One of the important things to decide when looking to purchase a vehicle is whether to buy a used or new car. People are usually tempted to go for a new vehicle considering how fascinating new cars can be, as well as the integrated cutting-edge technology and mint-smelling interior. Despite these, you may want to ask: Is it smart to buy a brand new car, particularly when you consider the huge financial commitment involved?
Despite the numerous benefits of brand-new vehicles, a lot of people still wonder why buying a new car is a bad idea. When asked, such individuals usually have genuine reasons why not to buy a new car. However, while deciding whether to buy a brand new car can be a tough decision, it is best for you to clearly understand the pros and cons of purchasing one, whether you are looking to buy your first car, downsize, or upgrade. This may help you in making an informed choice that fits your lifestyle without straining your personal finances.
Pros of Buying a New Car
The following are some of the benefits and appeals of purchasing a brand-new car:
Latest Technology and Features
Technology keeps advancing, and the automotive industry is not left out. Brand new cars generally come equipped with the latest technology and features on the market, which are usually exciting. The latest navigation features, improved and advanced infotainment systems, fuel-efficiency features (hence lower running costs), and enhanced safety features that come with each model year make brand new cars undoubtedly appealing.
Explain how new cars come equipped with the newest safety and entertainment features.
Full Warranty Coverage
Every brand-new vehicle purchased has a manufacturer's warranty that kicks in from the day it is registered for use. A manufacturer’s warranty typically covers the owner of a new car for a few years, usually ranging from 3 to 5 years, depending on the make of the vehicle. In most cases, the warranty may cover faults like air conditioning issues, engine repairs, suspension problems, and steering malfunctions.
In other words, the warranty takes care of the maintenance of any major faults or failures that may prevent a new vehicle from operating as it should, giving the vehicle owner peace of mind. However, faults with vehicle consumables like windscreen, spark plugs, tyres, petrol filter, oil filter, bulbs, and brake pads are typically not covered by a car warranty.
Customization Options
Anyone shopping for a brand-new car generally gets the chance to customize it exactly how they want. In other words, if you are purchasing a new vehicle, you may settle for the base model of that model year or opt to outfit it to your needs or taste during the manufacturing process. For instance, you may ask the manufacturer to add, amend, or remove some extra features like heated seats, blind-spot monitoring, GPS, heated windscreen, and sunroof. Also, you have the privilege to decide your preferred color and the interior finishing.
Better Financing Deals
Brand new cars generally offer buyers better financing deals compared to pre-owned vehicles. It is surprising to know that new cars purchased through financing often come at lower interest rates than the rates for pre-owned vehicles, but the reason is not far-fetched. Lenders generally consider brand-new vehicles low-risk investments, unlike used cars, whose values may even be difficult to determine and may need frequent repairs. Generally, anyone buying a brand-new vehicle stands the chance of getting a low financing rate, provided they have good credit.
Some people consider purchasing a brand new vehicle a horrific financial decision, but is it a bad idea to buy a new car? While the decision largely depends on a person’s circumstances, the following are some of the downsides of buying a brand-new vehicle:
Rapid Depreciation
Purchasing a brand-new car may not be the most viable financial decision due to depreciation. In fact, one of the most common reasons people think buying a new car is a bad idea is as a result of the potential rapid depreciation. Generally, once you purchase a new car from the dealership and drive off, it loses value instantly, and it continues to lose its value rapidly in the first few years of driving it.
According to auto experts, a brand-new car has the tendency to lose about one-third of its value within the first year of use, regardless of how well the vehicle is maintained. Unfortunately, the depreciation does not end with the first year. Rather, the vehicle continues to lose its value each year. As a result, when a vehicle is financed, the owner risks owing more than it is worth and may have to pay more for it through monthly payments than the vehicle’s actual worth. At the end of the day, the vehicle’s value may be significantly less than the initial cost.
Higher Purchase Price
You will likely spend more on buying a new car because they are more expensive than comparable pre-owned vehicles. The reason is quite simple; brand new cars come with a lot of perks, which are responsible for the high price tags on them. The cost of a new car may be prohibitive for anyone on a tight budget, especially if they intend to buy luxury or higher-end models.
Increased Insurance Costs
Brand new vehicles typically cost more to insure, and this adds to the overall expenses of purchasing a new car. Generally, the applicable insurance premium will depend on the model of car, and the newer the motor vehicle, the higher the insurance premiums. In many cases, the high cost of brand-new cars and the potential high cost of replacement parts are what is responsible for pricier insurance premiums, and there is usually no getting around it.
