Planning to buy a new car? Your newly purchased car might be giving you a financial burn without you even realizing it. Here’s why you should never buy a new car…
If you have recently purchased a car, or are planning to purchase one, I am sorry to say, but this may not be the best financial decision you can make.
You know this, right?
Your new car will keep you broke all day, every day initially until you pay off your car loan and unless obviously, you super-rich.
In fact, buying a car can be one of the worst financial decisions you can make.
In the event that you can do well without a car as well, avoid it.
There is a side benefit to not owning a car as well. That way, you’ll walk more to shorter distances which will help you keep healthy.
Not only is this the best habit you can probably inculcate in your daily routine, but walking can also help you in other ways as well.
Walking has been constantly linked with higher levels of creativity. Your creativity instinct shots up when you start walking.
Studies have demonstrated that walking for even 30 minutes a day is the ideal and perhaps the only medicine your body demands.
I have talked more in detail about this in Smartly Pick A House Location To Become Wealthier Than You Ever Imagined
But in the event that you absolutely need a car, try settling for a second-hand car rather than a new one. This way, you can avoid the financial strain which comes with a new one.
I have talked more about this and much more in Secrets To Know When Buying A New Car
The Monthly Costs
When you buy a car, two things happen:
- You feel like you are at the top of the world!
- Along with the keys, you take home a monthly costs burden.
Here are some of the most commonly incurred monthly expenses of a new vehicle:
- Car loan installment
- Car insurance
- Petrol /Diesel (which I think will get more expensive than the car itself in some time!)
- Monthly service
Oh and wait, thanks to the updated Motor Vehicles Act, if you, by mistake, break a law, you can be fined an amount that might exceed even your monthly salary.
Do NOT break traffic rules. They are meant for your own safety and others’ safety.
And also, if you live in apartments, you will have to pay for the parking space as well.
Back to the topic, keep in mind that the monthly payments are just the tip of the iceberg. More is yet to come.
These are the evident costs of owning a car. However, this is just the beginning.
The Depreciation Demon
One of the major costs of owning a car is invisible to most of us.
For those in the unknown, depreciation is the reduction in the value of an asset over time. This mostly occurs due to the asset’s wear and tear.
In a car’s terms, this refers to the value your car loses each subsequent year after you buy it.
Also, it won’t be surprising if the depreciation for the first year comes out to be greater than your other monthly car costs.
So, the above costs and the depreciation together make up the total cost of owning the car, right?
We haven’t even thought of the true costs until now.
Why you should never buy a new car – Other Additional Costs
The true cost of owning a vehicle is looking at what you give up for it. That is, the true cost is represented by your opportunity cost; that is, what you must sacrifice in order to own that metallic asset.
Here’s a simple exercise for you. Make a list of the things you value MOST in your life (max. 5 things are allowed)
For now, let’s use my list.
Here are the three things I value most in my life:
1. Spending time with loved ones
3. Financial Security
Did you notice something? No?
Read the list again. It does not include owning a car.
Here are a few things you are sacrificing on in order to own a car:
Have you ever wondered what the monthly expenses you’ll be driving around can very well be invested AND multiplied?
I know what you are thinking: investing such a little amount will not get me anywhere.
Irrespective of the size of the amount, if you invest it, you’ll be sitting on a much larger amount than what you initially had.
Experiences and Recreational Activities
Maybe retiring early is not your thing. But I am sure experiencing life is!
The fact is that there would be a lot of things that you will have to give up in order to finance that car.
Perhaps you are into travel, but due to budget constraints, you only get to travel from home to work and work to home.
Think about what you’d love doing but won’t be able to do once you have all these extra monthly expenses to pay:
Maybe attending concerts
Maybe partying away a weekend
Maybe trying out exotic food from expensive restaurants
Maybe going for a movie every week
And much more…
Whatever these things are what really make your heart to sing, just think about how often you can do these things if you don’t buy a car and instead of a walk a few times.
If you live in a city which has a well-developed public transport network, try using that instead of dumping all your money in a car. Instead, direct your savings towards the fulfillment of your financial and personal goals.
If your city does not have developed public transport services, think very hard before you finalize on getting a car. Make a budget before you set your eyes on an over-budget car.
Ask yourself; is it worth to give up on your life experiences for a car?
Hope this helped.
Keep following Bachat for more on personal finance.
Monthly costs and other additional expenses on top of car loan can become a financial pressure. And with Traffic rules becoming more strict with high fines, maintaining car cab be expensive.
Some of the most commonly incurred monthly expenses of a new vehicle: Car loan installment, Car insurance, Petrol /Diesel , Monthly service. It can hinder your Financial Growth.
The reason is Depreciation in the car’s value. The value your car loses each subsequent hour/year after you buy it.