Right now is quite possibly the worst time in the history of car buying to buy a new vehicle. I’m not even kidding. The car companies could fail, the banks don’t want to loan money, and to be honest with the recession economy being what it is it is hard to say whether you even have your job a year from now. So, if you’re thinking about buying a new car, don’t. It is a terrible idea.
Of course, buying a new car is almost always a terrible idea. The only thing you get with the new car is an overpriced warranty, a sleazy salesman, and the new car smell. Oh wait, you also get saddled with thousands of dollars of extra car payments that you shouldn’t have to pay. Compared to buying a used car, a new car is the scam of the century.
Once you drive a new car off the lot. Its value drops by thousands of dollars. In the first two or three years, the value can drop anywhere from 25 to 50%. Yet, if you have a five-year loan, after two years your vehicle is likely to be worth less than what you owe. Not only that, but you are likely to be stuck with the vehicle because of it. For that much longer. After 5 years, a used car doesn’t lose its value as fast, so you don’t get hit with the same depreciation penalty that you get with a new vehicle.
One time I actually sat down and ran the numbers, and I quickly realized that the difference between buying a new vehicle, or even a one-year-old vehicle to buying a three or four-year-old vehicle is staggering. If you were to compare a five-year-old sedan for $7,000 and a new sedan for $15, 000, you’ll find that over the life of the vehicle, say over the five years you own it, you’re likely to pay well over $15,000 more for the newer vehicle.
Actually, if you were to hold onto the vehicles for 10 years, it gets even worse. the amount of interest you pay on a new vehicle is so much higher, that in 10 years, you could buy a used vehicle, drive it for a few years, pay off the loan and get another one, and still end up paying less than the purchase price of the new vehicle. What a deal right? That doesn’t even figure in the extra cost of interest on the new vehicle.
Don’t be a fool, by used and save yourself thousands of dollars. Also, I’m pretty sure new car smell rots the brain anyways, so you’re not missing out.
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