You probably drive by one everyday. Full of new shiny cars with bright numbers and red tags in the windshield. New car lots. I am somewhat (although not full bore) of a Dave Ramsey subscriber. I do firmly agree that debtors are slaves to the lenders and I have seen the statistics and done the calculations to see what getting rid of a car payment and investing that money instead can do. It is nuts. Lets play this game.
So, you have 3,000 let’s say. You can 1. Put that as a down payment on a new car that costs 21,000. 2. Put that as a down payment on a used car for 10,000 and still feel pretty cool. Or…#3. Use that cash in hand to negotiate a deal on a not so new or pretty but reliable car. The average car payment in America is around 5 years (60months) and let’s be conservative and say $350.
Stick with me. Let’s buy the old car. So, I pocket and invest the money for those payments. Let’s say i make just under the market average and make it easy to calculate with 10% growth. Alright, so 350 a month payment
for a year is $4,200. Plus 10% interest: $4,620. That’s your money!
Running that calculation for 5 years…..26,472.60… Of Your own money! Not owed. Can you afford a 10,000 car now? I’d hope so! And…if you kept saving and investing, you’d be able to do the same thing a few years later… Also, how much would that 21,000 car be worth at the end of 5 years? 5,000? Not a good investment.
Moral of the story: let your money work for you, instead of chasing around things on credit you can’t afford. It will keep you poor!
(Here is Dave’s example) http://www.daveramsey.com/article/the-truth-about-car-payments/lifeandmoney_automobiles/