Hidden Fees and Taxes
Unlike a pre-owned vehicle, where what you see is what you get, brand new vehicles often come with several hidden fees and higher taxes. These may include title fees, sales tax, registration fees, and several other hidden fees that significantly contribute to the overall high expense of purchasing a brand-new vehicle.
Key Considerations Before Buying a New Car
Buying a brand-new vehicle can be an exciting experience. However, it is essential to consider a number of things to enable you to make the right decisions before purchasing a new car. Beyond personal finances, the following key considerations may help you determine if getting a new car is really worth it:
Long-Term Depreciation and Resale Value
A car depreciates when it loses value over time after purchase. New cars are known to depreciate faster in the first few years. According to car experts, brand new vehicles generally lose about 20% of their value after one year of purchase and may depreciate by approximately 60% within the first 5 years. Long-term depreciation of cars is often influenced by factors such as market demand, age of the vehicles, condition, mileage, features, and technology.
So, it is important to determine the depreciation trend of a new vehicle and consider its resale value before purchasing it. While some car brands and model years hold their value better than others over time because they are reliable and desirable, others do not. Also, missing safety features or obsolete technology in a vehicle may shrink its resale value over time. When buying a new car, it is best to opt for a vehicle with high resale value to enable you to potentially minimize the impact of depreciation.
Maintenance and Repair Expectations
It is not enough to buy a car, and ownership goes beyond the initial purchase price. Before purchasing a new car, it is crucial to consider the long-term maintenance and repair costs as the vehicle ages. While all cars require regular maintenance to operate optimally, it is always good to consider buying new car brands and models with a reputation for durability and reliability. Barring other external factors, such vehicles may not require frequent maintenance aside from routine maintenance and repairs. Similarly, it is important to consider the availability of replacement parts and service centers.
Technological Obsolescence
With the persistent advancement in technology, it is no-brainer that even new technology and certain features in new cars designed to enhance the driving experience now become quickly obsolete as new vehicle models arrive. Therefore, it is vital to consider how quickly and rapidly cutting-edge technological features in a car become outdated. A vehicle generally remains relevant and enjoyable as long as it has modern technological features.
Before buying a brand new car, you may want to evaluate features such as parking assistance, navigation systems, smartphone compatibility, and adaptive cruise control to ascertain that they run on contemporary technology. Similarly, it is important to assess the driver-assistance technologies, infotainment system, as well as the overall upgradability of a car's technology before purchasing it.
Environmental Impact
Considering the suitability of a vehicle for the local conditions where it will be operated, as well as the environmental impact, before purchasing a car cannot be overemphasized. For instance, driving on rough roads is often a challenging experience. Hence, if you intend to operate a vehicle more frequently on such roads, consider buying a car with a sturdy suspension mechanism and good ground clearance.
Furthermore, it is common knowledge that producing new cars requires substantial energy and raw materials, which, in turn, leads to carbon emissions and potentially contributes to environmental harm. Although the fuel efficiency of used cars may not be impressive, buying one may help avoid carbon emissions associated with manufacturing new vehicles and potentially reduce the carbon footprint.
Another important consideration before buying a new car is choosing between a gasoline or diesel-powered vehicle, or an electric vehicle. Unlike electric vehicles, gasoline or diesel engines have higher lifetime carbon emissions. Although it is more carbon-intensive to produce electric cars, they generally redeem the carbon deficit within a short period. Hence, if the intention is to go for a greener option when shopping for a new car with a lesser environmental impact, purchasing an electric vehicle seems like a good choice.
Market Trends and Incentives
The car market is dynamic. Market trends such as interest rates, inflation, and supply chains are usually outside people’s control and may influence the cost and value of new cars. They directly or indirectly affect the pricing and availability of vehicles. So, any individual planning to purchase a brand new vehicle may want to consider how the current market conditions may affect the initial cost of the car as well as its future resale value. Typically, vehicles with high market demand and low supply tend to depreciate more slowly than those with lesser demand.
Furthermore, before purchasing a new car, you may wish to research whether the manufacturer offers incentives and the time of the year they roll out such incentives. Incentives such as financing offers, discounts, and rebates may significantly reduce the initial cost of a brand-new vehicle whenever they are offered. Therefore, that time of the year or sales period when a car manufacturer offers varying incentives to stimulate sales may be a good time to purchase your dream brand-new car.
In the end, deciding whether buying a new car is worth it depends on your personal priorities, financial situation, and long-term goals. By carefully weighing the benefits—such as warranty coverage and the latest technology—against drawbacks like depreciation and higher costs, you can make a well-informed choice that aligns with both your budget and lifestyle.
