Can you afford a new car? If you are asking that question, then the quick answer most likely is “No.”
Capital Budget Strategies, LLC – Austin’s Best Budget Coach – says never buy a new car! Always buy a used car and only pay with cash. We help clients create personal budgets to achieve financial independence. We also show them how to save enough to pay cash for their next car.
Imagine life with a monthly car payment?
Always remember, a car salesman in not your friend, though he acts like it! His job, the only reason he has been hired, is to get the most money out of your wallet or purse. The more money you pay, the bigger his commission. You buy unnecessary extras like undercoating and deluxe floor mats – he sees lots of dollar signs in his eyes!
Why do you think car dealers hide all the information you need to make a realistic choice, like how much they actually paid for the car? Their practiced techniques are perfected to keep you in the dark and make you think you are indeed a savvy car buyer!
You may have read that 3-page Reader’s Digest article on “How to Save Money Buying a New Car,” on your last plane ride, but you are not an experienced negotiator. While you may shop for a new car every 4 or 6 years, your salesman deals with 50 car buyers a week! Salesmen actually attend formal classes on how to tempt customers into paying as much as possible for their cars.
Seems unfair, right? You bet it is!
Capital Budget Strategies, LLC – Austin’s Best Budget Coach – has another plan for your money. And this one is actually good for you. (You’ll thank us in your old age).
Let compare strategies. If you finance a new car for 5 years at $300/month, you end up with an $18,000, 5-year old car that will be tremendously depreciated. On the other hand, if you purchased a used car or kept your current car a bit longer and invested that same $300/month for 5 years into a low cost Index Fund, you will have $80,000 in 40 years! If you invest more than $300/month for longer than 5 years, you’ll have even more money in retirement. (Source: Vanguard website, November 2016, assumes annual return of 4% after inflation)
Remember, even though you are now young and beautiful – you will (hopefully) retire at some point. And the time to plan for your retirement is when you are young and have plenty of time to let interest compound!
Trust us, in 40 years you will be thankful you didn’t buy that 2017 Tesla to impress your friends on South Congress on Saturday nights, but rather did the “adult” thing and made the right choice about what to drive.
A well-financed retirement beats a new set of wheels any day!
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