Let me get right to it – one of the worst investments you could ever make is to buy a new car, and to make it doubly worse, taking out a loan to pay for it.
Here are some quotes from a variety of web sites to support my position:
“Let’s set up a hypothetical scenario. You have $25,000 to invest and a certain investment broker approached you with a great new investment vehicle. He starts by telling you that it is one of the most popular investments in North America. He goes on to say that you can feel safe because a large amount of Americans invest in this product. You have the same question as most would: “How much money can you make on this investment?” When you ask, you’re surprised by the answer. Your investment broker tells you that the chances are nearly 100% that you will make no money at all. Then he tells you the really shocking part: The chances are nearly 100% that you will lose at least half of your investment and most likely much more than that! Who would sign up for an investment like this? The answer is, quite possibly, you! You would sign up for it because like most Americans, if you are purchasing a new car, you’re probably leasing or financing it. For most Americans, a car is a terrible investment, but you need one, so what do you do? How to lose less: first, purchase a used car. Next, only buy an automobile when you can pay cash for it.” from Buying A Car: The Worst Investment?
“…your car is not an investment. It depreciates over time…You do not lose as much money when you buy a used car. One of the best things you can do is set up a fund for your next car (that you contribute to each week). Then you can begin to pay for your cars in cash.” from Is Buying a Car an Investment?
“Automobiles are some of the worst investments you’ll make in your life…Here are 11 steps to buying a car (I am not listing all of them here, but the link is at the end of this paragraph). 1. Buy late model used. 2. Start saving for your next car now.” from How To Buy a Car As a Good Investment For The Future
“No. 1: Paid too much for a new car that depreciated quickly” from The 5 Worst Car-Buying Regrets
“I’ll probably get in trouble. After all, I write new car reviews. Advising people not to buy new cars is not what you’d probably expect. But, here’s the fulsome scurvy truth: I – and every car journalist I know – drive used. Because we know. And now, I’m gonna spill the beans, give you the Straight Dope – so that you’ll know, too. Here goes. A new car is the absolute worst investment you’ll ever make. from Does it Ever Make Sense to Buy a New Car?
So what’s the big takeaway from all of these articles?
Only buy a used car, and only use cash to buy it.
And then once you have the car, keep driving it as long as it still fulfills its basic purpose: getting you from Point A to Point B in a safe and reliable manner.
Your bank account will thank you for your wise decisions.