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My dad recently bought a new car complete with air induction, a performance chip, a complex exhaust unit and many other enhancements. He insisted that I take it for a spin, eager to show off his new toy. I was very impressed and completely sold on the $18,000 mechanism after a quick spin around the block, and, while the smell of the new leather interior is still haunting my olfactory perception, the contents of my wallet in comparison with my father’s is vast. The purchase of a car is of the larger investments one makes in their life, so a person must not be too hasty in it’s purchase as they may overlook some very important factors that come into play when buying a new car.
Primarily out of sheer pride, everyone has an innate desire to be the first to drive their car off the lot. The thought of being the first owner putting the first miles of a new car is alluring, however, anyone on a budget should never do such a thing. Average depreciation for a car is 15 to 20 percent annually. So, if my dad could have just been patient for two years, he could have purchased his new car for $14,400. I can think of many things that
I could do with $3600, and it’s certainly worth settling for a slightly used car. It’s also important to utilize patience planning, setting aside money for a down payment, or, if possible, a cash payment for the vehicle. If financed, interest is going to consist of a large portion of your overall investment, so, the less of the percentage of the purchase you finance, the better. Many people get bored with their new car after an average of five to six years. So, back to my dad as an example, his $18,000 car is going to cost him approximately $3573 if he proves to conform with the norm. If he, however, decided to put a little planning into his purchase, let’s analyze his savings. First off, as we have seen, he knocked off around $3600 by waiting on a couple years worth of depreciation. Next, if he paid half in cash on an interest rate of, say, 6.5%, that comes to an additional $468 in interest charges. Furthermore, if he decided to hang on to his car for an added three years above average, that decreases the cost per year from $2880 to $1600. So far we’re looking at $5348 in savings.
Finally, proper maintenance is crucial, and this should be planned for. Avoid buying a car that you cannot afford to have worked on. Look for something that you are familiar with under the hood, as self-maintenance saves a fortune on labor costs. Some simple things that anyone can do include keeping it clean both inside and out. Stains on the seats and rust spots on the body definitely don’t increase the resale value. Read the car manual to make sure you are keeping up with the basics including oil changes, tire pressure, brake pads and other basics. This decreases your chance of major, more expensive troubles up the road, which can save you a possible fortune.
While I don’t plan to be outdoing my dad anytime soon, I am planning for my big purchase using these steps. Patience is a virtue and good things really do come to those who plan and wait, which is exactly what I am doing. Anyone who uses these simple steps can someday own that nice car and with a solid car finance plan, spend a whole lot less in it’s acquisition.