Why Not Buy a New Car?

Maybe you've just returned from a car show and, heady with excitement, you are more than ready to get yourself your favorite model. Because getting a new vehicle is on your mind, every television commercial or print ad you see is beckoning you to put yourself behind the wheel of a brand-spanking new car. The temptations are real; after all, you need a car to get though life. However, the reality is there are plenty of reasons why you shouldn't buy a new car.

Leasing May Be Better

Car buying expert and radio personality Adam Goldfein says that if you fall into three categories, you should not only consider leasing a new car versus buying one, you must lease because it always will work out better mathematically for you. The three conditions to lease rather than buy are if you have good credit, if you drive less than 20,000 miles per year and if you plan to get a new car within four years. If you can say yes to all three conditions, you should not buy a new car. However, if you cannot say yes to all three conditions, then you should not lease. That still doesn't mean buying new is your only option; you can buy a certified pre-owned vehicle, which is a used car with a warranty, or you might be able to hang onto your present car longer. Almost any car can get you around safely up to 200,000 miles, according to Des Toups, senior editor at MSN Money.

New Cars Are Expensive

Perhaps the most obvious reason not to buy a new car is the expense. If you only look at the sticker price of the new car when determining whether you should buy, you only see part of the equation. You also have to pay for insurance that is probably going to go up with the purchase of a new car. You also have to figure in gas, maintenance and repairs. True, you have those expenses with your present car, but if you don't include those costs in your budget, you could be getting in over your head. Also, keep in mind that some cars depreciate faster than others. You can find reliability studies from Consumer Reports and J.D. Power and Associates.

New Cars Depreciate

A new car depreciates the second you drive it off the lot. Unless you are paying cash for the car or are putting down more than about 20 percent of the cost, you are probably going to be underwater on the car, meaning that you owe more on the car than it's worth for probably a year or more. You'd be in pretty bad shape if you got into an accident during this time that totals your car because your insurance company pays the value of the car, not what you owe. Or, perhaps you lose your job and can no longer afford the car payments and have to sell your car. Again, you probably can only sell the car for what it's worth, not what you owe. To protect against those scenarios, you can purchase GAP insurance, which covers the difference between what you owe on the car and what the car is worth. Of course, if you can only afford a small down payment, if you can only afford a car with a 60-month financing term or if you are rolling negative equity from your last vehicle into a new one, maybe you should not buy that new car.

Tips for Buying New

If you are still dead set on buying a new car, be as informed as possible. If you don't know what you're doing, you could be making some costly mistakes. For example, unless you are buying your first car ever, you probably already have a vehicle. Not knowing the value of your present car before you put it up for sale or trade it in can cost you some bucks. The most important factors in determining your car's value are how old it is, how many miles are on it, the make and model of the car and what sort of extras it may have. Kelly Blue Book, Edmunds and Auto Trader can all give you a good idea of the value of your car. Always be prepared by reading reviews of the car you want and the best price the manufacturer is offering for the car, including special deals and rebates, before you set foot in the dealership.