Unless You’re Debt-Free, You’re Burning Money Buying a New Car
Being a driver is an American identity. And driving a car is a mark of status for many people.
But driving a car is really a utility.
It costs money to drive a car. And could put you in debt.
And many people in debt insist on buying new vehicles. Many car dealerships strategically market their advertising to target young people in debt to buy a new car.
People in debt who want to live above their means are more likely to buy a new car. However, a car loan means a new monthly car note on top of their other bills.
Too many Americans spend their whole lives in debt quagmires. So, if you have a large debt-to-income, buying a new car may not be the best thing for you to do.
If you are in the market for a new car, ask yourself the following questions:
- Are you renting?
- Do you have a lot of unmanageable debt?
- Is your debt-to-income ratio over 30%?
- Do you need a car for work or family purposes?
- Are your personal finances solvent enough to pay a monthly car note?
The Cost of Owning a New Car
The average American owes their debtors over $92,700.
But if you drive a van, SUV, RV, or exotic foreign car, your annual maintenance costs can top $12,000, especially if they are new.
Still, a new car loses value the moment it rolls off the factory line.
The average new car loses about $3,800 in value annually or about $313 monthly for every second you own the car.
Focus on Improving Your Personal Finances Before Buying a New Car
You can buy a used car for $20,000 to $25,000. After the coronavirus pandemic, most people started focusing on buying used cars anyway.
Or you can lease.
But unless you have a large family or job that requires you to drive, you may want to pass on getting a new car. You have to put money into a car to drive it. If your personal finances are in disarray, you may want to wait on getting a new car until you can afford it.
The average monthly car payment for a new car is $577. That means you will have to pay almost $7,000 annually in car note payments.
Focus on improving your personal finances before tethering yourself to paying for a new car.
Allen Francis was an academic advisor, librarian, and college adjunct for many years with no money, no financial literacy, and no responsibility when he had money. To him, the phrase “personal finance,” contains the power that anyone has to grow their own wealth. Allen is an advocate of best personal financial practices including focusing on your needs instead of your wants, asking for help when you need it, saving and investing in your own small business.