Buying a new car
I would like to give buying a new car tips and ideas 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 leasing a new car to compare whether leasing a new car or buying a new car 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 when buying a new car . With that said, lets take a look at buying a new car. 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
Okay so what are the advantages and disadvantages of buying a new car?
buying a new car 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.
When buying a new car 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 buying a new car… buying experience. Now lets get to the more serious reasons that make this a practical and hopefully good investment.
When your buying 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 buying a new Car, Truck or SUV purchase. The nice part of buying a new car; 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. On the other hand it’s a big purchase.
Buying a new car & financing
The biggest drawback to buying a new car 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 buying a new car. buying a new car can be expensive, just search for buying a new car 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. buying a new car 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 with buying a new car, nothing written in stone but looking at a $30,000 vehicle with under a 100 miles mwould 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.