We know that the thought of a brand new car is tempting. The smell is intoxicating, the perfect paintwork looks amazing and the brand new number plate tells neighbours that things are going right for you. Then there’s the ability to customise the vehicle to your exact specifications. Who doesn’t want to sit down and build themselves the perfect car? If you really stop and think about it though, does it actually make sense to buy a brand new car or would you not be better off purchasing a used vehicle? With so many reliable used cars on the market does it not make more financial sense to invest in one of these and save yourself a bit of money at the same time?
Is buying a brand new car financially sensible?
Brand new cars not only cost a lot of money but they also lose a lot of money in value. The minute you drive a new car away from the dealership you have immediately lost yourself 11% in the value of your vehicle. After a year you are looking at a loss of 25%. Cars will always depreciate because of wear and tear but the speed in which the value drops is never faster than when the car is new. It just doesn’t make good financial sense, therefore, to buy a new vehicle. Instead, purchase a nearly new car and the value won’t decrease as quickly and you will have saved yourself a packet on a car that isn’t really that old anyway.
With low loan interest rates can your money be better invested elsewhere?
When it comes to financing, an option is getting a loan for your new car. You do have to ask yourself if this makes good financial sense, however. Sure, interest rates are low but is it a good idea to invest a loan on a car that will only decrease in value anyway? When interest rates are low it is wiser to take advantage of investments. Why not look at putting money from any loan that you have secured into a high-interest savings account or investing in some stocks or shares and make yourself a bit of money? You could always treat yourself to a new car with any profits that you make at a later date.
Alternatively, you can lease a brand new car long term for a monthly payment
If you feel that you absolutely need a brand new car why not consider leasing? When you lease a vehicle you will have a monthly payment to make but this often costs less than financing a new car. You won’t actually own the car at the end of your contract but you can then lease another new one, which usually means you can pay out less on maintenance costs. When you lease a car depreciation isn’t an issue, so in a way you are not just sinking your savings into something that will just lose value anyway. Leases tend to be handled by independent brokers too, who can often source really good deals on your behalf.