The time will come where your current vehicle has run its course. You’ll need to buy a new one, meaning you have to decide what car to buy. This decision can be tricky, but one of the first things you have to consider is if you buy a brand new one or a used one. Naturally, your first instinct is that a brand new car is surely better. Yes, you get the latest technology and safety features, plus a car that’s never been driven so – in theory – it should last longer.
Nevertheless, many people argue that buying a new car is an awful financial investment. In fact, one self-made millionaire dubbed it the single worst financial decision you will ever make! Most people are discouraged from doing this, but the question is…why?
So, why are brand new cars not worthy of your investment?
Cars are depreciating assets
Primarily, new cars are bad investments because they never increase in value. Not only that, they struggle to hold their value from the moment you drive them home. It’s believed that new cars decrease in value in their first year more than almost any other period. You could literally sell a car that you bought 12 months ago for 20% less than what it’s worth.
Yes, all cars will decrease in value, but it affects used cars a lot less. Some of the used cars for sale are 5-10 years old, meaning the price isn’t going to drop too dramatically if you buy one now and sell it in a couple of years. By contrast, if you bought a brand new car now and sold it in 5 years, you’d lose a lot of money from that sale.
New cars are hard to improve
Some people make a living out of being wheeler-dealers and buying cars then selling them for profit. This proves that cars can be good investments! However, the key is in the type of cars that they buy and sell. You will never see someone buy a brand new car and sell it for profit, it just doesn’t happen.
Instead, they purchase used cars because there’s more room for improvement. You can take an old car and add new technology or features to it, boosting the price. In fact, most wheeler-dealers look for rundown cars that barely function, bringing them back to life.
A brand new car has no room for improvement as it is shiny and full of all the latest tech and gadgets. There’s nothing you can do to increase its value and sell it for profit.
Are New Cars A Good Investment?
In conclusion, you should not buy a new car. Brand new cars are bad investments because they cost a lot of money yet depreciate in value from the very first day you drive them. There’s no way of improving the car and adding value to it, which you can do with used cars.
If you want to avoid losing money when buying a car, you are always better off buying a used one. To be honest, if you want to have a brand new car, you’re probably better off leasing it instead.
Sharne is an HR and Office Administrator with a degree in Classical & Archaeological studies. She has a passion for dogs and loves to share money management tricks in her spare time!