What Is The Best Way To Buy A Car?

What is the best way to buy a car? If you buy a used car and use this system, you will never have another car payment again and save thousands in interest.

In any financial decision, one principal must always be applied. That principal is delayed gratification. If you don't absolutely need whatever you are thinking about right now, then you can definitely wait for it. This applies with any item that you are planning on buying on credit. In this article, we will only be looking at automobiles.

First off, you must understand that the automobile industry is hoping that you will buy new. They make their greatest profit when you buy a new vehicle. They would absolutely love it if you would lease a new vehicle. That is why every car commercial you see on television is selling a lease. They have a HUGE profit margin on a lease.

Now, a vehicle is a need...correct? Absolutely. You have to be able to motivate. However, there is no rule that says that you have to have a new car...yet. The plan I am about to give you will allow you to be in the car that you want in a matter of a few short years with minimal interest paid and no need to ever have a car payment again.

1. Determine how much you can afford to spend per month. Let us assume you can afford $250.

2. You need to find a $3000 car that you are willing to drive. You can easily find one that will last and be dependable. You just have to, here is the key, delay your gratification.

3. Get a five-year loan on the $3000 car. No matter how much the payment is on the loan, pay the amount that you said you could afford every month. At $250 per month, you should have the car paid off in about 13 months with about $250 in interest paid on the loan.

4. You now own your car. Continue to drive it for the rest of that year, but keep paying the $250 per month to yourself. It doesn't matter if you put it under your pillow. Just keep putting it aside. You were planning on paying it to the finance company anyway, so you won't miss it.

5. At the end of that year, you will have a car that is worth about $2000 and will have $2750 saved. Sell the car, and buy a $4750 car. Since you paid cash for the car, you will be able to get a discount. That means your car will probably be worth at least $5500.

6. Drive that car for a year and continue to pay yourself the $250 per month. At the end of that year, you will have a car that is worth $5000 and $3000 in cash. Sell the car, and buy a car for $8000. With the discount, you should be able to get a $9000 car. Remember to continue to buy used, however. A new car loses alot in depreciation as soon as you drive it off of the lot.

7. Continue that process for the next year. You now have an $8500 car and $3000 in cash. Sell the car, and buy an $11,500 car. It will be worth around $12,500.

8. You are now in the fifth year of the process. At the end of the year, you will have a $12,000 car and $3000 in cash. Go buy a $15,000 car.

So, let us compare. Using a traditional purchase plan five years ago, you would have been able to buy an $11,000 car for $250 per month with 10% interest. You would have paid $4110 in interest. The car would now be worth approximately $5000. In order to be in a better vehicle than you started with, you will need to go get another loan and pay more interest.

Using our system, you paid less than $400 in interest on the initial loan. You now are able to pay cash on a $15,000 car. If you continue to buy used, you won't have to pay the depreciation. So, you can continue to pay yourself the $250 per month and move up in car regularly or save the $250 per month and stay in about the same level of car forever.

Isn't delayed gratification fun?

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