Is Buying a Brand New Car Irresponsible with the Oncoming Recession?
Updated on November 16 2024
The cold hard truth: The Philippines, and the whole world is already in an economic recession.
There has been no formal announcement from our economic leaders but it is only a matter of time until we officially join the rest of the world in what the International Monetary Fund is calling the “Great Lockdown,” while others termed it the “Coronavirus recession,” or “Great Shutdown.” All of which refer to the massive global economic slowdown caused by the COVID-19 pandemic.
As we attempt to return to work and earn a living, the “new normal” of social distancing and community quarantines has also reinforced another truth: the need for personal mobility. The country’s public transportation systems–already in a sorry state–have been stretched way beyond capacity. For many Filipinos, the only realistic alternative (other than a long walk) is buying their own car.
“Used or brand new?” That is still the first consideration, pandemic or not, but is it actually irresponsible to buying a new car during a recession?
The main problem with buying a new car
The usual problem is that buying a new car is very expensive. Most of us will have to buy one with financial assistance–usually a bank loan–to manage the cost over several years (with a large amount of interest added on.) With a stable job and monthly income, it’s not too much of an issue to take out a loan.
However, not a lot of money is going around during a recession. Businesses and business owners will find it hard to stay afloat during quarantine because the majority are reluctant to spend, and that leads to one of the biggest and scariest consequences of the recession: a major rise in unemployment.
No one is 100% secure in their job. The recession will force us to be responsible with our hard-earned money just in case.
The main problem with a brand new car then becomes: Do I want to keep paying for this car if things get hard–can I even pay for it if things get worse?
Long-term plans are not safe in a recession
Unemployment has just hit a historic high of 17.7% that's roughly 1 in 5 Pinoys without a job. A figure that we can expect to climb even higher.
Without job assurance, taking on a big loan becomes a significant financial risk. As the recession grinds on, everyone will have to think carefully about where their money goes. And in the worst case scenario that you need to prioritize other essentials like food or shelter over your car loan–then all your hard-earned money could disappear along with the car itself.
With all that in mind, buying an expensive brand new car can be thought of as irresponsible. During a recession, the most sensible thing to do is avoid adding debt to your plate and remaining financially flexible for whatever comes next.
But what about my personal need to move and work?
Don’t feel guilty! It is not wrong to need a big ticket item like a car even during tough times, but a cheaper high-quality used or repossessed car is the most responsible option. Without interest and with depreciation accounted for, you can find deals that come close to half the cost of a brand new model.
With repossessed cars in particular, it is unfortunately expected that a lot of cars will be returning to banks as people deal with this unforeseen recession. That means banks will be itching to sell a lot of fresh inventory, at even lower prices, to cut their losses.
And until the government gets its act together and begins to seriously address our transport crisis, a quality used or repossessed car is the best option to take you wherever you need to go. There is also that peace of mind in having the safest way to travel when it comes to social distancing–especially with a second wave looming over us.
Finally, consumer spending is actually the way out of a recession. Purchasing a car helps not just the bank or car seller, but the overall economy when it comes to the big picture. And in the biggest picture of all–the environment–a used car is a ton of the Earth's precious resources being reused rather than going to waste.
What car to buy during quarantine?
The ideal car should be cheap and practical. Buying used means you save on depreciation and interest–money that could be useful to make it to the post-quarantine intact. An economical sedan like a Vios or diesel SUV would be the best choices to buy for now.
Buy a cheap car during the recession
At Automart.Ph we have thousands of high-quality used and repossessed cars at the lowest possible and fixed price. No markup, walang patong. You can even ask for an expert mechanic to accompany you while inspecting our stock.
We have professionally trained advisers waiting for your free one-on-one consultation. Head over to Automart.Ph or contact us at 0927-887-6400 for more information or to set up an appointment.