Cars Depreciate at a Rate of 20% A Year
In fact, the second you drive it off the lot, it has already depreciated 11%.
Car Payment Can Hurt Your Debt-To-Income Ratio
Buying a car can significantly impact your debt-to-income ratio, and this is important if you're trying to buy a house because if your debt-to-income ratio is higher than 43%, you will have a tough time getting a qualified mortgage.
Cash Is King
Cash flow is more important than driving a brand-new vehicle. There are better options than buying a new car, like refinancing a car or downsizing. Always explore those first.
A New Car Is Not an Investment
A liability decreases in value, such as a car. And in addition to depreciation expenses, vehicle owners should also expect to budget $150 monthly for yearly car maintenance and tires.
Car Companies Want You To Have Payments
By getting you to focus on monthly payments stretched out to 60 and 72-month loan terms, they can get you to a point where you can afford that new car.
Used Cars Are Simply More Affordable (By About 40%+)
When you go to buy a used car, you're getting a steal, and you let the previous owner or lease eat the 40% depreciation if you buy two years used.