Buying a new car is very exciting and there are a few benefits to buying a new car that aren’t as obvious as just the “new car smell”.
One of the biggest problems with buying a second hand car is often you wont know the car’s history.
That means whatever happened to your car before you purchased it could remain a mystery!
Was the car involved in a serious collision that has dramatically damaged the car under the surface, leading to a risk to you if you have a crash?
Perhaps the car hasn’t been properly serviced and maintained and it’s just a matter of time before something very expensive breaks.
Even if you get a thorough inspection for the car, there’s often a lot of things that don’t get checked because they’re too time consuming to take apart and check. The only way to really know what the cars history has been is to buy new as you’ll be getting a car with a blank slate.
I’ve had a lot of friends buy second hand cars only to spend a lot of money on maintenance, repairs and ensuring it remains up to standard. For many of them, it would have wound up being cheaper to buy a new car and they would have enjoyed the security of having a car with a clear history, more modern safety features and the new car smell.
For many people looking to upgrade their cars one of the first questions they ask themselves is whether to buy second hand or new. There’s no hard and fast rule and there’s a lot you need to take into consideration, such as what you can really afford, whether you’ll pay in cash or use car finance and how long you intend to use the car for.
So should you purchase a new car?
As a general rule, I wouldn’t buy a car that cost more than half of my annual income. That’s just a rule I personally have, I’d feel silly driving around in a car that cost as much as I make working for six months of the year. Think about the cost of the car, what you make in 3, 6 or even 12 months and figure out what you’re prepared to spend. I’ve seen students who are on low wages walk away with new cars on finance that are worth more than they make in a year. I wouldn’t call that a wise financial decision!
Avoid putting the whole car on finance. Even if you’re offered 100% finance when buying anything, whether it’s a car, electronics or something that’s a luxury more than a necessity, I would suggest saving up at least some part of the deposit. If you use finance correctly, it can save you money over time or free up money for other things. For example, I have pretty massive student loans but I’m choosing to repayment them at the minimum repayment rate because there’s 0% interest and in theory I could make more money on my money if I choose to invest it.
So, using car finance might work out to be a really smart way to pay for your car, but sit down and do the math and make sure you’re signing up to something you can afford long term.
Calculate how much use you’ll get out of the car. One day I am really looking forward to buying a brand new car, but for now I have decided not to go down this route. Why? Because I don’t know how long I’ll be in this city. I’m planning to move away in a few months and I’ll keep my car in storage and use it for maybe half the year. I’d love a brand new car, but for my circumstance it doesn’t quite make sense. If you’re going to buy new, be serious about how long you’ll use it and maybe calculate the per year cost of having your car.
Buying a new car is one of the most fun experiences you’ll have, so make sure you spend a little bit of time thinking about how you’ll pay for it, how long you’ll have it and how it fits into your budget and savings plan.
Do you own a car? Is it brand new or secondhand? Let me know in the comments below!