Do I Need A New Car?

 Do I Need A New Car?

New Cars Are A Temptress

Do I Need A New Car

When a person’s car dies, or people crack enough jokes, a person will inevitably ask themselves at some point: Do I Need A New Car? This question comes with a lot of stigma attached to it.  Friends and family will generally tell you yes, and use phrases like “you deserve it,” “treat yourself just once,” “pamper yourself,” and “spoil yourself.”  None of which really make sense truly to us.  We very much have an anti-debt philosophy, so when we hear things like this we wonder how putting on a pair of debt hand-cuffs is “spoiling yourself.”

People take lots of pride in driving up in their brand new vehicle, but all too often people purchase cars that they can’t afford!  They do it more image, status, and pure ego.  In the long run what they end up doing is robbing thereselves of savings.  The first thing a person needs to ask is: Why Do I Think I Need A New Car? Some reasons include:

  • My car is too old
  • My car is too ugly
  • My car is about to break down
  • The repairs are costing too much
  • I need dependability
  • I’ve had this car too long
  • I don’t want it to depreciate much more

And the list goes on.  We’ve heard a lot of silly reasons as well, but it is usually because the person is saying anything they can to get into a new car.

Is My Reason Good?

You must ask yourself if your reason is good.  We included a few bad reasons in that list such as “I’ve had this car too long” and “I don’t want it to depreciate much more.”  Both of which make no sense and are completely silly, in most instances.  How do you have a car too long and what does that even mean?  Is it high mileage? Does it look or feel too old?  Has it lasted you for two decades?  What defines the car as being too old for you?  Here are some questions you should ask yourself if this is your reason:

  • Is the car dependable?
  • Does the car serve its purpose of transportation?
  • Is the car owned outright?
  • Would you have to finance a new car?
  • Can you continue to get by with this car?

If you answer yes to these questions then we would say you are better off without a new car.  What about the depreciation reason?  Are you kidding me?  The car depreciates the most in a year the first year you purchase it.  According to PFInvesting the car will depreciate about 18-28% in the first year alone.  If your car is 5 or 10 years old, then you should basically get depreciation out of your head.

The Cold Mathematics

Sure, your current $7,000.00 car may depreciate to $6,000.00 over the next year, but if you jump into a brand new $20,000.00 car you’ll lose $3,600 minimum in value in your first year. Pick your poison, $1,000 lost, or $3,600 lost?  Maybe a new car isn’t for me, should I look at getting a nicer used car? Be sure to check back with us on Friday when we discuss the merits and downsides of a used car.

What About you?

What about you, what are your thoughts about new cars?  They clearly have their merits, but is it worth the extreme upfront cost you pay of an 18% – 28% depreciation in the first year?  Do you only drive new cars or only drive used cars and what are your reasons?

Photo Credit: Hugo Schotman

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Comments

  1. says

    Great post. How many people rationalize a new car purchase with the reasons you listed? My guess is a lot! I like your second list of questions to ask yourself if you are considering a new car, and I really like your conclusion: don’t do it if you answered yes to any of these questions. I agree.

    My wife and I drive older, dependable, paid for cars (a 99 Cadillac and a 96 Olds). Neither of us has any plans to buy a newer car, but when we do it will be with cash.

  2. says

    I will admit that we have bought new cars most of the time. That was mostly because of the deals we could get through GM discounts. When I compared what we would have to pay vs. buying used, it was minimal difference. (Plus, I knew the history of the new car.)

    However, in the above example, I was looking at used cars that were only 1 year old. I don’t think I deserve a fancy car or anything, I just always wanted something reliable and safe for carting my 3 kids around. We bought my current car with cash and will run it into the ground. (Its not even 2 years old and already has 50k, so that is a literally true statement. Poor, tired car.)

    I do know many that way, way, way overspend on a car. My only requirements are that it has room for our family and it has a million airbags. Nothing else required. Oh, and the little beeper warning when you are backing up.

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