Have you got the fever for a new car? Maybe it’s that new Scion FR-S, or the Mercedes C-Class, or one of those rugged 4-door Wranglers? The research firm Polk has data that indicates Americans buy a new car every 6-8 years until they reach the age of 76 when they stop buying cars altogether. But you’ve got to ask yourself: is it really the right time to buy a new car? There are no hard and fast rules about when or how often you should buy a new car; however, there are items that you should keep in mind when trying to decide if and when you should buy one.
Is Your Existing Vehicle Paid Off?
The first thing that should cross you mind before you buy a new car is whether you still have a balance left on the loan for the last one. If you have a loan balance that is greater than the trade-in value of your car, you should wait to buy. You do not want to start a new loan with a large amount of negative equity. If you do, you may find yourself required to carry some very expensive gap insurance.
Is Boredom Your Motive?
Secondly, why are you considering a new car? Is your current one in need of expensive repairs? If the only reason is that you are tired of it, then consider this…you will get tired of the next one too. Why not keep on being tired of this one for another year or two, pay off your loan or, if it is paid off, why not put some money into savings. If you can save a little more for a down payment, you will keep your next payments low and pay less interest.
Why Wouldn’t a Pre-Owned Vehicle Meet Your Needs?
Lastly, do you really need a new car? Would a used one meet your needs just as well? There are plenty of reliable certified used cars on the market, many of which still offer part of the factory warranty. You can secure big savings by opting to buy pre-owned. How big? Well, a new car is loses 40% of its value after just two years, and 50% after three years. So you can get a car with low miles and little wear-and-tear, which costs several thousand dollars less. Put those saved funds in savings, or invest them prudently, and you’ll be in a much better financial position for years to come.