Car Payments Vs. Savings
Most people I know love their cars, but hate the car payments. If people drove their cars until for three more years after paying it off (assuming that bought it new) and took their monthly payments and put it in a high interest savings account, how much money would they have towards a new car? What if they saved for 5 years? Edmunds says the average car loan for a new car is $447 so I used that for the savings calculation.
- 3 years at 4% gives you $17,067.16
- 5 years at 4% gives you $29,635.64
You can buy your next car with cash, just by driving your car longer!
Consumer Reports Shares Their Ratings
Cars don’t last forever, so how would you know which cars are more suited to being driven longer? Consumer reports did a study and they have 10 cars that could make it to 200,000 miles and 10 cars that probably wouldn’t make it. Here are 5 from each of the category, read the rest at the site.
- Consumer Reports’ “Good bets” for making 200,000 miles: Honda Civic, Honda CR-V, Honda Element, Lexus ES, , Toyota Highlander
- Consumer Reports’ “Bad bets” for making 200,000 miles: BMW 7-series, Infiniti QX56, Jaguar X-type, V8-powered Mercedes-Benz M-class, Mercedes-Benz SL
My first two cars were bought with cash and while they were older cars (’85 & ’90), they did the job from getting from point A to B. I got a VW Passat, which had car payment that just reached my budget limit. It was unfortunately wrecked 4 months later.
Instead of learning my lesson and getting a used car with the cash back I got from the insurance company I signed up for car payments on my VW Jetta. Now once, I’m done paying this car off, my goal is to set aside that car payment money into savings for the next car. If the VW Jetta lasts 3 years, that would be great, if 5 years, even better.
What about you? Do you have car payments? What are you planning to get for your next car?
Photo Credit: Pascal \o/