Your car may drive like a dream, but in reality it’s an almost guaranteed economic sinkhole.
Sure, there’s a strange situation right now that some used cars are selling above the purchase price, but that’s due to COVID’s supply and demand problems and isn’t expected to last that long.
And the main personal finance law for cars is that all the extra dollars you spend on cars are blown away. Still, if you’re against billion-dollar marketing campaigns or smooth-speaking salespeople, this can be hard to notice.
Here’s a too common car purchase come-on and a message that’s been omitted.
What they say: It’s cheaper to rent a car than to buy one.
What they don’t tell you: To be clear, the monthly cost of leasing a car is actually actually less than the monthly payment to buy the same car on a loan. However, the lease is for 3 years. You have to buy it or just rent another new car, as most people do. If you continue to lease, you will have to pay the lease fee forever. Therefore, leasing is a pitfall of four-wheeled money.
If you buy a car with a five-year loan, you will own the car completely at the beginning of the sixth year. As long as you keep driving the car, you won’t pay any more. This can mean that you don’t have to pay for your car every month for years. This leaves room for cash flow to spend the money on other financial goals.
Given that the average car payment is now over $ 500 (more than $ 400 for a used car), this can help build up emergency savings, repay student loans at a faster pace, and home. This is a great opportunity to hide your money for down payments at. .. But only if you don’t fall into the lease.
What they say: Among trade-in prices, low interest rates and enthusiastic lenders, we can definitely take you to that new car.
What they don’t tell you: If you choose a used car instead throughout your driving day, you can put yourself in a great position to save much more and retire. The opportunity cost of buying a new car or buying a new pickup truck fooled by an upgrade can be an overlooked severance pay of tens of thousands of dollars.
What they say: Low interest rates and easy financing are great opportunities to buy a new car.
What they don’t tell you: With a new purchase, you agree to be a monetary lump that pays the largest portion of your car’s depreciation. Buying a used car (or earlier) three years ago can effectively hit the seller with significant depreciation costs.
What they say: Our dealers even arrange financing for you. This is not an easy task.
What they don’t tell you: You will pay a lot for its convenience. Dealer-arranged financing often has interest rate markups, and one academic study estimates that in 2018, borrowers will spend an additional $ 1,800 over the entire term of a mortgage. Shop online. Be sure to check your co-operative transactions. They often have the lowest mortgage rates available and many are easy to get involved.
What they say: Do you care about the environment? We are the same. Check out our EV.
What they don’t tell you: Waiting for a few years to buy an electric car could be a better deal as EV prices could match combustible engine cars due to the rapid decline in electric car costs by 2023. there is. I’m still using a large (up to $ 7,500) EV that is eligible for a federal electric vehicle tax deduction.
Dealer-arranged financing often has interest rate markups, and one academic study estimates that in 2018, borrowers will spend an additional $ 1,800 over the entire term of a mortgage.
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Buying a car — what ads and sales people don’t tell you
Source link Buying a car — what ads and sales people don’t tell you