over the same 3 year period.
The next time you feel compelled to trade in a car for one that’s brand new, consider whether the new car smell is really worth the thousands of dollars that you’re giving up for it. Even in today’s economy, with huge dealer incentives and cash back, the used market typically offers better values since nobody is buying.
