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Despite experts calling for 2024 to be a great year to buy a new vehicle, I’m not interested. It’s not just because the average price of a new car is $48,759, and it’s not just because I’d like to give electric vehicle (EV) manufacturers a year (or five) to work the kinks out. I really just don’t see it as a good financial move right now. Here’s why.
I have no desire to pay more for auto insurance
The expenses involved in owning a vehicle go far beyond the monthly loan payment. Drivers also have to cover the cost of gas, routine maintenance, occasional repairs, and auto insurance.
Although we recently changed insurers to save more than $1,600 annually on bundled homeowners and auto coverage, I know that buying a newer model car means getting hit with a higher insurance premium. The more a vehicle is worth, the more it costs to repair. And it’s the price of expensive repairs that gets passed along to the consumer by way of higher insurance premiums.
Between November 2022 and November 2023, car insurance costs outpaced inflation, increasing by 19%. Honestly, I’m just not okay with adjusting our monthly budget to pay more to an auto insurer.
I want to pay down debt
Now that the inflation rate is nearing the Federal Reserve’s target of 2%, it’s about time for the Fed to lower the federal funds rate (the interest rate at which banks loan money to other banks). While the federal funds rate is not directly connected to the interest rates we pay as consumers, where one goes, the other typically follows. In other words, once the Fed lowers the federal funds rate, we can expect interest rates across the board to follow.
We took out a mortgage in mid-2022 that left a bit of a sour taste in my mouth, but because I believe that we “marry the house, date the rate,” I knew that we could refinance when rates dropped. It makes no sense to take on new debt when what I really want to do is refinance existing debt.
I’m still cautious about overpaying
One of the best things about being a finance writer is research. Yesterday, I was looking into which auto manufacturers currently offer promotional interest rates of 3% or less. At first, it seemed like a great way for someone (who actually needs a new car) to finance their ride. However, just for fun, I did the math. If someone with excellent credit were to buy a $48,000 vehicle and snag a 1.99% interest rate, their monthly payment for 60 months would be $841, and they would pay $2,470 in interest.
The thought of having over $800 less each month to save for retirement strikes me as ludicrous — especially since our current vehicles run fine.
Yesterday, as I cleaned my desk off for the evening, it suddenly struck me that I’d grown up. There was a time when I ignored the critical part of my brain, the part that reminded me of the difference between wants and needs. There was a time when I would make a financial decision, reasoning that I could “figure it out later.”
Today, before I make a money decision, I stop long enough to think it through. And now that I’ve considered the idea of a new car in 2024, the answer is a resounding no.
If you’re considering buying a new car in 2024, these questions can help you decide if now is the right time:
- How much will the cost of insurance increase if I buy a new car?
- Does my monthly budget have the wiggle room, or will it be a struggle to make payments?
- Do I have money put away for emergencies?
- Would I rather wait until interest rates drop, or do I plan to refinance the vehicle when rates are lower?
Answer these questions to make the right call for you and your finances.
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