One of the many disadvantages of buying a new car is the fact that the value immediately depreciates as soon as you drive it off the lot.
Each year, people buy over 17 million new cars in the United States.
If you’re thinking of getting a vehicle, there’s a good chance you have considered buying a new car. You should always take into consideration the disadvantages of buying a new car. It’s a big decision, and you don’t want to rush into it.
Buying a car can be a great experience, and it can make you feel better. A lot of people avoid used vehicles because they have a stigma of being unreliable. That is not the case, with most used cars lasting for years before needing any work done.
Disadvantages of Buying a New Car
One thing that most people don’t think of is the disadvantages of buying a new car. They believe that once you get a new car, it’ll run like perfect forever and won’t have any problems. The reality is that modern vehicles have disadvantages too.
1. The Value Drops the Moment You Drive It
The second you take your new car off the lot, the value of the car drops. Many new vehicles come with rebates and incentives that also immediately lower the value of the car. This means that while the car may cost you $30,000, it won’t be worth that the second you drive it off the lot.
In general, a new car will lose 60 percent of its value after five years. That means if you purchased a new car for $20,000, It wouldn’t even be worth $10,000 after five years. Cars never stop depreciating, but after the five-year mark, the rate of decline slows down.
2. New Cars Are Expensive
Owning a car can be very expensive. One of the disadvantages of buying a new car is the upfront price that you’ll have to pay. There’s more to consider than the cost of the vehicle upfront, but that can be daunting by itself.
New cars cost a lot of money, usually in the tens of thousands of dollars. Add to that the interest cost of a loan and finance charges, and you could end up spending a tremendous chunk of your income on a new vehicle.
3. Insurance Is a Killer
The cost to insure a new car is based upon the value of that car. While the value continually decreases, your insurance does not go down as fast. If you’re carrying a note on the vehicle, you’ll have to pay for full coverage insurance, even if you don’t want or need it.
The average monthly premium for a new vehicle can reach as high as $136. That comes out to over a thousand dollars a year that you’re spending on insurance alone. Insuring an older car can cost less than half that.
4. Model and Year Dependability
Car manufacturers are always adding and changing things on their new line ups every year. This can be a great benefit, but there’s something that most dealerships won’t tell you about. A harsh reality of the car market is that not all years and models are made as well as others.
New lines of vehicles and modified older ones can have reliability problems. While many cars undergo various tests, that doesn’t mean you’ll get one that could pass those tests. With the addition of so much digital technology, the potential problems increase exponentially.
While a used car has reliable data from consumer reporting groups and reviews on dependability and performance, you won’t have the same luxury with a new vehicle. The reviews that come out have been paid for and don’t always reflect the quality of the car you’ll get.
5. The Cost to Tax and Title Your Vehicle
The cost of registering a vehicle varies based on state, but one thing that is true in every state is that the higher the price, the more taxes you have to pay. When you go to renew your tag, it will cost you more money.
Some states even require that you pay tax on a vehicle you didn’t purchase in their state to get it tagged for that state. This means that the phantom costs of a new vehicle can be increased at every step of the car ownership process.
6. New Cars Take A Long Time To Pay Off
Paying off a car loan that is worth $20 or $30 thousand will take you far more time than paying off a loan for a few thousand dollars. Most car loans are made out to be paid back in five to seven years. This means that you could be paying for that new car from the time your kid is in 5th grade until they graduate high school.
Having a lot of debt will also make you less likely to be able to get another loan. If you want to buy a house or do anything that requires a loan, you’re going to have more trouble with a massive car loan out.
Buying A Used Car
A lot of people dream of buying new cars. This has been true for decades, for about as long as cars have been around. For most of us, however, buying used cars tends to be a better investment and cost us a lot less.
Used cars used to have a bad reputation because of dependability, but since the early 2000s, cars are more reliable than ever. That reliability does not magically go away because the car is resold. You can benefit from the same modern reliability from a vehicle that is ten years old or more.
Don’t Be Fooled By The New Car Shine
The disadvantages of buying a new car are many, yet there are some advantages. Don’t be fooled, however, into thinking that you’re going to be coming out ahead. You won’t.
Do your research and purchase a car from a year that is dependable and well maintained. Saddling yourself with almost a decade of debt doesn’t have to be the price of owning a vehicle.
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