Buying a new car is a big investment. You want to be sure that you are getting the best car for your money by researching every car before you purchase it.
If you are thinking about buying a new car, be sure to ask yourself these ten big questions before you make your decision. 1. What will you use your car for? 2. How hard is it to park? 3. How much is it to maintain your car? 4. How much is it to insure your car? 5. What kind of car seat will you need? 6. What do you have to pay for a car? 7. Where do you want to buy your car from? 8. How much will the insurance cost? 9. Will you need to repair your car? 10. How much do the repairs cost?
Do you want to earn extra money?
Wondering why you should never buy a new car? It can be hard to take. Maybe you really like the smell of a new car. Now you can buy it in bottles. And that’s just as well, because you should probably never buy a new car. You know how expensive they are. But if you earn enough, doesn’t it make sense to buy a car that isn’t used? Maybe as a personal decision, but not as a financial move. As Thomas J. Stanley and William D. Danko examined in their book Millionaire Next Door, they found that more than 20% of millionaires buy second-hand. For some high net worth individuals, it’s just one of many smart financial steps that help them build and preserve their wealth. Furthermore, CarFax claims that cars can lose over 10% of their value in the first month after they leave the lot!
10 reasons to never buy a new car
To discourage you from buying a new car, here are 10 reasons why you should never buy a new car.
1. New almost always means higher purchase price
This is no surprise, and we’re not just talking about the sale price. It is the total cost over the term that you need to consider. Think about it:
- Taxes for car dealers
- Maintenance (e.g. oil change, etc.)
- And then there’s…
That’s not to mention the cost of car insurance, sales tax and other costs associated with buying a car. Add to that the cost of repairing the car. Raise an eyebrow? And here we debunk the myth that a new car is financially attractive because it requires fewer repairs. So if you compare the total cost over six years (which includes maintenance and all repairs), Edmonds.com found that buying a three year old car beats buying a new car by thousand dollars. Saving money is the main reason for buying second hand. Who couldn’t use a few thousand dollars? So most of this list is devoted to why you save as much as sellers say by buying a used or pre-owned vehicle. And before you get caught up in the idea that driving a new car will give you a different, better experience than driving a used car, consider this: Similarly, when you start a new car, don’t you drive a used car after you’ve driven it for a while? By the way, when we bought our van, we paid about $8,000, which was $15,000 less than what a similar new model would have cost. And no, we didn’t spend that much on repairs.
2. You pay more interest
How much will you save by buying a used car? This depends, among other things, on whether you are paying for the car in cash or financing it. Loan ratesto are generally lower for new car loans, so you might think that’s a reason not to buy a used car. However, since you usually borrow much more money to buy a new car, you usually pay plus in total interest charges than when you buy a used car. Use the car loan calculator to compare the cost of a car for a specific car loan or personal loan amount and find out your loan rate. If you pay cash, you exclude all interest costs . This is exactly what we did when we bought our van. And for most of us, it’s probably more realistic to save up enough money to buy a good used car, than to pay cash for a new one.
3. New models depreciate faster
Still wondering if you should buy second hand? At some point you will have to trade in or sell your car and you will realize how much value it has lost. When Edmonds.com made the comparison, it calculated the residual value of each car after six years. Unsurprisingly, depreciation is higher on newer models – this explains much of the extra cost. According to Carfax.com, a new car loses about 20 percent of its value in the first year, and some cars lose as much as 50 percent. The average depreciation rate is 60% over the first five years. Depreciation slows down over the years, but either way, if you buy a cheaper used car, you lose less overall value. According to Carfax.com, a $30,000 car loses at least $6,000 in value in the first year, possibly $15,000. That’s more than our minivan’s $8,000 depreciation in the three years we’ve had it.
4. They pay higher taxes and royalties
Most states impose a sales tax and registration fee when you buy a vehicle. They can be significantly higher for new than for used, mainly due to the price difference. It’s pretty easy to figure out that the sales tax has gone up. Regardless of the tax rate, the following rules apply: If you pay twice as much for a new car as you do for a used one, you generally pay twice as much sales tax as well. However, in most states, the registration fee is also based on the cost of avehicle. For example, if you live in Santa Monica, California, and you buy a new car for $25,000, the DMV’s registration fee calculator will cost you a total of $2,515 in taxes and registration fees. A used car bought for $12,000 will cost you $1,241. That’s still a lot, but it’s a savings of $1,274 (not counting the $13,000 you saved on the purchase price).
