Stop! Here’s Why You’ll Regret Buying That New Car
There really aren’t many feelings that can compete with signing the final pages of paperwork, getting the keys, and driving home in your brand new car. The way the paint shines, the way the interior smells, the double (or maybe even single) digits on the odometer — this car just rolled out of the factory a few weeks ago, and now it’s all yours. Then, a month later, the first payment is due. You’ll need to change the oil — and the tires. And with each passing month and mile, the honeymoon period fades until your car isn’t new anymore. It’s just a car.
For the past six years, Americans have bought more new cars than ever, besting each previous year by a considerable margin. But the market is cooling in 2017. Those six years’ worth of record-setting cars are flooding the used market, which means there are more high-quality pre-owned models on sale. Car buyers might also be realizing once that initial rush wears off, new cars are, well, kind of a rip-off. As much as automakers want you to line up to buy the latest and greatest, here’s why it’s a bad idea to put your hard-earned cash down on a brand new car.
1. Leasing is more attractive …
In 2016, a record 17.6 million new cars left dealership lots. While trucks, crossovers, and SUVs led the sales pack, the real story was the increase in leasing. As long as you stay within the terms of your lease, it’s not a bad option. You have a new car for two to three years (while it’s still covered under factory warranty). Then, you turn it in and get something new.
Sure, there are downsides, such as having to put down a chunk of cash for a car that’s not really yours and mileage limitations. But if you’re dead set on a new car, more Americans than ever are deciding leasing is their best bet.
Next: But what happens when the lease is up?
2. … so much so that leased cars are flooding the market
If you don’t have your hopes up for a brand new car, consider this. A big reason car sales are likely to fall short in 2017 is because a glut of 2- to 3-year-old leased cars are due to be turned in. If you’re looking for something that’s newer and well-maintained (these cars were technically owned by the car companies, after all) and don’t feel that leasing is right for you, then you could potentially become the owner of a great car for up to half off the original sticker price.
Next: Would you really want to be a beta tester?
3. Glitches galore
It’s a tale as old as time. A brand new car comes out that’s stuffed with the latest features. Within a few months, service centers are flooded with repairs. The automaker comes up with a quick fix and promises the kinks will be worked out by the next model year. It’s a good rule of thumb never to buy first-year car models. But if you’re interested in a car that’s a year or two old from a dealer, chances are any recall repairs or updates have already been performed.
Next: One of the fastest ways to lose thousands of dollars in a minute
Thanks to Edmunds, we have this clear-eyed look at the ravages of depreciation. The minute you drive your brand new car off the lot, it loses 9% of its value. In your first year with it, it loses another 10%. After that, it’s around another 10% a year — and that’s if you don’t put many miles on it. So if you’re looking to make your hard-earned dollar go further at the dealership, buying new just doesn’t make sense.
Next: Dealerships want to sell you a car. They don’t care whether you can afford it.
5. It’s easy to get in over your head
There’s a cardinal rule of buying a new car: 20-4-10. Never put down less than 20% of the agreed upon price. Never agree to a car loan that’s longer than four years. And make sure your annual payment is less than 10% of your income.
Unfortunately, too many people throw caution to the wind in the excitement of buying a new car, and they ignore the rule. With automakers itching to keep sales at an all-time high, they’ve taken to offering some creative financing options. Beware of these. At best, you’ll end up spending far more than the sticker price when all is said and done. At worst, you’ll be on the hook for a car you can’t really afford.
Next: The numbers usually never add up.
6. You’ll pay more for less
The average price for a new car is around $33,000. At that price, you can buy a nicely equipped Ford Fusion, F-150, or a base model Toyota Highlander. For about the same amount, you can also afford a certified pre-owned Mercedes E-Class, BMW X3, or Lexus RX. A lot of us might not be able to afford these cars new, but depreciation is the great financial equalizer. Unless you’re set on a single make and model, look at what your money will get you on the used market. You might be pleasantly surprised.
Next: How will you feel about your car in 2021?
7. It’s not new forever
We know. The honeymoon phase with a new car is great. But let’s say you either ignored that 20-4-10 rule, bought a low-spec model, or bought a car that was replaced by a new model a year or so later. Now you’re into the fourth year of your lease, your car is worth half what you paid for it. And it’s likely the manufacturer’s warranty is history. In short, you’re completely on your own and on the hook for any problem that could come up.
Next: Admit it. You’re not buying a future classic.
8. You’ll never get your money back
We all know someone who has the same tale of automotive woe: “When I was in college, I bought a (’60s Porsche/Hemi ‘Cuda, Fuel-Injected Corvette) for $1,000. If I’d kept that car, I would’ve made a fortune!” Although that might be true, let’s face it: Odds are you’re not going to make a profit on your car. No matter how you spec it, modify it, or take care of it, you’re probably never even going to get back what you put in. So before you plunk down a ton of cash on that brand new car, you might want to make sure you’re doing the right thing.