Thinking of buying a brand new car?
Last week, two of our family friends bought brand new spanking 2009 model cars, a Honda Jazz and a Toyota Vios both 1.3L engines, both paid downpayment and put them into financing, one for 4 years the other for 5 years. A brand new car, if it would only be for family use or leisure and not for business in my opinion, is a bad investment We all know that car value depreciates. We cannot really call a car an investment for its value depreciate over time with exception of course to rare vintage or collector cars where their value appreciates.
When buying brand new cars, after it has left the CASA or shop it has already depreciated in value. The money you paid for taxes, chattel mortgage or insurance is already lost. Car depreciates in value about 10-20% per year. The first year percentage is the highest. And to add it up, they would be paying for the 4-5 year interest for the mortgage, that is about more or less 200k pesos ($4,000) additional on the original retail price. If they were using the car for business then it would help for paying off the monthly mortgage but for family use it is more for leisure.
My wife got a chance to advice one of our friend before buying to instead settle for a 1 year older model, but the advice didn’t stick to her and they really wanted to get a brand new one. We were just trying to share what our experience was. Our car, an Aveo 2005 model, was bought in year 2006. It wasn’t brand new, it was a year older but we got it a good deal- almost 40% off the original value, it was repossessed by the bank for non payment of the original buyer. We sort of bought it on impulse even though we still have an existing good car. We paid for the half and the other half we put in financing for only 2 years. Those two years thankfully are almost over, the car’s value has depreciated but we didn’t have to pay that much and avoided the high depreciation of a brand new car.
Though it was a good deal, it is still a not-so-good decision. We could have invested the money on other things however during those times we bought things on impulse without thinking for the future, now much has changed. We have learned from our mistakes and we are saving for the future.
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