First of all, not my hand in the picture, that is a stock image. Now that we've cleared that up, let's chat about cars and car payments.
My first big girl purchase entirely on my own was a brand new Ford Fiesta in 2015. While it was brand new, it was well within budget because it was very bare bones. I have to roll up my windows by hand in 2020! I decided that I just needed a small reliable car to get around when I was between ship contracts because I had been throwing away thousands of dollars renting cars for a month or two at a time. All told, I got a great deal, financed it for 1.75% and began my monthly car payment of $190 a month.
Around this time, I slowly began learning more about my finances and beginning my debt snowball. I had already been paying $250 instead of the $190 mostly because that seemed like a well rounded number to me. Three years went by and my loans were paid off and I was left with just the car payment which a couple months of snowball payments took care of.
I promptly opened up a High Yield Savings Account at Ally Bank (not an ad, I just really like them) with the only purpose of my next car. I now deposit the same $250 dollars that I was already used to paying straight into this account and if I have a big auto expense I can use it if needed, otherwise it's a sinking fund to purchase my next car in cash.
Things I know now that I didn't know then-
Cars depreciate as soon as you drive them off the lot.
They barely count as an Asset toward your Net worth, in fact depending on gas, insurance and maintenance, they could be a Liability.
You can still get warranties by purchasing certified or used.
Cash is king when it comes to negotiating.
So even though my car is as bare bones as it could be for a 2015, I'm gonna stick with it for another 5 years...or until my fund gets big enough to buy my next car in cash. I have my eye on an SUV but who knows what the future holds!
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