I always liked this scheme and idea and I think there's a lot to be taken from it. Between this idea, plus growing more mature and getting over seeing cars as fun as much as they are tools, I'd like to get to the point where I have only one car payment, or perhaps none.BUT!There's a ton of assumptions in this presentation that bother me that aren't answered. It's not that they can't be handled, but the scheme is misleading:- It assumes you have the resources to make a $475/month car payment to start with (I've NEVER paid that much for a car yet, and I've bought 3 new cars already in my life) MOST people who are in financial struggle will NOT be paying that towards their cars.- 9.6% interest rate on new cars? When was this made, in the 80s?- It assumes you're starting with a car you already own free and clear AND is worth something. That's rarely the case -- most of us already have a car(s) and payment(s) and have to figure out how to break into this from that place.- It assumes no major repairs or many smaller repairs are required on the cars you have while you are working this scheme.- It ignores the "reliability vs. cost-effectiveness" of a newer car.- It assumes that a $11,000 car will last you 6 years. Right. Since when?This is not invaluable -- we DO need a new mindset. My father was the one who said, "Well, you'll always have to have a car payment..." and I took that for years before I re-thought it. BUT...this video promotes something easy that isn't that way in the details.
My two cents plus a little experience... I paid $4,500 cash for my first car (96 Avalon) and drove it for 6 years, just sold it for $1,800. My husband bought his car (97 Altima) for $3,600 cash and has driven it for 7 years and it is still going strong!!Sure we've had car repairs, we knew we would... probably on average $400/year per car.It takes patience to find a good car but last summer we bought a 2006 Hyundai Sonata with 95k and paid $6000 cash.(we used the $1800 from my Avalon plus money we have been saving over time... lets see that would have needed to be $60/month for the six years I didn't have a car payment!!)We've found the best way to find value in car-buying is by calculating the yearly cost.My fist car $4,500(purchase price) - $1,800(sell price)= $2,700/6 (number of years owned) = $450 + $400 (Repairs) + $200 (Oil & Maintenance) = $1,050/year.If you wanted to look at it as a "car payment" (plus repairs & maintenance) it would be $87.50/month.Doing the same with my husbands car(and assuming we can sale it for $1000) it equals $81/month...but it will be cheaper than that because we are still driving it!Besides the 9.6% interest assumption from the video I don't know the rest is that far-fetched. I think a lot of the... "repair costs will be astronomical", "older cars are so unreliable" are fear tactics used by car salesmen and not reflective of reality.
Nathan,I think the presentation is simplistic for the sake of communication and impact. Yes, the rate is high. Yes, there will be other costs for maintenance/repairs. But I think the point is clear:If you stop buying expensive new cars in favor of buying less expensive used cars which you can pay off more quickly, you can start putting the money to work for you. You may not get there within 10 or 20 months, and you may not get a 12% interest rate on your money (you could even lose money in mutual funds). But you will save money over time. No doubt about it. And possibly even get your money to work for you if the market treats you well, which has traditionally been a pretty solid bet if you are investing for long term.
I am obsessed with Dave Ramsey. He IS THE BEST! He changed our lives! We own two cars, no payments. We are also starting a college fund which is super exciting!xo,Amy
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