7 Reasons You Should Never Buy a Brand New Car

On average, a brand-new car costs around $750 per month. Yet, that same new car will depreciate so fast that in five years, when it is finally paid off, it will only be worth 37% of the initial purchase price. 

The solution is simple: buy used, and here are seven reasons why.  

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. 

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