A couple months ago, my husband's car stopped working properly. We decided that fixing the issue would cost more than the car was worth and sold the car. We needed a replacement for him, so we had to buy another car. We had not anticipated needing to buy a car, but we luckily had our savings started for buying our first home. We set a limit on how much we wanted to spend and set out to find a car.
We ended up getting a great deal on an '04 Pontiac Grand Prix GTP that my husband loves. The dealership even knocked off $500 for paying in cash. We got a great deal and owe nothing to the bank, which is amazing!
Let's look at a scenario. Let's say you buy a new car for $20,000. According to bankrate.com, for a new car, 60 month loan, interest is 4.03% on average right now. After five years, you will have paid $2,116.08 in interest for a total of $22,116.08 for a car that is now worth much less than the original $20,000. You take the hit of interest and depreciation!
Tip 1: Don't forget to account for tax, title, license, and any dealer fees when budgeting for a new (or new to you) car.
Tip 2: You can usually save some money by doing a private sale rather than buying from a dealership. Make sure the paperwork is properly done in a private sale.
Let me know your opinion in the comments. ;)
EDIT: Thank you Diego for finding the mistake in my calculation. ;) It has been fixed now.
Not our actual car, but it looks like this :)
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