- An insurance expert shares tips for deciding whether it is best to buy a new car now or rather in the new year.
- There are two important questions to answer first: Do I have the necessary monthly cash flow and how will it affect your long-term financial position?
- The most obvious reason to wait if you're buying new is that you'll be able to buy a 2022 model, which massively affects your resale value - but there might be a way around this.
This time of year many prospective car buyers wonder whether it's best to buy now or wait until the new year, according to Ernest North, co-founder of digital insurance platform Naked.
"Whether you're downgrading to a smaller car due to working from home, getting a bigger car because your family has grown, or replacing an old vehicle, there are compelling arguments either way," says North.
Make sure you can answer these two questions: Do I have the monthly cash flow to afford this car? And how is your long-term financial position affected by owning this particular car? To answer this question, exclude the capital repayment portion of your instalment, but include the depreciation over the finance period.
North shares some of the most frequent arguments for and against buying now.
Arguments for buying now
You may be able to buy a 2022 model in 2021
If your heart is set on owning a 2022 car, you can often (but not always) buy the car in December and only register it in 2022 to improve the resale value.
You could pick up a bargain
With the year running to an end, many car dealers are under pressure to meet targets and move stock off the floor before it's devalued by the ringing in of a new year. That means some of them may be more inclined to offer a discount to close a deal.
You can use your bonus as a deposit
If you're getting a Christmas bonus or 13th cheque, you could use it towards your deposit and reduce the interest you will pay over the term of the car loan.
Potential for a lower insurance premium
Buying a 2021 model now means a lower insurance premium than driving a 2022 model.
You should put safety and reliability first
If your car is getting old and wonky, it's a good idea to replace it before taking a long (holiday) road trip.
Car prices may rise in 2022
As car manufacturers make their 2022 models available, they'll inevitably hike the prices. The prices of many models may rise more than you expect, especially if the car (or a significant portion of the parts) are imported.
Arguments against buying now
"The most obvious reason to wait if you're buying new is that you'll be able to buy a 2022 model, which massively affects your resale value," says North.
Some good deals early in the year
If you're considering a used vehicle, many private sellers are under pressure early in the year with Christmas and "back-to-school" depleting their cash flow. Some might offer an attractive price to secure a quick sale.
Clearer view of your financial situation
If you've splashed out on lavish celebrations or an expensive holiday, your financial resources may be under pressure. Plus, there are often unexpected costs at the start of a year. Before committing, you might want to ensure you can afford that new car.
Covid-19 and remote work
You could buy a new car that mostly sits in your driveway for two months because your employer decides to extend work-from-home, or the government introduces new restrictions to manage future Covid-19 waves.
Your life may change in 2022
There may be other big changes in your lifestyle early in the new year – perhaps you'll get the nod from your boss to work from home for good or decide to have another baby. If your life isn't settled, rather wait to ensure you buy the right vehicle for needs.
A car isn't an investment
"A car is not an investment, it is a cost of living. You might prefer to defer the cost of buying a car and paying off debt or keeping your money in an interest-bearing account," concludes North.