February 23rd, 2013
Buying a new car is one of the worst financial decisions you can make. Let’s say you buy a brand new $30,000 car. What does the first year look like?
Buying a new car is one of the worst financial decisions you can make. Let’s say you buy a brand new $30,000 car. What does the first year look like?
As soon as you drive a new car off the lot, especially a luxury car, the price drops significantly. As much as 25%, you just paid the person who made the sale $7,500. If you can’t make the payments and need to sell you might need to come up with this money.
Currently auto loan interest rates are low, even at the lowest rate 2.99% which a first time car buyer probably doesn’t qualify for you’re paying an additional $2,400 in interest. Plus you’re likely not to get a good interest rate through the dealer unless there’s a promotion. Your monthly payment is $545.66. Plus you’ll need to buy comprehenive coverage insurance which will increase your insurance rate. Also registration fees are more expensive on new cars. The first registration might be financed
After the first year you’ve paid $6547.92 + insurance and lost $7500+ in depreciation. You’ve lost $13,957. and still owe $25,853 on the car. It’s ok, but only if you look really good and don’t mind losing a lot of money that you could be investing and earning interest on.
Instead a first car should be a reliable used car. Loans less than $2k typically don’t require comprehensive insurance. Ride your bike, save up and pay cash.
As soon as you drive the car out of the dealership, it begins depreciating. A car that is worth $30,000 can depreciate at a rate of up to 25% a year. That means that the car you bought today, may only be worth $22,500 a year later. After a year of paying for the car every month, paying for more expensive insurance, and spending a little more to take extra care of your pricey ride (ie. car washes, tune ups, etc), you also lose another 7,500 right out of your pocket.
Clearly you two get this message loud and clear. I don’t have much to add, but as always here are two final points. The tag, title and registration fees Aaron spoke about are anything, but small. In the state of Iowa you will pay 5% of the value of the vehicle (they call it a fee, but it is simply another tax that goes by a different name). That is another $1,500 you can add to that very expensive vehicle. Other states may charge you the state sales tax which could run 7, 8 or maybe 9%. Can you really afford that?
The final point is a bit abstract. Do not tie your self-image up with your car. You are not more successful just because you buy a new car (you are clearly less successful financially as Aaron and Thomas explained). You are not more popular (many people will actually envy you and jealousy is an ugly emotion). You are not happier (in short order that debt and the stress that comes with meeting that monthly payment will weigh you down).
Disconnect who you are from “stuff” that you own. Drive a car to get from point A to point B. You will win financially and psychologically. Great job Aaron and Thomas!
Stile Cap elmetti sono la versione che la maggior parte delle persone considerano essere la più comune. Sembrano un berretto da baseball con la tesa nella parte anteriore. Essi offrono una protezione di base contro la maggior parte delle cose che un cappello duro sarebbe in grado di proteggere l’utente da. Si può andare in mare o di un acquario e di vedere gli squali reali effettivi. Si possono fare tutte le domande che volete su rapimenti alieni e / o le probabilità di vita su altri pianeti, ma nessuno è stato in grado di produrre un trasferimento reale, ET fisici. Quando più persone in Alaska affermano di aver visto un gufo di fuori della loro finestra, è più plausibile per me che in realtà ha visto un gufo! Sono in frickin ‘Alaska.
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First off, I have been a claims atjesdur for 20+ years. Using a credit report to help determine rates is pure BS. As another poster stated many people with good credit suck at driving. Their the ones who are wealthy and too busy to pay attention while driving. I have investigated 1000 s of accidents and there is absolutely no correlation between bad credit and bad driving. I agree there is a correlation between good credit and the insurance company getting paid on time. That is their main concern. Using the credit report crap to charge higher rates is just a bonus to the company.And folks let’s be clear about the myth that insurance is required in all states. It is NOT!! It certainly should be but it is not.People who are not in the insurance game (like nan6872) assume that insurance is required in all states because that is a logical conclusion, except when dealing with insurance and vehicle laws there is not much logic applied. There are many states that do not require mandatory insurance but instead require financial responsibility . For example I handle a lot of claims in Wisconsin. There are tons of insured drivers there drinking their great beer and driving home. Insurance is not mandatory there, however if you have an at-fault accident while uninsured the Dept of Transportation will revoke your license and registration if you do not sign a contract to repair the damages you are responsible for.
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