The Worst Way To Buy A Car | Never Buy This Way
So as things get more expensive and salary don’t really move as much, you could understand why we would go from a 35 year term, to now almost 6 years. And theirs a new term in town called the 84month car loan (that’s 7 years ). A long time. So, let’s talk about it and see if its worth it.
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1. Financing terms and details
Now this is common sense, the longer the loan, the lower the payments are going to be
But the longer the term, the more money you are going to end up paying
Think about it:
If your neighbor is selling you a car for $10,000 dollars and he agrees to give you a oneyear car loan with no interest
That means every month you’ll have to pay him $833.33
Now let's say, that’s too much money for you, you convince him to give you 5 years to pay it off and in return, you’ll pay him an extra $1,000 at the end of the loan
This is a terrible deal but he agrees, your payment are now $166.66, and you only have to give an additional $83.33 per month, to cover the extra $1000
What happens is simple:
At the end of the 5 years you have a car, he has been paid $10,000 and you paid him $1000 as a bonus
Your total outofpocket expenses is $11,000
However:
The 10,000 dollar car is only worth $5,000 dollars now
Which is normal and you expected that
Is this bad:
Well in this is example it can be debatable but in real life it's usually a bad idea
Here is why
Let's go faster:
The car cost $25,000 dollars and the interest is 10%
And the term is 7 years
Your monthly payments are $415.03 dollars
After 84 payments you’ll be done
You would have paid $25,000 plus $9,862.49 in interest for a total of 34,862.49
Now the 25k car is only worth $12,500 on average
Common sense tells you that’s a terrible deal
2. So what the alternative Tommy
I’ll tell you what no one wants to hear
Wait a little longer and suffer a little longer, it’ll be worth it
Here is what you should do:
So if you have $500 you can make the payment each month, that’s $6,000 a year
If you save up for 1 year you can buy a 6k car in cash or if you save up for 2 years you can buy the car of the guy who paid 35k and now his car is only worth 12k
And you can own it in cash
But what about in the meantime
Well not all cars are built equally
You can buy a Honda Civic or Toyota Corolla that’s about 1015 years old
And but it is for a good price in cash
It's reliable and not pretty, but it will get you rolling while you save up
3. Is it ever a good idea to borrow money for a car
In my opinion it's not
If you can buy something in cash and save up for later
It's better
Comments:
#1
But I’ll spend more on repairs than the car is worth
You’ll never spend 35k on repairs like you would on that new car
#2
But it's just a little debt
The answer is, that the less debt you have the better you’ll be
Debt is bondage, once you have it, it is not that easy to get out of it
#3
What will people think of me
The people who care about what you drive and judge your character on it, are not the people you want to consider their opinion
And your friend that’ll make fun of you, is still going to ride along with you
4. While it is true cars have become more expensive they haven’t changed as far as depression goes
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*Some of the links and other products that appear on this video are from companies in which Tommy Bryson will earn an affiliate commission or referral bonus. Tommy Bryson is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available. I'm an Accountant but I'm not your Accountant, always review information with your Accountant/CPA and your Financial Advisor.
