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Here's a Car Buying Strategy That Could Put Thousands

I’ve never understood why most people would want to do the following ‘traditional’ and ‘normal’ things when buying a car:

a) Buy it new
b) Finance it

Think about this question: Is it really a great idea to borrow money on something that goes down in value every month AND pay interest on it?? Consider the following examples:

Bob buys 8 cars between the ages of 25 & 75; He pays an average of $20,000 per vehicle and finances them at an average rate of 6.5% for 5 years. He pays a total of $187,835 over the time period in principal & interest or $313.06/month.

Susie buys 8 cars between the ages of 25 & 75; She pays an average of $8,000 per vehicle and uses her ‘deal skills’ to find great values and pays cash each time instead opting to start an investment plan that she pays into each month. She picks an investment that she has come to understand and manage. She pays an average of $107 for the car itself and an average of $70/month more for maintenance bringing her total to $197/month….a full $126/month less than her friend Bob.

Susie’s $126 / month is invested and returns an average of 8% compounded over time. Her $126 invested over the time period turns into $999,397.

There is an over-abundance of promotion of the use of debt for pretty much everything. In are recent advertisement, the announcer suggested that the first thing to do when to buy even a used car is to ‘get pre-approved for financing.’ What a HUGE pre-supposition! Paying cash wasn’t even on their radar screen. What a small worldview. If you don’t have 6 months of your living expenses saved or couldn’t have conceived of paying cash for YOUR last vehicle, perhaps it’s time to upgrade your own thinking.

The average retired person in the USA depends on government, family or charity to meet daily living obligations. Ask any one of these retirees if an extra quarter of a million dollars or even an extra $50,000 would influence their retirement lifestyle?? It may be an eye opener.

© The Financial Independence Project, Inc. 2009 – Eric Johnson – 941.713.9307 Voice