What if you just bought a cheaper car?
As of March 2023, the average car payment has exceeded $750/month as many car buyers are opting for 72-month payment terms with high interest rates. Can most people afford payments like this? Or has it just become the norm in a long list of other debts we take on?
The average car loan length is 69(nice) months, so let’s take 69mos and multiply it by $750, you get $51,000. That’s a big chunk of change, and while a bit of it is taken up by interest rates—that’s a lot of money to spend when there are cheaper alternatives.
Why it’s OK to have a cheap car
If you don’t spend a bunch of money on your car (which is almost always a depreciating asset), then you’ll have more money to spend on assets that go up in value over time. If you buy a $10,000 car, you’ll have an extra $40k to put into the stock market, a down payment for a house, or to quit your job and travel the world for a year or three.
Sure, you’re whip might not have the newest tech, most-modern safety features, and it might not be the fastest, most-efficient, sleekest-looking vehicle on the road—but honestly who cares when you’re saving life-changing money.
Cheap cars are fun
Chances are, you’re going to have a manual transmission in your cheap car—which is much more fun than an automatic. This means you get to choose the gears *yourself, you get to rev the engine higher, and you can even drop the clutch and do sweet skids / burnouts whenever you want. (Cops love this)
There’s also the added benefit that you don’t really care too much about the paint, your car’s general appearance, and it didn’t cost you too much, so if something breaks it’s not the end of the world. Now think about if something breaks on your 50 thousand dollar mercedes…it’s thousands on thousands of dollars per trip to the dealership. No thanks, I’ll take the 2005 Honda Fit with 180k miles and a manual transmission.
Are cheap cars “cheap” anymore?
Let’s ask Google:
“Since the start of the pandemic and the resulting disruptions to new car supply chains first sent prices soaring, used car prices posted their largest annual increase on record – up 45% in the 12 months ending in June 2021, according to the Consumer Price Index – before swinging to a 12-month drop of 8.8% in the most recent reading for December.
Today’s average used car price is about the same as the average new car price as recently as 2010.”
source: CNN
After you account for inflation, used car prices have finally fallen back to pre-pandemic levels—which is good for those of you that are shopping for a used car, and not so good for those of you that purchased a new car during the inflated pandemic car-buying period.
Although in recent months it’s been a poor proposition to look for a used car, it seems the horizon is bright :)
So, next time you’re thinking about taking out a fat 30, 40, 50K loan on that flashy new Audi, just think about what you could do with the savings…
It’s ok to drive a cheap car, don’t worry about the Joneses.
Al
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There comes a time in every man’s life when he either really wants a motorcycle, or goes out and buys one. I’ve been the former—and now I’m the latter.