Thinking of buying a new car? There’s a pretty good chance you are making a mistake.
In fact, about 1 in 4 trade-ins last year — 23%, to be exact — occurred when a new car was 2 years old or younger. That means many drivers are trading in their cars and looking for new ones much earlier than they should — a costly mistake, according to automotive research site Edmunds.
Citing Edmunds transaction data, The Associated Press declares:
“Because two years is generally not enough time to hit the break-even point of a car loan, most people who swap cars this early will owe more money on the loan than what the vehicle is worth.”
However, even if you pay for vehicles in full, buying the wrong car and then trading it in after only a couple of years will still cost you.
How costly is such a move? Consider this example with real-life numbers from Edmunds: Say you bought a new Honda Accord LX in 2017. The manufacturer’s suggested retail price was $24,030, but you got a deal for $20,643. After taxes and fees, you paid a total of $22,700.
You later realize the Accord is not the right fit for you and sell it back to the dealership after two years for a trade-in value of $13,522. That’s 40% less than the total you paid two years ago.
The Accord is known to hold onto its resale value well. With other cars, your loss could be worse.
The AP concludes:
“These significant drops in value on the trade-in will easily outweigh the money saved by diligent price shopping. And what often happens next is that the buyer will roll the unpaid balance of the older car into the new vehicle’s loan, making it more expensive …”
Avoiding a car-buying mistake
Perhaps the best way to avoid the fate illustrated by Edmunds is to buy a car you will love — and will keep for many years.
Getting the right car starts with research. Fortunately, the internet provides endless amounts of information that can help you separate the top car models from the duds. You can find some of the best websites in “6 Websites Everyone Should Check Before Buying a Car.”
We offer additional advice in “8 Tips for Buying Your Next Car for Less.” For example, we note that the price of many models starts plummeting once they have more than 100,000 miles:
“By saying no to these high-mileage cars, you’re rejecting a lot of good deals. Not every high-mileage car is a good buy, but if you find a reliable make and model, you can get good quality at a low price.”
Have we convinced you that a used car often is more cost-efficient than a new one? Then, check out “5 Steps You Must Take Before Buying a Used Car.”
Do you have some helpful car-shopping tips? Share them in comments below or on our Facebook page.
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