First of all, I would like to ask you: How would you finance a car?
I could bet that most people would say to have a good credit score and try to finance it in a car loan, wrap it up in a mortgage, or get a line of credit through something. Then have a $200-$600/month car payment. And, after five years finally have it payed off.
All this is inspired from Dave Ramsey, Suze Orman and many other financially-minded people I follow.
So, back to the car thing.
When you are first buying a car, get something small and cheap. I’m thinking around $5k and under. Don’t have to get a loan. Buy this car used, and with cash outright. AND, at the same time, start putting the equivalent of a car payment inside a savings/money market account.
Let’s say you did this for two years @ $300/month + 1% interest = About $7,300
So, if you could get $2700 out of that $5k car + what you saved = $10k
I don’t know about you, but I’m thinking that a $10 used car could buy a pretty decent vehicle.
Just to get to the end, I’m going to do this for about six years. Staying with the decent $10k used car, and saving $300/month + 1% interest = About $22k in the bank!
Let’s compare that to a five year car loan on a car loan for $22k:
$300/month payment @ 6% = About $26k total cost of car
And I wouldn’t stop there, I would do this until I could get the car of my dreams!
So, I have never bought a car or gotten a loan for anything. I also would think that a car payment/month would be more than $300/month. Actually, I hope my math is correct, but financing the car would cost about $125/month more than paying for it through savings. $125/month is a huge chunk of change for me especially! That is my food budget for a month! So in colclusion, the ending to this advice is this: Do what your grandparents told you to do and save your money instead of getting it now and paying dearly for it later!
Now, for those of you that I just saved hundreds a month on a car payment, how ’bout you share some of that cash with me?