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Abstract:
If you are looking for ways to save money on your car, do some commonsense number crunching to determine the real cost of your automobile. The real cost of your car may be a shocking reality for you.
If you have a five-year loan with an interest rate of 9% on a $21,000 car, the interest drives the total cost to $30,450! That's $9,450 of interest you’ll pay! A good used vehicle could have been purchased for the cost of the interest alone.
$4,200 total annual car payments x 5 year loan = $21,000
$4,200 x 9% = $1,890 of interest per year
$1,890 interest payments x 5 years = $9,450
$9,450 [5 years Interest] + $21,000 total car payments = $30,450
In fact, for the amount of money you are spending on your car payment, you could practically afford a mortgage payment. If you changed your values of what you believe you should be driving, you could buy more than one used car for $30,000.
Take care of your car, and it will take care of your wallet. Regular oil-changes and tune-ups are absolutely essential to keeping unexpected car emergencies at bay.
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Honestly, unless you are a salesperson and are required to drive clients around, do you really need such luxury? If you are committed to keeping your new car, promise yourself that you will drive it for at least 7-10 years before purchasing another vehicle. Ideally, you would purchase a used car for your next car, and purchase it outright, without borrowing the money or incurring interest. Let's face it you wouldn't have cash flow problems if you had $7,000 or so sitting idle in a bank account. You can use the period of time after paying off your vehicle to begin saving for your next vehicle – a used car – purchase. Make the best financial choice in this matter based on your individual circumstances.
Don't procrastinate; take action on the items listed below:
- Review your transportation options.
- Call your insurance agent and bank to compare rates.
- Send in half your loan payment every pay period if there are no bank penalties for early payments.
- Find a good mechanic.
- Wash your car yourself.
Take care of your car, and it will take care of your wallet. Regular oil-changes and tune-ups are absolutely essential to keeping unexpected car emergencies at bay. Research the value of new and used cars at the Kelly Blue Book website.
If you are an older driver, inquire with AARP or your insurance agent to determine if your state offers an auto-insurance discount for drivers who take a skills-refresher course. Avoid the convenience of monthly insurance policy payments if there is a penalty or fee associated with doing so.
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