We needed to purchase a new car for my husband who uses it for business. He puts on an average of 45,000 miles annually. We did not have enough saved to pay cash for the car so I needed to FIND an additional $150 a month for the increased car payment.
By reallocatng my spending money I was able to find an additional $300 per month. We reduced the amount of money we will spend on entertainment and babysitting and clothing/school supplies.
When my car is paid off in March of 2010, we will save that payment and hopefully have about 50% of the purchase price of a new car when I need one in 2014 (my car will be 10 years old then and have over 150,000 miles on it.
By Diana from Prospect, KY
Why do you feel that you have to buy a new vehicle when yours is 10 years old? My car is almost 12 years old, I drive it 100 miles per day, and it's in great shape. Careful maintenance pays for itself. I'm sure mine will last for another 5 years easily, if not much longer. An older vehicle has cheaper insurance and personal property tax too.
Sometimes buying a new car CAN save you money. As technology increases, so do things that make cars run more efficiently with better gas mileage. Also - eventually the cost of repairs, days of work lost while car is in shop, etc can eat at your "car savings".
Not to mention that in 10 years, your vehicle needs will change. I drive a minivan right now. By the time it is 10 years old, we will no longer have 4 kids to drive around. Even if I went with something that gets 30mpg, I'd be saving at LEAST $3500 a year in gas in getting something smaller. And who knows what will be available technology-wise in 5 or 10 years?
Overall you are correct in that it IS cheaper in the long run to use your cars til they die. However, the question becomes when do you call the time of death. Do you wait until after you've spent more than the worth of the vehicle in repairs?
I'd say keep the car an extra year or two and put the car payment in a specific savings account for a new car. When you have enough to buy another outright, then buy it. :)
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