4bar wroteThat is correct, it costs more to keep buying new rather than keeping a vehicle and just paying for the repairs. The question is though, why does it matter? If we wanted to do the least expensive thing we wouldn't be buying BMW's our garages would have Hyundia's, Kia's, Toyota's etc. in them. Besides, some folks like to have newer vehicles always under a warranty, for them it is worth the extra cost for buying new every four years or so.But that costs you more , versus keeping the same car long term, and dealing with repairs.
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It's all just one continuum of money spent on cars. It really doesn't matter how you want to structure those payments. Yes, some methods save money over a few decades, but I doubt anyone would really care about those differences over a lifetime of funding cars.
One drawback of lump sum cash payments up front, is that cash is typically part of an emergency fund or invested in a portfolio (cash could be part of that portfolio earning interest). Using income to fund car payments over time allows you to leave the lump sum cash invested for compounding.
Cash flow is the most important concept. Some people tend to spend too high a % of their income on cars (per their income quintile) and then don't have enough liquidity to cover all their other expenses.
minus.spire wroteCorrect... Well said.Assuming one has to fund a lump sum for a single cash payment of a new car, that funding requirement does not just go away, as it needs to be replenished for the next new car purchase down the line.
It's all just one continuum of money spent on cars. It really doesn't matter how you want to structure those payments. Yes, some methods save money over a few decades, but I doubt anyone would really care about those differences over a lifetime of funding cars.
One drawback of lump sum cash payments up front, is that cash is typically part of an emergency fund or invested in a portfolio (cash could be part of that portfolio earning interest). Using income to fund car payments over time allows you to leave the lump sum cash invested for compounding.
Cash flow is the most important concept. Some people tend to spend too high a % of their income on cars (per their income quintile) and then don't have enough liquidity to cover all their other expenses.
Yes it appears that most people are essentially broke; some at higher levels. When I used to co-own Lendingtree, I closed 1000s of home loans (all different types) at the full spectrum of dollar amount. No matter if the loan was on a $200k house or a $15 million house, EVERY person pretty much had their cash flow maxed out. This was easily verifiable via their income and credit reports.
It helped stress to myself that living like that is not very wise, as you're an absolute slave to money. I've purchased my last 2 decades of vehicles with cash... I end up able to make better deals and have saved thousands on interest. A portfolio making, say, 8-10% on my money (but not a guarantee) might sound like it's better than a 4% car loan, but the interest isn't just a wash. This is long-term logistics math since I'm not a business (writing off interest). I'm now at the point where the money is just there for when I need to buy a new car.
So long-term can lead to tremendous savings doing a cash purchase AND still keep a portfolio - namely through dividends. And an extended warranty is not only piece of mind, but as the OP has noted, mathematically feasible.
