I used to buy automobiles like most people do. I borrowed money from a finance company or bank to buy the car. It is called an auto loan. Even with today’s very low interest rates this is not a smart way to buy a car. It is much smarter to be your own banker.
I purchased a very good quality 2009 Ford Ranger pickup for $11,000 cash recently. In doing this I saved over $1500. Here is how I did it.
I saved $200 a month for just under four years to accumulate the $11,000. I made these “auto payments” to myself by putting them in savings each month. At today’s interest rates the amount I received in accrued interest from the bank was negligible so we won’t even count that.
I shopped for the auto I wanted and paid the $11,000 cash. That is what the truck cost me, $11,000 total.
Had I financed the truck, say on a 48 month loan, at 3% interest, the monthly payments would have been $198 per month for the next four years and the total interest I would have paid to the bank would be $859.00. If my credit had not been so good I could have paid as much as 6% on that loan, which would have cost me $213 per month and total interest to the bank would have been $1760! As it was the principal I paid out was only $183 per month for four years.
Depending on credit you can save between $859 and $1760 by paying cash for a good car at $11,000. You can pay more or less depending on the car you want and you can pencil that out.
Of course as soon as I wrote that check for the truck I continued laying away $200 a month for another car purchase in four years or so with no interest.
You never have to pay a bank interest again in your life to buy a car if you do it the smart way. Be your own banker and pay yourself first. My only problem now is to decide how I want to invest the $1760 I saved on that transaction.
Daniel R. Murphy
Daniel R. Murphy
Educating people for building wealth, adapting to a changing future and personal development.