This may get me in trouble, but generally speaking, it's how I choose to live - and purchase vechiles. It's at least good food for thought...

http://www.chicagotribune.com/busine...isuretempo-hed

 

I like this idea:

After paying it off, continue making monthly car payments to yourself, perhaps in a separate bank account. When you need a new car, buy one for the price of your savings plus the sale value of your old car. Repeat this, and you'll regularly trade up to a more expensive vehicle while paying cash.

 

That's alarming, nearly everyone I know is into the 40,000 plus cars and trucks!!

I looked at a new Ram 3500 CTD Mega at about 55K, and walked away telling the dealer it looks better on his lot than it would on mine!!

 

$55K on your side of the border? Wow! I ordered my '07 for 47 and change up here where we usually are always more expensive on everything. I didn't order a sunroof or DVD system however.

 

Kinda why I drive a "99" . She runs better than why I bought it new, and I paid cash after saving for it. It will be in my estate sale.

 

I think those financial articles have a bit of a scare factor to them. While I generally agree with what they are saying, I think they are a bit to extreme. I see nothing wrong with buying a vehicle outside of their guidelines, as long as the vehicle payments do not prevent you from meeting the max contribution limits for your 401K and IRA accounts. Yes, if you are taking money that you could be contributing to your 401K and IRA accounts to make a car payment, then you are buying too much.

The US Government will allow you to save $14k - $15K per year, tax free. Then most employers will match a percentage of that, tax free. Additionally, you can save up to $4000 in a tax advantage Traditional/Roth IRA. A car payment shouldn't be preventing you from making those contributions.

 

The new payment I would have if I bought that '06 was what kept me from buying it. I am going to put that 13K into real estate instead, then I will be able to buy a new '08 or '09 brand new cash (I hope) lol.

 

Just curious . Will the '07's sold in Canada have the same emissions equipment the U.S. requires ?

 

Marine, you are right on target!

below is from link above. totally agree with and have practiced it forever. if you don't have the cash to pay for a vehicle, then you don't need to be buying it.

one only has so much cash flow per month. make those payments to a mortgage(s) instead of a vehicle.

think of all the cash you've touched in your lifetime.... it's not what you earn, it's what you keep. Real estate and other real property will allow you to keep what you earn.

fortunately CTD come in all price ranges. there's some pretty sweet low mileage first gen's for very reasonable prices.

disclaimer: this strategy is not for everyone... but for those who practice it. makes a huge difference in your long term financial health.


"2 You financed the car. If you cannot pay for it in cash, you cannot afford the car. This seems harsh because it raises the question, "Where am I going to get money to pay cash for a car?" That's really the wrong question. It should be, "Where do I find a car to buy with the cash I have?"

 

In some instances, your money can make more for you in a bank. E.g. interest rate of vehicle is lower than interest rate of bank.

 

Thats what I did. With my trade in I had enough to pay cash. However with the finance rate of .9% I kept the cash and sold my old truck privately for even more than the trade in value was going to be. I just put the cash into several CD's that were at the time getting just over 5%(granted it was a promo rate at the time but what did I care about that). Put them in various lengths so that one would mature every 3 months over a 3 year period
(the .9% was only valid for 3 year finance term). Then I had the next three months worth of payments. I ended up making enough interest to cover just over 2 1/2 truck payments. So by keeping my cash and letting it work for me I came out even a better than just paying cash. Now this wont work for all situations it depends on the difference in the cost of money between the financing and the investing.

 

It's not much, but my Money Market Savings account is at 5.08%.
Next truck I buy will not be financed, and will be a used brand new one. Again, not until '08 or '09.

 

if your spendin more than too much on a monthly payment and an emergency comes up you could be and probably are more than screwed.

 

By their numbers I couldn't even afford to buy half of my 98. Good thing I used my numbers!

Chris

 

That's excellent advice, but unfortunately the average family in this country isn't able to put that kind of money into savings. We are considered "above average" when compared to the average household income even though we're a single income family, but even with a reasonable mortgage payment, only one car payment, very little credit card debt and no other debt we don't have an extra $19k per year to put into savings. Even if my truck were paid off we wouldn't have that.