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Lots of people buy new cars. We know they are more expensive, but we want to be the first person to own the car, to smell the new leather, and enjoy being the first person to take the vehicle on the open road. I suppose it is only natural to want to own a brand new shiny car, but if you are someone who is looking to be financially sensible, then buying a new car might not be a good idea.
Let’s look at four cons that some people overlook when getting new wheels.
It will deplete your finances
Many people think that buying a new car is a good deal. These metrics say otherwise. As you can see, the average cost of buying a new car is $648 per month, so if you do not have the cash available to buy a new car outright, you could be setting yourself up for a huge, ongoing financial commitment, when you could easily by an older car for a third of the precise or less, depending on your needs.
New Cars Typically Don’t Hold Their Value
You might think buying a new car is a smart investment because you can sell it on and make a lot of your money back, when you are done with it, right? Wrong. On average, a brand new vehicle will lose 20 percent of its value in the first year of ownership, which means you will end up losing thousands of dollars. Keep the car for a few more years and it will be worth as little as 50 percent of the value in just five short years. Used cars in good shape hold their value far better than new vehicles, as well as being cheaper to buy in the first place.
It Could Affect Your Credit Score
If you have just bought a new car and you are making huge payments towards your car loan every month, then you might just find that other lenders are less likely to offer you a line of credit than they otherwise might.
This is because credit lenders like to see a low credit utilization score. If you are using a high percentage of the credit available to you, it will be tougher for you to pay it all back. Especially if something goes wrong, which means you will be looked at as a high-risk borrower by many. This is not so bad if you have an emergency fund but if you rely on credit when things go wrong, it could soon get you into trouble.
As you can see, if you’re trying to be smart with money, it rarely makes sense for you to buy a brand new car, especially when there are so many high-quality used cars available around the country at much lower prices. Cars that are less likely to lose value or cause other financial problems for you now and in the future. You know it makes sense to consider buying a used car!
