Ah, that new car smell. It’s captivating. Just sit inside a brand-new vehicle and it will overtake your senses. Your car doesn’t smell like this car. Your car doesn’t look like this car with its flawless interior and exterior. Suddenly, you want to buy that brand-new car.
Wait. Don’t sign the papers yet.
Before you drive that brand-new car off the lot, let me provide you with some percentages. Hopefully, these numbers will turn that new car smell from alluring to repelling.
1. 10%. This is how much brand-new cars drop in value over the first month, pretty much as soon as you drive the car off the dealer’s lot. You pay a significant premium to be the person who gets to drive a new car off the lot. Is that experience truly worth the cost?
2. 20%. This is how much your brand-new car will depreciate in the first year. Some studies push this number to 25%. Within the first twelve months, a brand-new car will be worth almost one quarter less than when it was purchased.
3. 10%. This is how much your brand-new car will drop in value for the next four years. The depreciation slows down, but it exists nonetheless.
4. 60%. This is how much a brand-new car can depreciate in the first five years. A brand-new car can be worth only 40% of its original purchase price after five years.
A brand-new car is rarely a good purchase. Car depreciate, often rapidly, over time. If you are needing a car, consider purchasing a new-to-you (used) car. Save thousands, by allowing someone else to drive the brand-new car off the lot. Don’t allow the new car smell to lure you into a bad financial decision. Develop an aversion for that new car smell.