Simply put; if you buy a $30,000 car and keep it five years put 75,000 miles on it chances are it will be worth $10,000, so you lost $20,000 divided by 5 without interest or any fancy calculations you lost $4000 a year.
If you keep it 10 years it would be worth say $2,000, so you lost 28,000 or divided by 10 $2,800 a year, so you saved $2,200 a year over the 5 year plan. You could have spent $8,000 in repairs and still saved $3,000.
Add the interest, property tax, higher insurance costs the five year plan gets a lot worse.
Try Rachel’ plan she still has her 1963 Mercury Comet on the 47 year plan I figure she has saved over a half a million dollars.
The slavery of debt
Most Americans use money they don’t have to buy these cars adding interest charges that may times add another five or six thousand dollars to the equation putting themselves into a position of making payments on a car that has less value than the loan balance, (we used to call that bankrupt, when you owe more than your worth).
Pro 22:7 The rich rule over the poor, and the borrower is servant to the lender. It’s a bad feeling many of us have been there.
What’s the answer: Keep your car! You will have it paid off before you know it if you just keep at it. Then you will have the perfect used car, you will know its pedigree first hand. Take care of your car Pro 12:27 The lazy man does not roast his game, but the diligent man prizes his possessions.
According to Federal Reserve statistics released this week The Average Auto loan in America in 2010 is running right at $28,000 for an average length of 63 months at 4.5% meaning the Average car payment right now is right around $500.00 a month. They also say that the loan to value ratio is about 90% so the new cars are valued at approximately $31,000.