Buying a New Car: Is the Car Note Really Worth It?

Anyone would love buying a new car. It’s fresh. It’s different. It’s well… something new. But while everyone loves new things, is buying a new car really worth it? What growth potential does that new car cost you? Let’s find out.

So, let’s say you buy a new car? That isn’t why you are poor.

Let’s face the reality of things. Buying a new car isn’t what makes you poor. A car is an investment and something that will reliability (hopefully) get you from point A to point B. So, buying a car is not a bad idea but let’s talk about the smart approach when it comes to maximizing your income for profits that you should take.

First off, if you have barely any money in the bank, financing a car is a bad idea. Sure, you say you can’t afford to buy a 2-thousand-dollar car right now but you can easily turn around afford a 15 thousand car instead because it was 0 to little down. This seems like a solid investment because you talked yourself into the fact that it will get you to work, allow you to run errands and do everything to make you money.

Show Me The Numbers

So, let’s talk numbers since that is what seems to catch people’s attention the most. Say you walk in and buy that car for 15k down and maybe have close to an additional 1k in fees to register it. This puts you at 16k total for this car. (you can’t afford a 2000-dollar car but you are now driving around in a 16-thousand-dollar car? Interesting…)

Buying The New Car

buying new car

Now because you are financing this car, you will have to get yourself some bigger insurance. Instead of around 130 a month, you are now paying 260 a month. Only an extra 130 a month. Since you are financing this car, you will also have to pay interest on it too. Let’s say you have a rate of 7.99 APR. Now let’s put the numbers in our magic wallet calculator. We also put down that you are going to pay off this car in 3 years.

Monthly Payment Estimate $501
Annually Payment Estimate $6012
Total Principal Paid Estimate $16,000
Total Interest Estimate $2,036
Total Payout Estimate $18,036

You will average a bill of 56 dollars a month for 3 years in just interest. That is a total of $672 dollars a year. That is more than enough to cover minor repairs on a car. But we are not done. You still have insurance.

Monthly Estimate $260
Annually Estimate $3120
3 years Estimate $9360

Buying The “Old Reliable” Option

buying new car

Now let’s look at that $2000 car you picked up on the market place to get back and forth for now.

Car Cost $2000
Registration $150 Estimate
Maintenance, Tires, Fluids, Breaks, bulbs. $800
Extras! Car scent, wax, vacuuming, etc. $75
Total $3025

As an older car stays in your garage, you should always set aside an extra 100 bucks a month to cover repairs for it. If you do some research, you could probably fix a lot of the small issues on your own with little to no knowledge with resources like YouTube, google and other maintenance car books based on your model.

Here is the cost of the car now with insurance.

First Year (counting 100 away a month) $4225
Second Year (Counting 100 away a month) $1200
Third Year Counting 100 away a month) $1200
Total for the three years $6625

Maintenance

Do keep in mind that you will have to pay for maintenance on your new car too. Now let’s see the insurance on this car.

Monthly Estimate $130
Annually Estimate $1560
3 years Estimate $4680

What’s the Total?

So now that you have seen numbers, let’s see them side by side.

  New Car Used Car Difference
Car Purchase      
First Year $6012 $4225 $1787
Second Year $6012 $1200 $4812
third Year $6012 $1200 $4812
Total $18,036 $6625 $11,411 
Insurance      
Monthly $230 $130 $100
Annually $2760 $1560 $1200
Total $8280 $4680 $3600
Total $26,316 $11,305 $15,011

So, if you bought that car for 2k, you will have saved $15,011 plus any of the 100 bucks a month that you put away that you didn’t spend. But what is the point of saving that money if it’s not going to grow?

What Can That Extra Money Do For Me?

Now we will take that $15,011 invest it into an account that grows at just 7.5 percent APR. This is for 1 year.

Amount to invest (the amount you saved) $15,011
APR 7.5%
Number of years? 1
Monthly interest Potential $93.81
Total of Interest $1125.82
New Value of your investment at the end. $16,136.82

Now, let’s move this up to 3 years.

Amount to invest (the amount you saved) $15,011
APR 7.5%
Number of years? 3
Monthly interest Potential $93.81
Total of Interest $3,377.46
New Value of your investment at the end. $18388.46

Let’s compare 5 years.

Amount to invest (the amount you saved) $15,011
APR 7.5%
Number of years? 5
Monthly interest Potential $93.81
Total of Interest $5,628.60
New Value of your investment at the end. $20,639.60

Keep it there for 10 years?

Amount to invest (the amount you saved) $15,011
APR 7.5%
Number of years? 10
Monthly interest Potential $93.81
Total of Interest $11,257.20
New Value of your investment at the end. $26,268.20

Keep it there for 20 years

Amount to invest (the amount you saved) $15,011
APR 7.5%
Number of years? 20
Monthly interest Potential $93.81
Total of Interest $22,514.40
New Value of your investment at the end. $37,525.40

Let’s say you keep it there will you retire. You started this at 25 and retire at 65.

Amount to invest (the amount you saved) $15,011
APR 7.5%
Number of years? 40
Monthly interest Potential $93.81
Total of Interest $45,028.80
New Value of your investment at the end. $60,039.80

Now if you look at things, you can take that 13 grand easily turn it into over 200k over the next 40 years. All because you drove that beat up car for just 3 years. If you treat everything in your life with this mindset, your success is limitless.

Do You Really Want That Car Note?

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