Most people need a car for their day-to-day lives. When you’re in the market for a vehicle, it’s tempting to buy a new one. After all, you’ll know there’s nothing wrong with it because it hasn’t even left the lot. However, there are several reasons a brand-new car isn’t worth the money, especially when you can make a used car look new again.
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Higher Purchase Price
You almost always have to pay a higher price when buying a new car. Extra costs include car dealer fees, maintenance, sales tax, and more.
You’ll Pay More Interest
Because a new car has a higher purchase price, you will spend more on interest. If you, like most people, buy that brand new car with a car loan, you’ll pay interest on it. More cars have lower loan rates, but you will likely pay more because the significantly higher sticker price is what accrues the interest.
Faster Depreciation
New cars depreciate much quicker than older ones. A new car loses between 20 and 50 percent of its value within the first year, and the average depreciation rate is 60 percent in the first five years. That depreciation then slows over time.
Higher Taxes and Licensing
You have to pay taxes and licensing fees when you buy a car. The more expensive the ride is, the more expensive the tax and licensing fees are. It’s also likely that the registration will be higher for a new vehicle. Therefore, an expensive car will continue to cost you more in more ways than your loan.
Higher Insurance
Another reason a brand-new car isn’t worth the money is insurance. Some cars are more expensive to insure than others. Older cars often have years of data that insurance companies can use to calculate the likelihood of a significant repair.
There is also a good chance that when you take out a loan for your brand-new car, it will require you to insure it fully. Lenders require collision coverage, which can often be pricey. When you buy a used car in cash, you don’t have this expense unless you want it, allowing you to lower your insurance bill more.
As you can see, there are several reasons a brand-new car isn’t worth the money. So before buying a new shiny toy, take these factors into account and opt for something used and reliable.