So here you are, seriously considering purchasing a brand new vehicle. The truth is, you’re probably already looking at new cars. You may even be planning to buy one shortly. Before you do, first consider the reasons not to buy a new car.
You probably have a lot of friends that drive new vehicles. You’ve been in them. They’re comfortable, classy, sexy and probably destroying your friend’s finances for the foreseeable future.
I’m glad I caught you before you take the plunge. I have been down this road before, 3 times to be precise. Partly because I’m a sucker for a slick salesman and partly because I used to care deeply what people think of me. That was what drove me to buy new vehicles.
I’m hoping to save you a bit of pain by highlighting some really good reasons not to buy a new car. These are things that I’ve learned the hard way…3 times. For me, making payments on a new vehicle is the emotional equivalent of stepping barefoot on a piece of Lego over and over again.
In my opinion, there are a couple of good reasons to buy a new car, and a whole bunch of reasons not to.
With dealerships advertising super low (sometimes even 0%) interest rates, offering higher trade-in values and all sorts of other promotions, a new set of wheels might be awfully tempting right about now.
Well before you head down to the dealership to sign your life away, read this post through to the end. I’m going to show you how to decide if a new or used vehicle is right for you.
Here’s what I’m going to show you in this post:
- Why you ALWAYS lose money on a new car
- Why warranties don’t really matter
- How salesmen get you to sign, even if you’re not completely sure
There are many more reasons to stick with your aging ride, or upgrade to a more recent model on Craigslist, but I’m going to give you my top 8.
Table of Contents
9 Reasons To Reconsider A New Vehicle Purchase
-
New cars depreciate rapidly
According to Edmunds.com, a new car loses an average of 11% of it’s value the minute you drive it off the lot. After that, it continues to depreciate at a rate of 15-25% per year for the next 5 years.
Naturally, your results will vary depending on the make, model and purchase price of the vehicle you choose. I think we can agree however, that you stand to lose a crap-load of money over the next 5 years.
-
A car is a tool, not an investment
I can’t count how many times I’ve heard the word ‘investment’ used when referring to an automobile. Let’s clear this up right here: a new car is NOT an investment. Ever.
An investment by definition has to have some potential for a positive return. Unless you drive for a living such as a courier or salesperson, your car just isn’t ever going to make you money.
There’s nothing wrong with that. It’s just a tool, like a can opener or a coat rack. You spend money on those things and you recognize that you’re not going to get it back, and it’s worth it to have the tool. Start viewing vehicle ownership the same way.
-
You’re probably going to buy things you don’t want or need
Dealerships know exactly how to extract every last penny from you. They know how to get you to sign up for undercoating, paint protection, extended warranties, disability and death insurance on your payments.
But worst of all is the monthly payment. This the new car salesperson’s oldest trick, and it’s a good one. In the finance office they will ask you: “how much can you afford each month for a car payment?”
This is a red flag. They don’t want you to know the true cost of the vehicle. Encouraging you to view the transaction in terms of monthly payments also makes it easier for them to sell you upgrades because hey, “It’s only an extra $5 per month, you spend more than that on coffee!”
-
If you finance the car, you don’t own it
You do not own a vehicle that you owe money on, it’s as simple as that. The company that holds the credit note owns it. Don’t believe me? Stop making payments for a couple of months and they will send a repo man over to take it back.
Please don’t fool yourself on this. Unless you pay cash in full for your vehicle, you don’t own it. The bank is simply allowing you to drive it as long as you continue making your payments.
-
You get way less car for your money
For $15,000 you can get a loaded 5 year old car with leather seats, GPS backup camera and all the bells and whistles. That same $15,000 will get you a base model compact if you go the brand new route.
-
Warranties aren’t all they’re cracked up to be
It is nice to have a car with a warranty, but it’s really not essential. If you do your research and buy a used car that’s well-rated for reliability, and have it checked over by a good mechanic before buying, and keep up with maintenance, you’re unlikely to have major problems.
Even if you did have to do a major mechanical repair on the used car, the cost still would not add up to what you would pay at the dealer when you account for interest and depreciation.
-
It’s not going to be new for long
That thing is going to get dented and scratched. People are going to back into you at the shopping center and it will drive you nuts having damage on a car that you still have 4 years worth of payments on.
This one I can relate to. My friend dropped something against the side of my nice new truck and I had a conniption!
-
You will pay more for insurance
If something happens to that nice new car, it’s going to cost your insurance company a lot of money to replace it. So of course it stands to reason that your rates are going to be a lot higher than they would be on a 5 year old car.
I have made my life much more difficult by convincing myself that a new vehicle is something that I really needed. I hope that the 8 things listed above give you a better picture of what you’ll be getting yourself into when you purchase a new vehicle.
Here’s the thing, you may be thinking that I’m completely against buying new vehicles, I’m not. I am however, confident that it’s not the best financial choice for most families, and financing is never a good idea.
I hope after reading all of these reasons not to buy a new car, you will at the absolute least take the time to get more informed about what you’re getting into, if not call off the purchase altogether.
If you have the money to buy a vehicle outright and are comfortable with the long-term implications, then I say good on ya!
What has been your experience with a new vehicle purchase? Share in the comments below!
- Living In An RV in 2020 – Save Money And Crush Debt - June 5, 2020
- Tangerine Review 2020 – Best Online Bank In Canada? - April 14, 2020
- EQ Bank Review 2020 – The Best High-Interest Savings Account In Canada? - March 31, 2020
I’ve personlly never spent more than $5000 on a car (and I’ve only purchased two in my life), but this is a post I feel like needs to be shared with everyone I know. Most people aren’t at a place to really look closely at their finances, but this is so straightforward and reasonable that maybe it will get through to more.
Thanks for reading Angela!
Personally, I don’t think it should be so easy to get money from dealerships. If I want to borrow $5000 from my bank, they require income verification and a ton of other paperwork. Ford Finance will loan me 40k on my signature and a smile. They’ve made it really easy to buy a new car, so many people do, regardless of whether or not it’s in their best interest long-term.