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June 2002

Pay Cash for Your Next Car

Amy E. Gibb, MBA, CFP

A shiny red car pulls up beside you at the stoplight. The styling is sleek, the lines exquisite. The car is strong and beautiful. You want that car!

We love our cars. The bigger, the faster, the newer, the better. "No Money Down" "Low Easy Payments" "0% Financing". It is easy to buy the car we want and desire. But stop! Think about what your car might be costing you?

Time - We spend at least 25% of our income to buy, insure, license, run, house and maintain a car. 2 hours a day, a week a month, 15 years of life. "But", you say, "I have to have a car to get to work" and I say, "You have to go to work because you have a car". Wouldn't you like a job that paid the same but gave you an additional week vacation a month? That week is sitting in your driveway.

Money - A person will spend more than five-hundred-thousand-dollars on buying and maintaining cars during a lifetime. If we were to save and invest this money, we would have accumulated more than four-million-dollars.

In spite of the cost, it is unlikely that we will abandon our beloved machines. There are ways to reduce the years of our lives and thousands of dollars that we spend to have them.

• Wants vs. Needs - Understand the difference between your wants and needs. A $5,000 car might get you to work and to play as well as a $25,000 car. The additional $20,000 represents time out of your life and money out of your pocket.
• Watch Your Budget - Buy a car that fits your budget. If you can't pay for the car over two or three years, it is too expensive for your income.
• Fewer Cars - Have fewer vehicles for your household and encourage your family to walk, ride a bike or take the bus. In spite of what they tell you, teenagers do not have to have a car to survive.
• Don't Trade Up - Resist trading up to a new car every few years. Even if the payments stay the same, you will be paying more. Focus on the cost not the monthly payments.
• Say No to Leases - Resist leasing a car unless there are specific business and tax advantages.
• Own Your Car - Drive the car that is paid for
• Don't Buy Your Car a House - Think twice before paying extra for a house with extra garage space. This just increases to cost of owning and maintaining a car.
• Repair and Maintain - Maintaining and repairing a good used car will save you money.
• Pay Cash for Your Next Car - Pay your car loan off as soon as possible and start saving for your next car now. Paying cash for your next car isn't only for millionaires. Once your car loan is paid off, spend the next couple years driving the same car and making the same payments to your savings account. When you are faced with having to write a check for $25,000 out of your savings account for your next new car, you might choose to buy something less expensive and go on vacation instead!
  

Amy E. Gibb, MBA, CFP

President

Money $ense

Amy@MoneySenseSolutions.com, www.MoneySenseSolutions.com

303.494.5362

Financial Advising for individuals and business owners

"Money isn’t everything, Managing it is"

Amy E. Gibb, President of Money $ense specializes in helping people spend their money wisely. She may be contacted at 303.494.5362, or for more information go to www.MoneySenseSolutions.com.