Can I really live without a car payment?
A new car will lose between 60%-70% of its value in the first four years that you own it. With that kind of depreciation, you have to wonder why so many people think they have to own a new car. A good one or two year old car still has plenty of life left in it and, in most cases, still has part of the manufacturer’s warranty.
Larry Burkett says that the cheapest car you can drive is most likely the one you are currently driving. In other words, fixing your existing car is almost always cheaper than buying a new one. There will be a time when you will need to purchase another car. Notice we did not say a new car. Just like saving for emergencies, you should be saving for the purchase of your next car.
The average car payment in the United States is almost $400 a month. If you were to save $400 a month for 10 months, you would have $4000. You won’t be able to buy a great used car for $4000, but you can get a decent car for that amount. If you buy the $4000 car, and continue to save for another 10 months, you will have anther $4000. Sell your existing car for $3500, add that to the $4000, and get yourself a $7500 used car. Are you beginning to get the idea? If you do this one more time, you should be able to get yourself a very nice $11,000 car, in about 2 1/2 years, and you haven’t paid the first cent in new car depreciation.