In America today, it is considered normal to buy a car and carry an auto loan. Drive the car of your dreams as long as you can afford the monthly payment right? This ideal is accepted by many without consideration of everything else that comes with owning a car.
Buying that new car can be exciting, and I’m sure you’ll receive numerous praise and congratulations from your friends and peers. It feels good, smelling that new car smell, or capturing others glancing at your new ride.
But then when it comes time to pay up, that’s when things probably don’t feel too good. Maybe you went from having a car that was completely paid off, maybe it had some issues who knows.
But adapting to have to shell out an additional $200+ a month for five or more dreadful years can stray you from your financial freedom and can get old very quickly. In the end you’ll most likely pay more due to interest accruing on the loan.
Here are some smarter alternatives than financing that new expensive car.
If It Ain’t Broke…
You all know the rest to that statement. But in case you don’t, if it isn’t broken why replace it. Cars are known items to depreciate as soon as they are driven off the lot. You get your moneys worth by driving that old used car until the wheels fall off.
If your car is paid off or even close to being paid off, keep it for as long as you can. Don’t abandon ship! Maybe it is not the nicest car, or your dream car, or possibly even a little embarrassing.
So what? I guarantee having an additional $200 or whatever the amount is, in your pocket each month would help out, especially during a tough time.
Buy A Newly Used Car With Cash
If you know that your car is on its last leg and you know you’re one or two more repairs away from calling it quits. Then it is probably time to start stacking up some cash for a new set of wheels.
Thats not to say that you need to have enough to go out and get a brand new BMW or that new Audi. But start putting away money so that you can afford a reliable used car that you can pay for outright with cash.
Growing up I used to see engineers, doctors and lawyers driving in regular average cars, nothing too flashy and always wondered why? Meanwhile some of my school teachers were driving around in a new Mercedes Benz.
It wasn’t until later that I understood that living a humbled lifestyle is what makes you and keeps you rich and wealthy. Not living above your means, but below it to maintain a comfortable lifestyle.
It is all about money spending habits. If you have money, and you KNOW you have money, you don’t feel that you need to prove that to others. Many people feel the need to impress others by buying expensive items, when in reality they’re only impressing those who either don’t really care or don’t have much money.
Another thing that some people fail to understand when buying a new car is maintenance costs. Luxury cars are notoriously expensive, from the time that you buy them, to everything that will eventually need repaired and routinely maintained.
That’s not including gas. There was a time where I pulled into a gas station, and an individual pulled up to a pump adjacent to mine in a beautiful new Porsche. He then got out the car and proceeded to ask me for money to help fill up his tank! What!? Listen if you cannot afford it, do not buy it!
Buy With A Large Down Payment
For those people that absolutely must have a newer car here is some advice for you. Don’t buy or finance a vehicle unless you can put down a large amount towards the loan. Meaning at least 50%.
This ensures that you will have a lower loan to pay down, and lower interest rates. With a lower monthly payment, this should allow you to pay extra each month to get that loan paid at a faster rate.
The more you pay each month, the less you pay overall because your monthly payment includes interest in it. You pay some of the principle, and then interest.
That extra money on top, will then pay down the principle of the loan faster. Which means less interest is paid over the span of the loan duration. The ultimate goal is to have a set of wheels that you can safely travel in that does not require a monthly payment. Driving a car that is completely paid off.. now that’s a flex!