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A recent article from Wisebread.com talked about how rich you would be if we stopped driving. It posed the question “What is a car really costing you?”
A car is a necessity to get around on your own schedule instead of waiting for a bus or call Uber to pick you up. The cost of operating a vehicle in the United States, as exemplified in the article, was estimated to be over $7,000 a year – and that does not include car or lease payments if you don’t buy the car straight-out:
- Depreciation $3,571
- Gas $2,168
- Insurance $1,029
- Repairs $745
Coach Kim joins me in today’s episode to explain how we can cut more than $3,000 in depreciation costs and save enough money to trade up in car every year. This process could lead a struggling full-time commuter to purchase a $15,000 with cash in 48 months.
Don’t believe it can be done? Keep reading.
The average car payment in North America is about $494. When a person’s expenses doesn’t reflect their goals we can demonstrate how selling the car can drastically change their finances.
Often our answers begin with this: Sell your car, pay off the debt, and purchase a car with cash.
It’s not fun, but it will DRAMATICALLY change your monthly cash flow.
What if I’m under-water?
If you are underwater on the loan, meaning you owe more than you can sell the car for, then you’ll need to come up with the difference. This is a requirement to satisfy the lender and issue the car title to the new buyer.
The following websites to research the current value of your car.
www.kbb.com/whats-my-car-worth
www.edmunds.com/appraisal
www.tradein.autotrader.com
If you are in a lease then ask what the early buy-out is. Note: Be clear to whomever you speak to that this is NOT the amount of the remaining payments.
Buy a $500 car for 1 year
This is not a permanent situation. Find a very inexpensive vehicle you can buy with cash. Get creative because some of the best deals are not on the showroom floor:
- Craigslist
- For Sale By Owner on the side of the road
- Local car repair shop
- Auto auctions
Don’t be afraid to negotiate with the seller for a lower price. Flashing five $100 bills in their face might just convince them to sell their $700 car to you at a discount.
Upgrade each year with cash
Now that you don’t have a car payment you should be able to find some money to put aside for your next car purchase.
For example: Save $200 a month for a year. This will enable you to sell your $500 car (which shouldn’t have depreciated that much) and put it with your $2,400 savings – giving you $2,900 to buy your new cash car.
Repeat the process and put another $2,400 with your $2,500-$2,900 car and you’ll find yourself driving a $5,000 car.
Can you see the power of paying cash?
Don’t forget to save for car repair
It is important to remember that all cars need maintenance and repair. Money should be put aside each month for car repair. This includes oil changes, tune-ups, the occasional flat tire or dead battery. Having a few hundred dollars should take care of most urgent car repairs.
How much does it cost to own a car? Edmunds has a wonderful online calculator that will show you what each make and model’s maintenance, repairs, taxes and even depreciation will be: Edmund’s True Cost To Own
Let us show you the numbers and give you hope in your finances. Schedule a free initial consultation today http://FinancialWellnessShow.com/coaches
