Buying a new car outright can seem like a wonderful idea, as you get your hands on a brand new car in great condition. However, it really isn’t the best option from an investment perspective.
Buying a new car outright can seem like a wonderful idea, as you get your hands on a brand new car in great condition. However, it really isn’t the best option from an investment perspective.
In fact, buying a new car is actually a bad investment overall. But rather than leaving you with a sweeping statement like that, let’s unpack it and show you why it would a bad choice, and what you can do instead!
Why Is Buying A Car A Bad Investment?
The most important reason why buying a car is bad as an investment is in terms of the value. When you pay for the car, you have to pay the full value of that vehicle, but as soon as the car leaves the showroom, depreciation sets in.
In fact, the second it hits the road, the value of a car drops by typically 50%. That’s a massive decrease in value for any type of investment. From there, to make things worse, as you use the car you actually cause the value to go down even further! It will just keep going down, effectively losing you money.
On top of that, because the initial cost of a car is so high, it is quite common that you have to get a finance deal like a Hire Purchase contract. That means that you are paying each month for the initial value of a car, despite the fact that the value is constantly decreasing.
If that doesn’t sound like a bad investment, then we don’t know what does!
What Alternatives Are There To Buying A New Car?
If you would prefer not to get yourself into a bad investment by purchasing a new car, you really have just two different options; buy second hand or lease a new car.
Buying a second hand car is probably the cheapest option initially, and therefore, might be the most tempting option too. However, since we are talking about the investment side of things, we need to look long term.
The initial cost of buying a second hand car is low, but there is always a high chance that you will need to cover the cost of repairs. Depending on these repairs, they can work out quite pricey, and because the car is used, there could be a lot of them. On top of that, you will need to pay for the MOT each year, servicing and more. Also, if something breaks, then the cost of fixing it is on you.
Leasing, on the other hand, means that you pay a lower monthly price than when buying a car, but still get the benefit of no MOTs and a warranty. It also means that, every 3 years or so, you can easily upgrade your car to a newer model.
The best part, however, is that you get to drive around in a brand new car without having to worry about the depreciation of it’s value, since you just give it back and upgrade later! So, why not take a look at the various car lease deals available here to see what you can get your hands on.