5 Reasons Why Buying a New Car Now Is a Terrible Idea

Have you been thinking about buying a new car these days and drooling over them every time you see one or get bombarded by them on commercials? Well, get a grip on yourself and your wallet right about now before you begin heading out to the car dealership.

Woman getting new car keys representing why buying a new car now is a terrible idea

That feeling that comes the moment a dealership hands over the keys to the brand new car is unforgettable. But a brand new car is not the right option for you right now. In fact, it is a terrible idea.

That New Car Thing Is So Tempting

I used to be a guy who loved getting a new car every three years or so (how stupid that seems to me now). I actually enjoyed planning, shopping, and hunting for one each time. I’m not sure whether it was a macho thing or just that I liked the idea that a new car gave me a better chance that each day when I stuck the key in it would actually start!

As a teenager, I always had an “old junker” and I’d say I would have had better odds in Vegas than in getting my ’62 Rambler to turn over when I went to college. (Keep in mind that was in the late 60s/early 70s.)

Of course that car cost me all of $300 so that made it a little bit easier to bear. Even at $1.25 an hour, I could pay for that (in about 6 months or so) and not the 72 months that it would take me to do today even with a really hefty down payment. Yes price is definitely a huge deterrent to buying a new car right now, but let’s get real—don’t expect prices to be any cheaper in 2023, 2024, 2025, or ever. That just never happens. But there are some real reasons that now is not the right time for buying a new car.

5 Reasons Why Buying a New Car Now Is a Terrible Idea

Reason #1 – Price (ridiculous MSRPs for 2023)

MSRP, Manufacturer’s Suggested Retail Price has increased ever since the beginning of the global pandemic. That’s because car production is one of the many sectors that were affected by the pandemic, from labor shortage to low inventory, from microchip scarcity to the availability of raw materials. This drove car prices through the roof and has led to the dramatic increases of the MSRP.

The prices of cars are expected to skyrocket even more in 2023. The effects of the pandemic are still with us, so we must expect rough times when thinking about new cars. But to make things worse, car dealerships have now taken this opportunity to increase their profit margins on new cars.

There’s a reason that car salesmen have been the brunt of jokes about their honesty ever since Henry Ford produced the Model T. That’s because we just don’t trust them, or at least we shouldn’t. They’re in business to make money like everyone else —a lot of money—so like everyone else, they think of new ways to do it and a pandemic has opened up the door for them.

Now you may not want to believe me, but when you see a Jeep Grand Wagoneer with an MSRP of over $100,000 and then the selling price is even higher, do you think it’s all because of shortages? I don’t think so. But if you want to buy one, is anyone going to stop you? Certainly they wouldn’t.

Reason #2 – Ridiculous interest rates when you finance your new car

It’s not a secret that interest rates are going nowhere but up right now. The latest inflation news just out this week shows that inflation hasn’t peaked yet and that the Fed is right at the beginning of driving up rates to slow it down. Already those 0% rates have disappeared and so have the 1%, 2%, and 3% deals.

These days, the rates are going to be higher and when the Fed takes its next rate hikes this month and September, they will be even more so.

The average new car’s interest rate in 2021 was 4.12% according to Experian and now it’s higher. But even worse, you could be seeing interest rates at 5%, 6%, or even higher for your car loan in 2023 and beyond. How much can that really mean towards your payments? Here’s an example:

Buying in 2021Buying in 2023
Cost of car$35,000$40,000 (prices will go up)
Credit score680680
Loan terms60 months at 4.12%60 months at 6.00%
Down payment10% or $3,50010% or $4,000 (more needed)
Monthly payment$581.33 (without taxes & licensing)$695.98 (without taxes & licensing)

That’s an extra $114.65 a month for 5 years ($6,879.00 in total).

Reason #3 – Credit disapprovals

With the increase in used and new car prices, most people are now looking for financial options beyond what their credit score can handle. That’s why when you’re buying a new car now, there’s a very high chance that you will be disappointed in some of the credit companies. Checking multiple times on your credit impacts your credit score. Just another reason to wait and delay any car purchase until things are much better and prices are lower.

If you know for sure that your credit score is not good, it’s not worth your time looking for a new car because it’s most likely that credit companies have even higher strict approval standards than before. Spend this time improving your credit score instead.

Reason #4 – No incentives

In the past, many automakers would offer you some incentives to convince you to purchase the vehicle. Many of us enjoyed these incentives that provided us with tons of benefits. But unfortunately, with the current car shortages and increased demand, automakers are no longer providing many, if any, new incentives.

If you’re planning to purchase a new car, you won’t get any benefits, and you will end up with a very high price to boot. Waiting means they will return and then you will get the advantages of a rebate or incentive.

Reason #5 – The increasing popularity of electric vehicles (EVs)

You literally can’t miss the ads for electric vehicles we are currently being bombarded with on TV and the internet these days.

With the price of gas and the shortage in the used car market plus the prices of brand-new gasoline cars, many people are now switching to purchasing electric vehicles. But, unfortunately, those electric cars have their issues, and they’re generally not cheap. This means that you might be forced to select a car that you’re not convinced of just because things are not working out with the other types of vehicles.

Don’t get me wrong, EVs are definitely the coming wave and by 2030 the expectation is that as many as 50% of all new cars sold will be electric. Millennials and Gen Z are most interested, but you will be soon if you are not at the moment.

Right now, about 6% of new sales are electric and that is more than double what it was last year.

There are also the concerns about recharging your car right now (eventually that will be your problem when looking for a gasoline station) and the high cost of the electric battery if it needs to be replaced (expected to come down in price as the popularity increases).

So What Are My Options?

There is one option remaining if you are in the car market. First ask yourself, “Do I really need a car now?” Need is the key word here, because even a used car will be priced higher than you ever remember they were.

If the answer is yes, get a certified used car and then take really good care of it. Yes, used cars might not seem to be a good option, but it may be the only option.

There has been a surge in the prices of used cars, but if you are thinking of getting one, then do not think too much because prices are going up rapidly so just do it if you need to.

Note: A used car extended warranty comes in handy too when you get yourself one. Used cars sometimes come with an extended warranty that can be transferable to the new owner. Always ask if the car has one of those before you buy.

Final Thoughts

Buying a new car now is a risk and pricing is obscene. My best advice is to take a good hard look right now at what you are driving and try to rationalize to yourself why maintaining it well and avoiding another huge debt like a new car makes real sense—especially in this very high inflation cycle.

Eventually, the inflation will peak and shrink, but when? It could take years to return to the 2% level that the Fed loves so much and where does that leave you? Driving your car or driving your car debt into the ground?

What do you drive now (we’ve got a 2013 Honda Civic with less than 60k miles) and do you maintain it well? Is it a purchase you need to make or one that you want? Is an electric vehicle in your plan and is now the best tine to make that purchase?

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