With a very little interest rate, about $12 of each payment is now going to interest and the rest is going to principle. It will be paid off soon and that’s a great feeling. We haven’t had any issues with the vehicle and we weren’t considering trading it in until we received an offer in the mail from the dealer. It seems this model is popular on the used car market and they are eager to get us into a new vehicle ($$$). I gotta say, it’s tempting.
However, no car payment is tempting too. We feel we’re in a good spot with a relatively “new” vehicle but when should we buy a new car?
I did some research and Edmunds.com says it’s almost always less expensive to repair a car than buy a new one. They say a new car typically loses an estimated 22 percent of it’s value in the first year and your existing car has already taken that depreciation hit.
On the flip side, if trips to the mechanic are costing you too much money and time from your work or family and you don’t want to worry constantly about future break downs, a new car may be worth the investment. New cars are safer than ever with many safety equipment becoming standard on new vehicles.
Edmunds formula to making a decision is if the cost of repairs is greater than either the value of the vehicle or one year’s monthly payments, it’s time to buy another vehicle.
I asked Pat about the cost of insurance on an older vehicle v. a new one. Would our insurance premium go up or down if we bought a new vehicle? Of course all rates depend on the driver’s driving record and the type of vehicle (sports cars really do cost more to insure) but he said a newer car would cost more to insure (there are reasons and I’ll let him break it down for you). But if you are in the market for a new care, the good news is, it’s also true that newer vehicles may have newer safety features that can lower your premium. It’s important you research what your rates may be on a vehicle you are interested in purchasing before you buy.
In our case, the van isn’t that “old” and we have the most recent safety features such a side air bags, the back up camera and a lot of what I’d call bells and whistles on it: Navigation, DVD player, bluetooth, auto start = all awesome features when toting around kids (and when I want to learn my Jazzercise routines on long road trips).
Not having a car payment soon and keeping our premium low is more attractive to me right now than a new vehicle that’s going to depreciate thousands of dollars the minute I drive it off the lot. And, according to Kelly’s Blue Book, if I wanted to sell the van to a private party, I could expect to receive just over $21,000. Not a bad chunk of change should I change my mind in the near future!
Are you in the market for a new car? Call us and ask what your insurance premium would be so you can factor the total cost of a new vehicle into your budget. We’d be happy to assist you.
The Patrick D. O’Brien Agency