Why Buying a New Car is Financial Suicide
Don’t Kid Yourself. Your New Car is Costing You More than You Think!
I’ve previously written several articles about cars and the financial ramifications that come with buying one new or used. Check out these articles first . . . if you haven’t already read them.
- Car costs are impeding your ability to invest for retirement. With just your car payment money you could be a millionaire in 30 years!! Read: Are You Driving Your Retirement?
- The depreciation on a new or newer car makes the price ridiculous. Most can’t afford to lose that much money that fast. Read: Your Car Costs are Destroying Your Ability to get Rich!
- You should only buy a car with cash. As debt is dumb and financing something going down in value is dumber. Read: Buy a Car With Cash or You Can’t Afford It!
And before you think that this is just a regurgitation of those articles, know that I wanted to focus on the trap of buying a new car specifically.
Buying New Cars Is a Mistake Made by All Walks of Life
I live in an area of the country where the cost of living is significantly lower than other more urban areas. To go along with the lower cost of living, incomes are also lower on average. There aren’t as many opportunities and young professionals tend to look elsewhere for those high paying jobs.
The area in which I live could be considered rural, and certainly a large percentage of the local population could be considered “red-neck”. But financial stupidity doesn’t only apply to the professional, or the blue-collar worker, or even the poor. It comes in all forms.
Instead of brand new Mercedes, Cadillacs, Audis or Jaguars on the highways, we have brand new F-150s, Dodge Rams, and Chevy Silverados. It always surprises me how many new SUVs and trucks there are on the roads that I travel every day.
For instance, I frequently pass on the highway large Dodge Ram and Ford F-150 pickup trucks. And while they are certainly nice trucks, I don’t think that anyone should be buying a new one. Unless you’re a millionaire, you can’t afford to throw away $25k over a couple years (depreciation on a new truck). And if you’re not a millionaire, you can’t afford a $900/month truck payment.
The Poor Reasons People Give to Justify Their Dumb Decision
I’ve heard a myriad of reasons why someone just had to have that new truck. And while some excuses are worse than others, I’ll give you three poor excuses for ruining your finances.
1. New cars are more reliable.
This is the number one reason that people buy new cars. I’ve heard it time and time again. And maybe some have had bad experiences with certain models of used cars. But to destroy your monthly cash flow, and destroy your finances by dropping $50k on a new, “reliable” vehicle is just insane.
There are many used reliable cars out there. Almost any Honda or Toyota will make it to 200k miles and even beyond. Don’t say that you wanted a reliable car, when in reality you didn’t want to put in the work to find a good used car. Check out carcomplaints.com when you find a specific model you want to buy. They will let you know if there are any models to stay away from too.
2. I Need Certain Features that Only New Cars Offer.
In my area, this excuse is popular. “I need a vehicle with 4WD (4 wheel drive).” We live in an area that may or may not have hazardous road conditions in the winter. This winter seems to be more so than past years. There have been multiple days where the roads have been ice or snow covered. And 4WD is certainly useful in those conditions.
But how many days are in a year? I hope you said – 365. So if you need 4WD for 4 days out of the year, is it really worth it to pay for a new truck just to have it? And, furthermore, there are plenty of used vehicles that have 4WD or AWD (all wheel drive).
You don’t need all those bells and whistles. You only truly need something that can get you from point ‘A’ to point ‘B’ safely. And if you can’t drive safely in a blizzard . . . then don’t.
You can get the features you want in a used car. Don’t get suckered in to paying full price by marketing and advertising.
3. I wanted the Warranty
This last excuse is one that I’ve heard often as well. But the logic behind this reason is questionable. Why?Because this excuse is totally contradictory to the number one excuse.
Why do you need a warranty if your new car is more reliable? You won’t use the warranty if your car never breaks. And if you’ve ever tried to collect on a warranty claim, you know that it’s quite the hassle. They don’t want to pay out any more than you do.
On the flip side, why would you want to use the warranty anyway? That means your car is a lemon.
But . . . peace of mind?
For peace of mind, try an emergency fund. If you have the money to fix your car when it breaks down, your security level will skyrocket. You’ll have so much more confidence. And if you did your homework before you bought your used car, it won’t have many problems to begin with.
Why Buying New is Never Smart.
Imagine you had a pile of cash sitting in front of you! Fifty thousand to be precise! Think about all the things you could do with that much money. Vacation. Debt reduction. Or even a down payment for a house. All of these things are valid ways to spend that money. Or you could take that $50k and buy a new truck.
When you buy a new truck. An F-150 for instance. You are taking that $50k and setting it on fire. Sure, you’ll get to drive around in that F-150. But it won’t be as cool and new a year from now. And you’ll still have that $900/month payment.
Your truck will lose it’s value so fast, it’ll make your head spin. Like I said earlier, if you’re a millionaire, you might be able to afford to throw away $50k on a vehicle. For the rest of us, it’s just dumb.
Have you ever purchased a new vehicle? How do you feel about that decision now?
Let me know in the comments. Thanks for reading and sharing.