Should You Get a Car Loan for a New Car?

Cars depreciate in value quickly

If you purchase a new car with a car loan, you should be aware that as soon as you drive it off the lot you will likely find that the car has depreciated between $2,000 and $5,000 immediately. When you get an auto loan for a new car you basically owe more than the car is worth for a good portion of the loan. Interest charges and other fees that increase the total amount borrowed, combined with the falling value of the car, mean that if you get in an accident soon after buying the car, you will likely owe the bank money after a claim check has been issued for your car.

Buying used cars with auto loans

Even though it is not as glamorous, a more sound car buying decision involves purchasing a car that is used. You will pay closer to the actual value of the car when you buy it used. One of the best deals on cars bought with car loans is a lease return. The depreciation has already happened, but the car is usually still in relatively good shape with low miles. If you are going to buy a car with a car loan, consider your options. You might find that a used car is better for you than a new car.

4 Responses to Should You Get a Car Loan for a New Car?

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