Jay and I have been having a streak of car problems over the past few months. We would love to buy a new (or at least NEWER car), but we are hesitant to lock ourselves into a monthly payment until we are absolutely sure that we can afford it. A wise friend of mine told me a trick. Each month, put the amount of money you would spend on a car payment into a separate bank account. Then, in a few years, you will have enough money to pay for the car in cash and avoid paying interest. This also decreases your risk in case you get laid off or have a large unexpected expense. Even if you don't quite save enough money to pay for the car entirely in cash (which will likely be our situation), at least you can put a substantial amount of money down which would lower your monthly payment. Thanks Becky!
2 comments:
I've been spending the last 6 months or so car shopping, so I can give ya'll a ton of pointers when it comes to buying time!
Also, I agree with your friend, that it is FAR superior to buy a car with cash than to have payments. Basically, the way I see it, I've got tons of monthly payments I have to make all the time, and the fewer of those, the better, because they're what'll kill you if something terrible happens and you don't have the money to cover everything!
Also, I'm sure you've thought of this, but the formula above doesn't really account for the additional cost of insurance each month.
My advice, for now, while you guys are still building careers, try to buy a car with cash for $2000 to $2500. You can get a solid mid-90's Honda, or Toyota, or any number of even newer american models with less than 200,000 miles on them. More money invested almost always mean you get more out of it, but that is a price section where you can get an extremely solid vehicle that will last for years, at a price that you can probably pay cash for in the relatively short term. When you guys are looking to buy, let me know, I'd be happy to share all I've learned!
Kim, thanks for the great advice! I forgot about the added cost of insurance for a newer vehicle. I will definitely seek your advice when we start seriously thinking about getting another car.
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