Buying a new car?
I would like to give some car buying tips or maybe more of a quick guide should you consider
buying a new Car. This article applies to most any vehicle on the market. See my article on
auto lease to compare whether getting into a car lease or buying is the right move for you.
This isn’t a comprehensive article but sort of an overview touching on some points that maybe
you haven’t considered. With that said, lets take a look at buying a new Automobile.
Let me start off by saying that buying a new car is usually the second biggest investment someone
will make next to buying a home.
The odds are pretty good that a new home purchase won’t actually be a “new” as in brand new never
lived in home but a used or pre-owned one that is new to you. So with that being said, I guess buying
a new car is the biggest “new” investment that most of us will make in our lifetime.
Here is a calculator to determine how much car you can afford.
Okay so what are the advantages and disadvantages of buying a new car?
Buying new is fun and can be exciting because it will be yours, that’s pretty cool.
It’s got that new car smell and the vehicle is flawless. Inside and out that new vehicle makes you feel
like a million bucks when you drive anywhere. You are just making up excuses to go driving.
Everything is new and perfect, the steering is responsive and the braking can even be fun to see how
quick you can stop. You just can’t wipe that smile off your face…yes it’s that good.
Well I just wanted to get that part out there because those are the touchy, feel good parts of the car
buying experience. Now lets get to the more serious reasons that make this a practical and hopefully good
investment. When you purchase a new car whether it’s leasing or buying, it’s under warranty and for at least
the next three (3) years all you have to worry about is making the monthly payment
No surprises as far as service is concerned apart from regular maintenance. No worrying about auto
mechanic cost for repairs. If you plan on keeping the vehicle more than the warranty period then you
should seriously consider an extended warranty and check my site as I will be giving extended warranty tips.
I have worked in the auto industry for a long time and understand what is involved with a new Car, Truck or
SUV purchase. The nice part of buying a new vehicle; you don’t have to worry about it’s history or anything
else along those lines. It’s a lot less time consuming than buying a used car. It’s so much easier to buy new
if you can afford to.
Buying a new car & financing
The biggest drawback to buying new cars are the Prices & rates and the total cost of car loans especially if you
don’t have a trade-in which equal discounts. This is usually when people get “sticker shock” when they see the
sticker price. New cars can be expensive, just search for new car buying guide or go to some local car dealers and
look at the dealer invoice price. The dealer invoice prices is where you’ll see the breakdown of the new car quote
along with dealer cost which is what it cost the auto dealers.
The auto insurance cost is higher because of the replacement value in the event that it gets totaled in a collision
or stolen and then the insurance company has to replace the vehicle.
The depreciation of a new vehicle takes it’s biggest hit when you drive it off the lot which could be as high as $4,000
and then usually drops by roughly $1,500-$2,000 or so each year after that.
Of course those numbers are not 100% as I just through them out there instead of using percentages. While
percentages are more accurate sometimes it’s better to see actual numbers to put it in more perspective. I was
thinking $30,000 as a mid-range number.
Just some quick math and nothing written in stone but looking at a $30,000 vehicle with under a 100 miles
would be worth around $26,000 once driven off the lot. Then a couple thousand each year makes that $30,000
vehicle worth roughly $17,000-$18,000 or so after 5 years with the right miles.
Again I’m just using quick math because of time and space reasons. There is a lot more that goes into the
equation but I think you get the idea.
Anything over the average mileage per year is going to have a negative impact on the depreciation. This is
vehicle dependent as far as depreciation because the residual value of some vehicles are a lot better than others.
At the time I wrote this article Honda, Lexus, BMW, Mercedes Benz are good examples of vehicles that hold better
residual values. This is just to give you a quick hypothetical example of how the car market works. There is more
that goes into the equation than this like options the vehicle has… etc.
In closing I want to briefly recap the the good and bad points of buying a new car:
The Good:
- 3 or year warranty – no auto repair cost
- Piece of mind that you won’t get stranded
- You know the history of the vehicle
- It’s got that new car smell
The Bad:
- Depreciation in the first year is huge
- Insurance is usually higher
- Keeping it free of dents, dings & scratches
- Keeping it clean & looking new
As with every major purchase that we make, there is research that needs to be done in order to make the
right informed decision and not leaving anything to impulse. I hope I have helped with my point of view on
buying a new car.