5. You pay higher insurance premiums
As a rule, used cars are insured at a lower price than new cars because the insured value is lower. Allstate Insurance says buying a used car will save you an average of $756 a year. Of course, it also depends on the model. Some, whether new or used, are just expensive to insure. To save even more money, check out the list of the cheapest and most expensive cars to insure before making your purchases.
6. You must fully insure new vehicles
There is another way to lower your used car insurance premiums. In fact, you may have enough money to pay cash for a cheaper used car but not for a more expensive new car, leaving you with yet another way to save on insurance. See, when you take out a car loan, lenders require collision coverage. But if you buy the car for cash (and can afford the potential losses in the event of an accident), you can forgo collision coverage altogether and pay much lower insurance premiums. We don’t pay comprehensive insurance for our van, which saves us hundreds of dollars a year. Without a lender telling us what coverage to buy, we can also opt for lower liability limits to lower our premiums further (I don’t recommend this, but it’s an option from to ).
7. New vehicle, limited to your choice
Let’s say you need to buy a car that costs no more than $20,000. In this case, you can’t buy a new Mercedes-Benz C-Class, as the price starts at just over $41,000 before addition of options. In fact, there aren’t many new models you can buy for less than $20,000. Fortunately, all options are available to you if you are considering a used model. If you’re looking for a Mercedes Benz C-Class, but can’t afford a new car, consider the 2009 model. It’s on Autobytel.com’s list of the most luxurious used cars you can buy for under $20,000. Or take the example of this author. My wife and I could have bought a new car, but we would never have gone into debt to buy a depreciable asset. So we would be stuck with our money in a new but small car, which could not be used for camping or transporting furniture. Instead, we bought exactly what we needed. In other words, buying used cars allows you to change the look of the cars you buy, giving you many more options no matter how much you have to spend.
8. You worry more when you buy a new device
When I lived in Colorado, I sometimes saw drivers of new four-wheel drive trucks avoid scenic mountain roads because they were afraid of a scratch or two. It’s just sad. What good is a four wheel drive if you can’t have fun with it? Meanwhile, I let the branches on these narrow dirt roads rub against our van without hesitation. The new scratches blend in with the old. Let’s face it: When you have something new and perfect, you worry about every little thing that can damage it, right? If you’re buying a new car, you may also want to consider the next item on our list…..
9. New cars can be a target for thieves
Not all cars are at increased risk of being stolen. But it’s safe to say that our ten-year-old minivan is not at the top of the list of thieves. Of course, the risk of theft also depends on the condition of the vehicle and the type. The list of most stolen cars shows you which models are most often targeted by thieves. Consider buying cheaper cars if you live in a high crime area.
10. Used cars Can be more reliable
Low mileage doesn’t always mean high reliability, which can seem counterintuitive. How can used models be more reliable than new models? Indeed, some cars are just better from day one, but you won’t know that until they’ve been running for a while. Let me explain… The number and severity of mechanical and other problems vary from model to model. And if you look at the reviews in the Consumer Reports guide for used car buyers, you’ll see that even the reliability of the same model can deteriorate significantly from year to year. The important point is that since they are based on reports from real owners, these reviews become more meaningful and accurateafter a few years. Look at this guide, and you’ll see at a glance rows of black markings telling you to avoid certain cars. In other words, with such a guide, you can choose a used car with proven reliability instead of taking the risk of buying a new car. By the way, if you don’t subscribe to Consumer’s Reports, you can find their car buying guide in most local libraries. They list cars by model name and year, and give reviews on everything from brakes to electrical systems to paint quality.
Pros and cons of buying a new car
- Low financing rates
- Extended warranty
- Previous new owners
- Known history of the vehicle (practically none, since it is new).
- Limited choice
- Maybe more thieves
- Generally higher costs
- Low mileage
- More expensive (probably the biggest drawback)
- Fast depreciation
- Car insurance costs
- Increase in taxes and other charges
- Complexity of credit card processing
Should I buy a new car?
