Maybe you recently got a bonus at work. Maybe your current vehicle broke down. Maybe you’ve got a savings account that is burning a hole in your pocket. Whatever the reason, you’re thinking about purchasing that fancy new car that you’ve seen slicking around town and is at the dealership with a red-for-sale sign on its windshield. Well, we’re here to tell you that no matter how nice of a vehicle it may be, purchasing an expensive, brand-new vehicle is not a good financial decision. We know you want the car. But we want what’s best for your net worth. You should too!
It Is Not An Investment
Investments are assets that should have a decent chance of positive returns. Automobiles, on the other hand, will almost definitely not earn you money. Not only will you lose value on the car itself, but you’ll also have to spend a small fortune on insurance, gas, and maintenance. There are few transactions throughout the last 100 years where an individual sold a car for more than they paid for it (think classics, collector automobiles).
At Its Basis, A Car Is Merely A Tool
Vehicles are one of many methods of transportation. They are designed, sold, and driven with the purpose of moving people from one place to another. Sure, they’re a bit more intricate than hammers and screwdrivers, but they only truly have one purpose. And you shouldn’t overspend if you don’t have to.
You Can Find A Comparable Used Car For a Much Cheaper
And you’ll probably be just as happy with it. There are even some theories that people keep using cars for the same period of time that they would’ve kept a new one. You might buy a new car and keep it for five years or you might buy a 2-year-old car and keep it till it’s 7 years old. You get the same utility, though- 5 years of use. Think about it, if we assume you buy a vehicle every 5 years, do you want the cheaper or the more expensive version? Well, do you want the new model or the used model? It’s basically the same question.
You May Not Even Need It
As we mentioned above, there are many methods of transportation. Think about your personal situation. Do you need a car or do you want a car? Many of us now live in urban cities where our jobs, food, entertainment, and shopping are all within a walkable range. The market is also shifting towards remote employees, making the need to get around much less demanding than it has been in the past. Even if you do have a commute, city buses, subways, ridesharing, and other public transportation could possibly save you thousands of dollars compared to that new car.
Lastly, And Perhaps More Importantly, You Can Put Your Money To Better Use
There are countless investments that could set your finances us for success that in the long run will bring you more satisfaction than a new vehicle. Put more into your 401(k). Put it towards a down payment for a house. Earn interest through peer-to-peer lending. Invest it in a crowdsourcing platform. Even moving the money to a low-yield, albeit super safe, a savings account will probably be better for your net worth than spending your money on a new vehicle.