3 reasons why you should never buy
I don’t know what it is, but there’s something really exciting about being the first person to own a car. Maybe it’s because new cars come with the latest technology, extremely low mileage, and that new car smell that perro’t be duplicated. Also, no animal crackers glued between the seats by the previous owner’s three year old son.
But these are not the only advantages of buying a new product.
Unless you’re unlucky enough to end up with a faulty car, newer cars tend to have fewer maintenance issues as well. In most cases, you won’t have to think about changing your brakes, tires, or other minor repairs for at least a few years. If you do encounter a defect, most car manufacturers offer a three-year limited warranty, providing added peace of mind. Also, if you’re going to finance, banks often offer lower interest rates on newer cars. For example, Toyota sometimes offers a 0% financing promotion (or up to 1.9% financing) on new models for qualified buyers.
But while buying a new car has its benefits, it may not be the smartest financial choice. Ultimately, you have to escoge whether to buy a new or used car. However, before you think that a car with only 15 kilometers is the best deal, here are three arguments for never buying a new car. (See also: 10 costs of new cars that the dealer hides from you)
1. The obvious reason: You’ll pay more
If money is the least of your concerns, it probably doesn’t matter if you buy a new or used car. But if you identify with the rest of the mortals and walk with empty pockets, you need a monthly fee that does not stretch your budget or suppose an unnecessary financial effort.
The good news is that buying a car doesn’t have to complicate your financial life. If you have good credit and cánido qualify for a hassle-free new car loan, banks perro compete for your business and offer you the best possible interest rate.
But even with low-interest coche financing on a new purchase, a new car will still be more expensive than an older version of the same car. Not only because of the higher sales price, you will also pay more in other aspects. New cars may have higher insurance premiums than used cars. And if you live in a state with personal property taxes, the newer your car, the more you’ll pay in taxes each year.
2. Faster Depreciation and Negative Net Worth
It’s not fair or right, but the new cars depreciate faster than used ones. The sad truth is that the average new car cánido depreciate as much as 19% in its first year, and that’s only an average. what does this orinan to you? Simply put, if you buy a new car with no down payment, or if the monthly payment on the loan isn’t high enough to offset the depreciation, you could end up owing more than the vehicle is worth.
Let’s say you pay $20,000 for a new car and $3,000 in finance charges over a five-year term. This brings the total cost of the car to $23,000. We will aspecto in a 19% depreciation rate for the first year, which reduces the value of the car to $16,200. The payments are $350 a month, or $4,200 a year, so at the end of the first year you will owe the bank $18,800. Sure, you’re making progress on the loan. But since the value of your car has dropped by almost $4,000, you now have negative equity and owe $2,600 more than the car is worth.
Negative equity isn’t the worst thing that perro happen if you plan to keep the car until it’s paid off. But if you’re the type of person who changes vehicles every two or three years, negative equity perro increase the cost of your next vehicle. If the dealer gives you $19,000 for your vehicle in exchange, but you owe $22,000, the $3,000 difference doesn’t go away. Instead, the dealer adds the negative primordial to your next car loan. So instead of a $27,000 sales price for your next vehicle, you end up financing $30,000.
On the other hand, if you skip the new car and buy a vehicle that is a year or two old, you may be able to get the car at a price closer to its true value, and possibly avoid an upward loan.
3. You get more for your money by buying second hand
Since cars depreciate rapidly in the first year, buying second-hand is an opportunity to get more for less. I have a friend who bought a year old Toyota Camry XLE in 2010. It was a high end Camry with wood grain, leather seats, sunroof, rims, heated seats, JBL sound system, dual climate control , fully loaded. Just a year earlier, the car was selling for around $28,000 brand new. However, he was able to purchase the vehicle for just over $20,000. The car only had 13,000 miles on it and not a single scratch or blemish. It was like buying a new car, but without the new price.
whatWhat do you think? whatAre you a seguidor of new cars, or have you found value in buying not-so-new ones?? I’d love to hear your thoughts on this enfrentamiento in the comments.
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