6 Reasons Why You Shouldn’t Buy a New Car If You’re Under 25
Written by
Tara Struyk
Edited by
Molly Sullivan
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So you’ve landed your first job — or your first decent-paying job. Congratulations! What’s up next? You may be wondering, “Should I buy a new car?”
For many people, a car may be essential for getting around in the city, but a new car isn’t. And the fact is, buying new just doesn’t stand up to financial scrutiny. The benefits of buying a used car far outweigh buying new, especially when you haven’t had long to build up credit or save for the down payment.
Here are a few reasons to avoid buying a new car in lieu of a used car purchase.
It’s a Luxury
A new car is nothing more than a luxury. Yes, you heard that right. By definition, a luxury is something that isn’t strictly necessary. It’s natural to be attracted to a brand-new car, but the reality is it won’t get you to work any faster or better than a used one. Plus, unless you have no student loan debt left over after college and have a big salary, it’s a luxury that isn’t affordable for younger adults — even those who can technically pay for it.
You Get Less Car for Your Money
If you’re looking to buy a car, you probably have a budget in mind. One of the benefits of buying a used car is that you’ll get a lot more car for your money.
For example, you can choose a new 2024 Honda Civic, which is still considered affordable at a starting price of $23,950; or, you can spend that $24,000 on a used car. That kind of money can get you a more luxury experience, like a 2021 Audi Q3 SUV or a 2019 Mercedes-Benz GLC 300 SUV.
You Take the Depreciation Hit
When you’re living on a tight budget, great car-buying advice dictates that value should be your main objective. That’s why a new car — as opposed to a used car — just doesn’t add up.
According to Consumer Reports, a car tends to lose about 45% of its value over the first four years of ownership. In other words, new car buyers are paying a huge premium simply because the car is newer — not necessarily better — than a car that’s a year or two older. That’s just bad value.
Plus, this kind of depreciation can also put car owners upside down on their auto loan. An upside down auto loan can lead to problems if the car gets totaled without GAP coverage, because the insurance company will reimburse you for only the car’s market worth, regardless of what you still owe on the loan.
You Pay More Interest
One trap many car buyers fall into is mistaking affordability with being able to make the payments. When you set out to buy a car, the idea isn’t to get the most expensive car you can make payments on, but to get the best car you can afford to pay for quickly — and at least partly in cash.
A four-year loan at 4% will add about $1,200 to the cost of a car. That means that a $15,000 car actually ends up costing $16,200 — 8% more than the sticker price. This is especially important if you’re a young buyer, as you may not have enough of a credit history to get the best auto loan rates anyway, and with average auto rates more in the 6-8% territory right now you’re looking at thousands added on to the price of your car.
Your Car Insurance May Be Higher
You’ll typically pay more insurance for a newer car than a used one. The equation is simple: The more a car is worth the more insurance you’ll pay.
Buy a used car outright and it may even pay to skip collision insurance altogether, which can mean hundreds in savings each year. A new car is also likely to hit younger drivers with a shorter driving history harder, due to higher insurance rates.
Used Cars Are Reliable
One issue that often concerns those who are seeking a new car is reliability. And while it’s true that a brand-new car of any make or model is unlikely to break down in its first few years, it’s important that buyers choose a car with a high reliability rating, rather than just relying on a new car warranty.
Opt for a used car that’s rated as highly reliable and invest some money to maintain it properly. When properly maintained, today’s vehicles should easily go well past 100,000 miles, and many could reach 200,000 miles without a major breakdown. When you consider how much you can save by buying used, you’ll come out ahead even if you have to make some repairs down the road.
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