Apart from Enron, One-Tel or HIA shares there is nearly nothing as bad as investing your money into a new car. The moment you drive the car off the lot you will lose a chunk of your money; anywhere between 15% and 25%. Do not buy into the hype of a new car. Yes, the new car smell is great. The feeling of that first drive is second to none. The excitement from your friends and family when you get the car is addictive. But the wholesale hardware accessories financial hangover is severe.
Buying a car is a very emotional experience. A lot of people see their car as an extension of themselves. And if you watch any car adverts, they use emotional words to sell you the car. How will this car make you feel?
If you need a late model car, why not purchase a one-year-old car. Let someone else take the big one off loss on the car. Then you purchase the slightly used car with a huge saving. Believe wholesale rivet nuts me; the excitement is nearly as good. While nail supplies buying a new car is not good financial sense. Buying a new car with a car loan is totally crazy. Nearly all car dealerships offer finance and banks throw their hats into the ring with great offers. How smart is it to purchase something that will drop in value, with cash? Not too smart. Now how smart is it to purchase something that will drop in value, with debt? Really not smart.
The dangers of car loans should be taught in schools. Just to give people a heads up on what to avoid when looking for a car. If you have never really thought about a car loan here are the facts:
On a $35,000 car with 100% of the money borrowed over riveters a period of 5 years. At an interest rate of 10% you will make car repayments of $743 a month. Plus over a 5 year period you will pay a total amount of $9618 in interest.
The average car will lose around 40% of its value in 5 years. So you have essentially paid $35,000 for the car and $9618 beauty equipment for the interest, a total of $44,618. For a car which you own free and clear but could only sell for $21,000 five years later, this is a loss of $23,618.
Had you paid cash for the new car, your car would still be worth $21,000 five years later but because you paid no interest, you would have only lost $14,000.
Had you waited a further year before buying and purchased your desired car second hand. You would have paid $28,000 cash (because the original owner has taken the 20% drop in price right away). And you could still sell it for $21,000. So you would have only lost $7000.
As you can see, by having some patience and waiting, you really can save quite a lot of money. There is a hardware supplies big difference between a $23,618 loss and a $7,000 loss.
Next time you are in the market for a car, sit down with some paper, pen and a calculator. Do the sums. Then try and take the emotion out of the purchase. If you do this, you can really make some big savings. And remember, if you need a car loan to purchase a car you probably can't afford it anyway.
My name is Adam Goulding and my story is quite simple. Four years ago my bank balance was so low paying rent was a big problem. The term completely broke and debt-ridden sums it up nicely. This was the result of a "she will be right" attitude.
Then like a flash of lightning, a thought wholesale salon equipment so extremely simple, yet a powerful realisation hit me. Whatever happened in my life with money up to March 15th 2005 wasn't working! Most decisions about my money to then were wrong.
Then my girlfriend, Renee (now my wife) let me in on her system for growing money. She told me secret number one of keeping more money in my bank account. This was the KISS principle, KISS simply stands for "Keep It Simple Stupid".
My new book is called "How to cut your debt to zero in 5 simple steps the keep it simple stupid home budget"
Now I have written a book on getting out of debt and a free monthly newsletter. Myself and my wife have turned our household budget around. Find it at http://www.mrhomebudget.com.au My nick name is now Mr Home Budget.