When it comes down to it, I really love cars. There’s just something about a well-designed vehicle that brings a smile to my face, particularly when I’m cruising down the road. And, yes, I’ve had my eyes on a new (or new-to-me) car for quite some time. If I didn’t have a financial care in the world and had the chance to own a Tesla, I would jump on that opportunity without question. However, since I do have to consider the financial side, is now the right time to buy a car? Here’s a look at my perspective.
The Current State of the Car Market
It isn’t a secret that the car market is in a bit of disarray. The pandemic dramatically impacted manufacturing, slowing the production of vehicles of every make and model. Add the chip shortage into the mix, and the delays just kept adding up.
Since the production struggles limit new car supplies, prices began to rise. Dealerships ended up with limited inventory, and those who decided that getting a car now is a necessity essentially had to pay what’s asked. Otherwise, the dealership could potentially just wait for the next interested buyer. In the end, that situation influenced the used vehicle market in several ways.
First, households that would typically buy new may hold onto their current car a bit longer, hoping that new vehicle prices will decline before purchasing becomes an actual necessity. That reduces the amount of inventory in the used market, impacting pricing there.
Second, since new cars are so pricey, more people are buying used cars instead of new ones. Again, this causes used vehicle prices to go up.
Between November 2020 and November 2021, used car prices soared, increasing by 27.9 percent. In December 2021 alone, the average cost of a used vehicle increased by 3.5 percent. The circumstances leading to those upticks are still present within the market, so the odds that the price will go down any time soon is incredibly low.
The Financial Side of the Equation
Currently, I own two vehicles that are both in great condition. They run fine and meet my needs. When it comes to routine maintenance, it’s reasonably affordable. Plus, both cars are paid off completely.
Right now, I don’t have a car payment hanging over my head, and that’s a great feeling. While I could potentially afford to add one to the mix, whether I’d want to is a big part of this equation. Without the monthly payment, I have a lot more flexibility in my budget. I’m making serious headway on a range of financial goals at the moment, and I’d have to slow down if an auto payment was suddenly part of the mix.
It’s normal for vehicle payments to be several hundred dollars a month, so it’s best to think that through carefully. After all, the average monthly payment on a used car loan is more than $500, and a new car payment clocks in well above $600. While that isn’t necessarily what I’d owe, they are undoubtedly eye-opening figures.
Then, you have to add in the fact that I might end up spending more than the vehicle would be worth if times were normal. Depending on when the market corrects, that could leave me upside-down on a car. If that happens, it backs me into a financial corner, as I wouldn’t be able to sell for what I owe if that became a necessity.
Should I Be Buying a Car Now?
In the end, I think that buying a car now isn’t a great move if it isn’t a genuine necessity. Whether a person is in the new or used market, the prices of vehicles are incredibly high. Even qualifying for a lower interest rate isn’t enough to offset the price tag. Plus, if a loan isn’t part of the equation, it’s just a lot of cash out of the door.
Plus, my two current vehicles are still perfectly good. They run well, and I can rely on them, so replacing either one isn’t crucial. With that in mind, I think that waiting is just the right choice for me.
Do you think that buying a new car now is a good idea or a poor financial decision? Have you decided to purchase a vehicle even if you don’t believe the timing is ideal? Were you able to score a bargain even with conditions being less than perfect for buyers? Share your thoughts in the comments below.
Read More:
- Car Dealerships Are Paying Top Dollar For Used Cars And Here’s Why
- How We Became A Single Car Family
- Cheap Car Brands You Shouldn’t Buy
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Tamila McDonald is a U.S. Army veteran with 20 years of service, including five years as a military financial advisor. After retiring from the Army, she spent eight years as an AFCPE-certified personal financial advisor for wounded warriors and their families. Now she writes about personal finance and benefits programs for numerous financial websites.
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