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I get a batch of inquiries from people about car financing. And it do me wish that more than people were educated on how owning new cars can be the biggest guided missile destroyer to their personal network worth. I don’t head automotive makers earning a batch of profit, and I cognize of one that earns the bulk of their money by funding and leasing cars. It just doesn’t have got to be your money, all the time.

There is a spectrum of two extremes that you can follow for car ownership. You can throw trade name new cars for lone a couple old age (buying or leasing) or you can throw each vehicle for well over 5 old age (and maybe purchase them used in the first place). You can already think which one is financially healthier, but it will assist if you cognize why.

It is my observation that owning a trade name new car for less than 4 old age is the biggest guided missile destroyer of anyone’s nett worth. I have got a lesson program for you if this is your penchant of car ownership. Each year, you should be forced to retreat the cash equivalent of the amount that your car depreciated over the last year. Then you take that batch of cash, and in presence of your parents, spouse, kids, and financial contriver – you provender it all into an industrial paper shredder that bends it to dust. It is just a small helpful tip from me to illustrate what you are doing to yourself.

When billionaire Robert Penn Warren Buffett was young, he refused to replace his old Volkswagen for many old age even when he had the money to purchase a new one. Why? Because over his lifetime, he knew that having $20,000 invested over decennaries would turn into billions of dollars in nett worth to him.

Car proprietors also shouldn’t throw on to them forever, because there is an inflexion point where the longer you hold onto a car, the better it would have got been to replace it. How can this be? It happens when the annual repair costs of the car outpace the driblet in value of a newer car. Let me explain: let’s state that you are driving your 25-year-old-junker and are paying $4,000 a twelvemonth in repairs to maintain it loping along. Now, if instead you had replaced it with a newer car (maybe still under warranty), and it only dropped $3,000 in value – you’d be $1,000 ahead, happier with a newer car, and alleviated at many fewer trips to the dealership over breakdowns. More mention stuff for this article is available at http://investing.real-solution-center.com.

It is too foolish for me to even get addressing the financial damage of leasing a car, or getting an auto loan for more than than than three old age and getting top down (when you owe more on the car than what it is worth). Just avoid leasing and +4 twelvemonth loan payment programs because these are the money-makers for the companies on the other side of the transaction.

Taking all this information into account, it is my sentiment that the following is the financially optimal car ownership model: purchase a car that is about two old age old with less than 20,000 miles, and maintain it for at least 5 old age until the repair costs begin exceeding $2,500 a year. As a general guide, this volition aid you avoid the crisp depreciation in the first two old age and give you a car under guarantee for a while, and then you bail out when the disbursals begin getting out of control.