Buying a new car can be a very important financial decision. Moreover, buying a used car has many advantages and also offers peace of mind. Let’s take a look at the 10 real reasons why you shouldn’t consider buying a new car.
- The new models are more expensive and offer limited choice.
- You pay more interest
- New cars lose their value faster
- Increase of taxes and registration fees
- Higher insurance rates
- You must insure new cars in full
- A new car limits your choices
- You worry more when you buy new
- New models can be targeted by thieves
- Second hand cars can be more reliable
- You save a lot of money by buying second hand
And I’m not even counting negative equity. A negative equity means that the value of your vehicle is less than your balance. How does this affect you? First: If you are involved in an accident and your car is considered a total loss, you may find yourself in a bad situation. For example, if your Ford Explorer is worth $20,000 and your debt is $25,000, you have a negative net worth of $5,000. Since insurers generally offer you compensation equal to the value of the car, you will be left with $5,000 for your car loan. How do you feel about paying for a car you don’t own? It’s horrible! Additionally, finance companies will rarely pay off your loan for a smaller balance due to a total loss. You will have to make full payment for a vehicle you no longer own. Or, if you want to trade in your car with negative equity, dealers will usually transfer the surplus (or $5,000 in this example) to buy your car, but sometimes, depending on how much negative equity you have, they may not! So if you’re trying to replace your sedan with an SUV or minivan for a growing family, you may find yourself in a tough spot because the dealer won’t include negative equity in your loaner car. This means that you immediately get negative capital when you buy. Although this can happen to both new and used cars, it is more likely to happen to new cars because they lose their value very quickly. Keep this in mind when you decide to buy a car. Consumers Reports, in its guide to buying used cars, offers free online information on how to avoid leaks when buying a used car and which used cars are best to avoid, in addition to reviews. You can also purchase a car history report from an online service like CarFax.com. In short, don’t make buying a car one of your worst financial decisions. Keep the extra money and buy a used car. Do you have a reason to never buy a new car or a reason to buy a car that is several years old? Tell us about it in the comments below!They say that everyone loves a bargain, but I can’t help feeling a bit uneasy when I hear that statement. I don’t know about you, but I can’t help but feel a bit apprehensive when I hear about all the hundreds of deals that are coming up this month to tempt me into buying a new car. But why?. Read more about why buying a new car is a bad idea and let us know what you think.
Frequently Asked Questions
Why you should never buy a new car?
Buying a car is a huge investment in your life, and you should be well aware of the risks if you choose to buy a new car. There are loads of articles on the internet about this, and most of them are really good, but here are our top 10 reasons not to buy a new car. Buying a new car is one of the biggest purchases most of us will make in our lifetimes. This was especially true before the advent of online research tools like CarGurus and Cars.com, which now make it a breeze to get side by side comparisons and price quotes from dealerships. These days, most of us want to buy our new ride from the dealership, but only because they offer us a better price. But is it really better?
What are the disadvantages of buying a new car?
The biggest reason you should never buy a new car is that the manufacturer will make money from you. That’s right. The manufacturer of your new car will make a profit from the sale of your new car. Want to know why? Because of how they make their money. Buying a new car is a big decision. You have to weigh a bunch of factors, including safety, convenience, gas mileage, styling, and resale value. The main problem is that you can’t save thousands of dollars by trading in your old clunker for a new car. The only way to save money on a new car is to buy a used one. But used cars are usually more expensive. So, there’s nothing left to do but decide whether it’s worth the extra money to buy a new car.
Why Buying a car is a bad investment?
Car prices have increased considerably since 2000, when the average new car cost just over $28,000. That’s right, nearly eight times as much. As car prices have risen, so have the numbers of new car owners, who took out loans to buy cars they didn’t really need, then watched those debts spiral out of control. In 2016, the average new car cost nearly $35,000, and the average new car owner still owed $20,000 on their car after three years. Buying a car is not a financially sound move. It’s not just because of the high interest rates, or that the average car will lose so much value in the first few years. You can buy a car for the same price as a new one, and it will be older in a few years and worth less. But you are not just paying for the car. You are also paying for the taxes, insurance, and maintenance that a car will require.
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