Buying a brand new car can be a nerve-racking experience! There are tons of myths and misconceptions floating around the internet about new vehicles and our goal today is to dispel a few of those myths. After all, at Langley Chrysler and the Trotman Auto Group, we live and breathe new cars every day!
Here are 5 of the most common myths about buying a brand NEW car:
- A NEW vehicle will depreciate by 50% the moment I drive away – Sure, new vehicles depreciate quickly, although 50% is a far stretch. Sure, the moment you drive a new car off the lot, it does drop in value. That being said, the most important question to ask yourself is “How long do I plan on owning this car?” and “What is my total cost of ownership?”. If you plan on owning the car for 10+ years, then depreciation is irrelevant whether it’s 10% or 70%. Also, you may pay a bit of a premium for a new car compared to used, but your total cost of ownership may be lower. Often new cars qualify for low interest rates (sometimes as low as 0%), whereas standard bank rates can be 6-7%, meaning any difference in price gets eaten up quickly in interest.
- Dealerships have huge markups in New cars – Certain new vehicles obviously have more markups than others. For example, a new one-ton diesel truck will have more markup than a Honda Civic. There’s a common belief that New Cars have several thousand dollars in markup, whereas most dealerships average less than $1,000 in gross profit per New Vehicle transaction.
- I’ll get a better deal if I pay cash – Banks pay a small commission to the dealerships for financing a vehicle (albeit, it’s only a few hundred dollars). Either way, it’s in the dealership’s best interest to finance a vehicle to a customer and often a dealership will give a customer a further discount if they finance as opposed to paying cash.
- Waiting until the end of the month is the best time to purchase a new car – Most manufacturers offer their dealerships incentives for hitting volume targets, and therefore stores will work as hard to sell their customers a car at the beginning of the month as they will at the end of the month. Top dealers often hit their targets early in the month, meaning there may actually be more value in purchasing in the first few weeks of a month.
- I can get a better deal on financing through my own bank – Unless you’ve got access to a secure line of credit (often against the equity in your house), you won’t find a better deal financing with your own bank. The average interest rate banks offer on vehicle financing is 7-8%. Auto manufacturers (i.e. Chrysler, Ford, Toyota, etc) pay the banks to buy down the rates, sometimes as low as 0%. This is how dealerships are able to offer low interest rates on new vehicle purchases.
At Langley Chrysler and the Trotman Auto Group, we live and breathe new cars every day! Come and discover the difference!
Here’s our Sales Manager, Matt Shirlaw, giving a brief break down for each of these myths: