You may have heard that it does not make sense to buy a brand new car because the car depreciates by 20% the minute you drive it off the lot., and that is true. There are a couple of exceptional situations when i think it may make sense to buy a new car
- When the price of Used and New are very similar: This certainly does not happen often, but the pandemic has caused a significant issue in the supply chain of goods and services across many industries, the car industry being one of them. I priced out a used 2021 Nissan Rogue with 15km for $37,000, and the 2022 version of the same car was priced at $less than $35,000.
- If you plan to buy and hold the car for a very long time. If you aren’t one of the masses that hold their car for just about 3 – 4 years before they trade it, but more like for 10 or more years, then you may be better off with a new car. First, you will likely have a reliable car that would serve you for that length of time, and the equity you built in the car over that length of time may put you at par with someone that bought theirs used.
Either way, you should be prudent in how much of your cash you put towards a liability such as a car. You can either skip buying an expensive vehicle or have an asset that pays for the luxury you would like.
Things you can do with the money you didn’t spend on the car?
- Trade: Buy and sell something: I know this sounds really mundane and not very creative or digital or whatever. But listen, buying and selling is a time tested, simple and easy way of making money. For instance, at Christmas time in 2021, I decided to sell hampers/gift baskets because people are typically looking for something to gift friends and family- that simple business made 100% return. For a $1000 investment, I made a revenue of $2000; that is 100% return in 1 month. Even the stock market couldn’t deliver such returns.
- Buy a cash flowing asset like a property, a business, or shares in a company.