You Don’t Need a Brand New Vehicle

I need to get something off my chest.

The average Canadian does not need to purchase a brand new vehicle.

We as a society need to get it out of our heads that purchasing a vehicle new is better, safer, more economical, etc. It is so incredibly wasteful for not only your wallet, but also the environment.

1. Vehicles are not an investment.

It’s no joke that vehicles depreciate the second you drive them off the lot. Without getting into the specifics as it varies heavily from vehicle to vehicle, look into the difference between a 2018 model vehicle of your choice vs 2017. Below is a handy graphic just to illustrate my point:

Vehicle Depreciation

2. You are not technically the owner of the vehicle… Yet.

If you purchase a vehicle from a dealership lot, it is likely you will have a lien holder on the vehicle, so the vehicle is not really yours. Just like with a mortgage, it belongs to the bank. To put it in perspective:

“A lien becomes the legal right of the creditor to sell the collateral property of a debtor who fails to meet the obligations of the loan or other contract. The property that is the subject of the lien cannot be sold by the owner without the consent of the lien holder.” 

In addition, any insurance settlements would go immediately to the lien holder before you see a dime. For example, if your vehicle is written off, and your insurance company gives you a cheque for $3000. However, the remaining loan on your vehicle is $4000. You don’t receive any of the money because the bank takes it and pays it to the lien holder immediately. In addition, you still owe the lien holder the remaining balance.

I cannot stress how often this scenario happens. 

For example. My vehicle is worth approximately $8000, while my remaining loan is approximately $14,000. In the event your vehicle is deemed a total loss, your insurance company gives you the Actual Cash Value of your vehicle. Not what remains on your lien. 

3. Used vehicles can save you so much money in the long run.
Used vehicles depreciate slower than new vehicles and the insurance tends to be cheaper because lower actual cash values means a lower risk. (Don’t forget to shop around for insurance however). Of course there is always the risk of purchasing a lemon, but make sure to buy used from a reputable dealer. Buying a vehicle online, can pose a lot of risk when the seller doesn’t have a reputation to uphold.

4. Most people buy bigger vehicles than they need.

Unfortunately many Canadians do tend to purchase vehicles that are bigger than what they need. It’s easy to fall into the, “what if?” trap.

What if I go camping? What if we have more children? What if I need to lug a 300lb bear in my trunk?

However, if you are able to purchase your vehicle outright, (in my opinion), you are more likely to purchase a vehicle that suits your needs.

Thanks for sticking around until the end! Before you think that I’m crazy. Imagine for a second how nice it would feel to not have a monthly car payment (and the interest associated with it). Imagine how nice it would be to not have to carry collision coverage because you don’t have a lien holder on your vehicle. Imagine not paying an arm and a leg for gas!

I know I would enjoy having an extra $400/month. How about you?

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