Next to a home, a car may be the regular person’s biggest source of debt. Very few of us live within walking distance from our place of work, and if we do, it may not be safe. In today’s society, a dependable vehicle is a basic need. However, in case you are already in financial trouble, it makes sense that you assess whether you can afford that shiny new car, or should instead make your way to the used cars division.
Everybody wants to drive a brand new car; however, it is imperative to understand that a car is not an asset. Should you be in debt already, you can’t allow yourself to be misled because can afford the monthly repayment on a new car. You will have to think long-term, and don’t overlook the hidden expenses.
Below are five things to consider when buying your next car:
- Second-hand cars are cheaper
You will have to look far and wide to find a brand new car less expensive than a second-hand one with the same features. You might not be able to pay for that new luxury car you’ve dreamed about, but one that’s a couple of years old might suit your budget.
- A vehicle depreciates in value
A new car will lose about 20 to 25% of its value the moment you drive it out of the dealer’s yard. According to studies, your car will lose nearly 70% of its value after five years.
- Reducing insurance costs
The primary element in determining the fee for vehicle insurance is the value of the car. Since a used car has significantly less value compared to the more recent version, the expense of insurance will be less.
- New cars are nice but expensive
Purchasing a new car is not automatically the best option. The latest statistics reveal that 35% of car buyers sign up for a 60 – 72-month loan at an average interest rate of 10%. New car buyers usually don’t think about the bigger expenses coupled with buying a brand new car.
- Remember the real cost of car ownership
A car creates several expenses and obligations as time passes. Ownership fees consist of repairs and maintenance, loan repayments, fuel and insurance payments. These will have a substantial impact on your monthly finances.
Think about what you could do with the money you will have spent on your new car every month. If you get into the habit of buying a new car every few years, you are not making sound financial decisions. Even though it may feel great to impress friends and family or travel in style, wasting funds on a new car is a sure way to retire penniless.
If you wish to become free of debt, instead choose a reliable second-hand car.