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Thinking of buying a car this year? Read on to see why that may not be the best idea.
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If you have a number of lofty goals set for 2024, you’re probably in good company. Many people make personal finance resolutions at the start of a new year, and one of yours might be to replace your old clunker of a car with a newer model.
It’s easy to see why you’d want to upgrade your car, especially if you drive often. But here’s why you may want to avoid buying a car this year.
1. Borrowing is still expensive
To combat inflation, the Federal Reserve hiked interest rates numerous times in 2022 and 2023. The good news on the borrowing front is that the Fed opted to pause its rate hikes at its last three meetings. And it’s even projecting possible rate cuts in 2024.
But still, the cost of borrowing money remains elevated, whether you’re looking at an auto loan, a personal loan, or a home equity loan. So if you’re in a position where you need to finance a vehicle, you might get stuck with a higher interest rate than what you want — even if you have an excellent credit score.
2. Car prices are still up
Car prices fell in 2023 for the most part. That’s the good news. But still, as of October, the average price of a new vehicle was $47,936, says Kelley Blue Book. That’s not exactly a small amount of money.
That said, you don’t necessarily have to buy a car that costs almost $48,000. You might reap some savings on a vehicle if you stick to a used model, or if you buy a newer model but forgo some higher-end features. But still, cars aren’t cheap to buy these days, so know that you may end up spending more than you’d like to.
3. Your current vehicle runs well enough and you have other goals you’re saving for
If your current vehicle is so old or has so many problems that it’s become unreliable, then it makes sense to buy a new one this year if you can afford to. You might end up compromising your job if you keep showing up late due to your car not starting. And you can’t afford to be stranded in your driveway when it’s time to pick your kids up from school.
But if your current vehicle runs well enough and you’re confident you can get another year out of it, then it pays to wait on a new car purchase if you have other pressing goals you’re saving for. Those might include building an emergency fund or replacing your home’s air conditioning system that may not make it through the summer.
A new car could make your daily commute more pleasant. And let’s just be honest and say that it’s nice to have new things in general, whether it’s a car, a TV, or a handbag. So if you have some money socked away in your savings account for a car down payment, you may be tempted to move forward with your plans to buy in 2024. But before you do, consider the drawbacks of buying a car this year, and consider postponing that purchase for another 12 months if doing so is feasible.
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