Buying a New Car, The Pros and Cons
Buying a New Car
There are many pros and cons to buying a new car. Below, I attempt to outline some of the most important factors to consider before you decide which car is best for you.
NEW-CAR DEPRECIATION
Depreciation is the value cars loose after you drive them off the lot, different cars depreciate at different values. Some cars have a high depreciation rate, and some have a low depreciation.
Potential new car buyers research the depreciation schedule of the car you are interested in.
Depreciation will not affect you much if you plan to keep a car for several years, and you will eventually get the value for your car. But if you change cars in a few years you will be affected and may even lose money.
In the past, if a new car was in an accident you could lose money due to the difference in what you owe versus the depreciated value, this happens if you don’t put down a large down payment.
Now, there is something called gap insurance, that you can purchase when you buy your new car and put down a low-or-no down payment. Gap
insurance doesn’t always work, but it sometimes helps.
There are many ways you can research the depreciation of the car you are interested in, by searching the many car analysis websites, before you decide on a car.
According to Edmunds, one on the many car analysis websites, on average a new car loses 11% of its value the minute you drive it off the lot.
During the first 5 years, the average car depreciates by 15%-25%. After five years the average car is worth 37% of what you paid for it at the dealership.
THE MOST EXPENSIVE WAY TO BUY
A new car is the most expensive way to buy a car when you consider the price of the car is at the top, and you must pay new car warranty service.
Insurance is the most expensive due to the loan value and replacement cost, and car registration or taxes are at its highest.
FIRST YEAR WARRANTY SERVICE
New cars have a warranty for the first year, and most have additional warranties for major items that go on for 5 to 10 years. To keep your first-year warranty active, you must get warranty inspections, usually about every 3 – 6 months.
Maintenance schedules vary according to make, model, and car manufacturer, your dealer will give you the maintenance schedule.
A major area many inexperienced new car buyers forget to include in their budget is the cost of the new car warranty service.
Get this information from the car dealer, before you decide on your car. Some new cars have a hefty new car warranty service.
The cost of the new car warranty service is what causes financial problems for many inexperienced persons.
Find out what the new car service cost before you purchase a new car. It is required to keep your first-year warranty in effect.
RECALLS OR LEMONS
There are those who think if they buy a new car, they will have the perfect car with no problems. That is not true. Pay attention to the recalls on new or near new cars.
You can research the recall schedule for the car you are interested in. One person, I talk to about car recalls told me he was forced to park his near new car because he kept getting recall notices.
He got a total of 37 recalls by the time I talked to him and simply did not have the time to take the car to the dealer at that time.
If these recall issues are not resolved, it can cost thousands of dollars in repairs down the line if the car is passed on to someone who does not check for the recalls.
It may also make the car unsafe to drive if the recalls are not addressed.
LOW MAINTENANCE VERSUS HIGH MAINTENANCE CARS
Low maintenance cars have two advantages. One, they don’t take a lot of your time. Two, they don’t take a lot of your money. Constant unexpected major car repairs are a large part of budget busting.
You can look up car maintenance history on cars at all the car analysis sites. New cars with high maintenance schedule should be avoided, this is another hidden cost.
During the car note period and after the warranty period, a high car maintenance bill could cause you to park it until you have maintenance money.
A low maintenance car is a more affordable option. Some cars have a high repair rate as near new cars and some have low repair rates as used cars.
If the potential owner maintains a regular maintenance schedule, with regular oil changes and tune-ups, and when something goes wrong it will be taken care of early.
Long Term Performance
Some cars last for several years without major problems some only last a few years. Check out the long-term performance of your car to see if you have a high maintenance car that requires a lot of repairs as a used car.
New Car Research
There are websites all over the internet where you can research new cars for cost, depreciation, new car repairs, warranty cost and just about anything else you need to know.
The following come to mind – Edmunds, consumer reports, Carfax, Kelly blue book (kbb), and many more. The important thing is that you do your research before you buy the car.
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Save Money When You Buy a Used Car Part 2
Buy a Used Car Part 2
This is the second part in the series of “Save Money When You Buy a Used Car”. Many people ruin their credit early because they buy a used car from the wrong source, and don’t understand the process. You have many options when it comes to buying a used car. Buying a used car the right way can save years of financial pain off your life.
MONTHLY PAYMENTS
Her son thought he had a good deal because his monthly payments were low enough for him to pay. The problem was, his payments extended over a period that made him pay three times what his car was worth.
The monthly payments are important, but not the main item you should focus on. The main items to focus on are 1. Interest Rates, and 2. APR (Annual Percentage Rate). Each of these items is determined by credit score and whether you are buying a new or used car.
You can decrease your interest rate and APR by putting down a larger down payment if you don’t have a good credit history. But, make sure you get the lowest interest rate possible, check your contract. Before you go car shopping, ask around for a reputable dealer.
EVERYTHING IS NEGOTIABLE
Since everything is negotiable, the first thing you need to do is to research the dealers you will visit. Their information is all over the internet, both local and national websites have information on used car dealers. If you are interested in used cars, look up several makes and models with the year, and research the prices.
Before going to the car lot, you should know the current interest rates and APR on used cars. You should also know your credit report and credit score. Ask the dealer to quote his interest rate and APR. Then ask him to show you a copy of his contract, tell him you must take it home to read it. Of course, he will emphatically say, “no”, if he has given you a bad contract. At least, take out your magnifying glass and read it. If this angers him, that may be a sign for you to leave immediately.
INFLATED USED CAR LOANS AND PRICES
Her son paid for several “add-ons” he was not aware of. The add-ons can include items that are already on the car or totally unnecessary, but with his purchase, were all “re-charged” to him. The items car dealers usually add on are 1. Service Contracts, 2. Rust Proofing, 3. Gap Insurance 4. Window Etching, 5. Credit Life Insurance, and anything else that is not necessary, but drives up the price of the car.
The only thing a used car buyer needs is car insurance, contact an insurance broker before you go car shopping, let him know you are buying a used car. He will work out coverage before you buy the car. Contact him from the lot to cover your car purchase. Refuse all the add-ons; all of them will inflate the price of the car well past its value. Download a copy of the “Easy Budget Planner” before you research car buying.
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