If it’s been a few years since you’ve shopped for a new car, you might be in for some serious sticker shock. While buying a fresh vehicle that no-one has ever driven, except you, might sound tempting, the price might make you run to the nearest used car lot. If you think the average cost of a brand-new car is $25,000 you would be wrong. If you thought it’s closer to $30,000, you would still be way off.
New research by Experian, a huge credit rating agency, states that in the U.S. average new automobile costs now top $34,000. That is a record number and is scaring off many first-time new buyers. While the most popular cars, like base model Honda Accords and Toyota Camry’s, are still under $30,000, many luxury vehicles new price tags have soared. For example, take a look at the Tesla Model 3, the company’s affordable electric vehicle. It starts out at whopping $35,000! The new 2020 Tesla Roadster has a retail price tag of $200,000. That makes it as expensive as many houses across the U.S. Also, Americans love affair with exotic and expensive European cars like the BMW, Mercedes, and Audi raise the overall average cost for new vehicles.
Insuring New Cars is Becoming More Expensive
If the sticker shock of a new car is not enough to prevent you from buying, maybe the price of insuring it will. According to AllianceInsurance.net a leading insurance comparison site, new cars cost about 35%, or more, to insure than used automobiles. This is because of the high replacement and repair costs. Also, lending institutions require stronger protection, like collision and comprehensive insurance on new autos. This can add up to hundreds in extra premiums each year.
When shopping for a new vehicle, it’s smart to budget the cost of auto insurance before you ever get a loan. Different models are much more expensive to insure than others. For example, a Honda Accord’s coverage might cost you more than a Camry, simply because they are targeted more often by thieves. For the smart shopper, calculate auto insurance premiums along with the car loan, to get a better picture of the overall monthly vehicle cost.
New Cars Depreciate Quickly
Here is one more reason you might not want to get a new car. They depreciate very quickly. In just five short years, a $30,000 new automobile will depreciate to about $12,000. That amounts to a 60% depreciation. This means your new brand ride is losing $300 per month in value, or $10 per day, every single day. That can be stressful, especially for those buyers that have a financial setback, like the loss of a job.
If that stat isn’t scary enough, maybe this one is. New cars will depreciate an average of 10% the very first month. So, if you buy a new $35,000 vehicle, you are watching it go down in value $3,500 in four short weeks.
Financing New and Used Vehicles
Did you know that new car loans, on average, are more than $11,000 higher than an average loan for a used vehicle? According to lending stats provided by Experian, the average new automobile loan was about $30,600. That figure is over $1,000 higher than the prior year. Even more alarming, the gap between a new and used car loan is about $11,300. This is causing many new car shoppers to get extended terms, like 72 month, or even longer loan terms. For others, they give up altogether on the dream of buying a new car and head over to the used car lot.
A used car might be a smart solution for those on a tight budget that still want a nice car. Many newer vehicles, like those that have less than 40,000 miles, practically feel and look new. Also, much of the depreciation has already taken place by the previous owner, leaving you with a car that will slowly go down in value.
Hey, for those with no money issues, then buying a new car is a thrill that many enjoy. However, for those consumers that watch every dollar, buying a vehicle is something that needs to be done very carefully, without a lot of emotion. If you do buy new, use sites that show you the actual real invoice cost and don’t get taken advantage of by slick car salesmen. Do your homework and know exactly what you intend to pay. Shop around for a low cost loan and get the cheapest auto insurance you can. If you do these two things, you will be way ahead of the game and enjoy your vehicle so much more.
