Author and radio host Dave Ramsey highlighted how a big recent occurrence in the car-buying space might affect consumers.
And he warned them about a mistake to avoid when considering the news.
“After a two-year trend,” he noted in his weekly newsletter, “March 2023 saw the first dip in new-car prices, ringing in at an average of around $48,000.”
But Ramsey bluntly stated that this should not encourage car shoppers to buy new. Instead, he believes focusing on a good used car is still the best move.
“We’re not going to beat around the bush: The very best way to buy a car is to save up and buy a reliable, slightly used car (with cash),” Ramsey Solutions wrote. “You’re always going to be better off buying used and paying up front instead of going for the shiny new model that some overcaffeinated car salesman is trying to get you to borrow money for.”
“The choice between a new or used vehicle (and how you pay for it) could be the difference between riding the highway to wealth and financial independence or spinning your wheels in a rut of debt and endless payments,” it added.
The top-selling used cars in the U.S. for 2022 were Ford’s (F) – Get Free Report F-150 truck, GM’s (GM) – Get Free Report Chevrolet Silverado and Equinox, Fiat Chrysler’s Dodge Ram and the Honda (HNDAF) Civic, according to Autoweek.
“Now for the math,” Ramsey Solutions wrote. “Whether you have a car, a boat or a lawnmower, they all go down in value over time as they go through the wear and tear of everyday use. That loss in value is called ‘depreciation,’ and it’s a fact of life.”
“But here’s the kicker when it comes to car depreciation,” it continued. “New cars lose their value at a much faster rate than used cars do. Depending on the make and model, some cars might hold their value a little better than others. But they all lose their value over time — especially new ones.
Ramsey solutions had the following to say about the arithmetic involved:
Just how fast do new cars lose their value? Buckle up. It’s going to be a bumpy ride! Here’s a look at how quickly a new car loses its value:
After One Minute: If you buy a shiny new $35,000 car, it loses somewhere between 9–11% of its value the moment you drive off the lot. You’re basically throwing $3,500 out the car window as you drive the car home for the first time!
After One Year: Fast-forward 12 months and that car sitting in your driveway will have lost around 20% or maybe even more of its value from the day you bought it.
After Five Years: You can expect your new car to lose 60% of its value after driving it around for five years. Most cars lose about 10% of their value every year after that steep first-year dip.
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