5 Common Money Mistakes About Cars
The car gives rise to intense passions in both sexes. Only a few decades ago, the car dealers were places where women do not dare let go and complex negotiations for a new car to their husbands, brothers and uncles. “Upside down on my car” is a term rooted in the American vocabulary, long before the current economic crisis turned “upside down on my house″ in the buzzword for the decade. Cars are expensive, but they are the biggest waste of money imaginable and have a car defies the fundamental laws of financial sense is there. There are 5 most common mistakes of money people make when buying a car.
1) Put money down on a new car
2) rent a car
3) The trading in a car
4) Buy a new car every 3-5 years
5) Debt old car traveling in a car again to buy
Putting money Down on a new car
The author of a well read and well-distributed financial blog The Simple Dollar, said that the money should be placed on a car GAP insurance to avoid. What is GAP insurance? GAP stands for guaranteed auto protection insurance is an additional form of car insurance that covers the gap between the residual value of the car and was withdrawn and the loan on the car. GAP insurance is an extra cost, especially if you buy a car that does not derive its value over the long term (as most do not), but it is worthwhile to collect up to $ 3000-5000 avoid the premium? Of course not. And here’s why. Cars are depreciating assets. Generally, they lose 10-25% of their value each year for the first 3 years.
Put money down on a car is so much to take a role of Benjamin in your bathroom, lift the lid and rinse for 30 to 50 of these accounts in the toilet. Any sum of money is a buyer of new cars, will not result in equity in the car, but disappears when the new owner drove the vehicle outside the party. GAP insurance on the other hand, a relatively low cost to a consumer may or may not choose to believe. Consumers should choose to get GAP insurance is based on the value of the new car and expected depreciation. For vehicles ranked in terms of less depreciation, less the GAP insurance. For most cars depreciate, GAP insurance will cost the most.
Kelly Blue Book shows an annual list of cars that depreciate the least. Not provide full coverage auto insurance for a car? No, certainly not. Insurers are smart, they will not pay more than one car is worth. Consumers do. Auto insurance covers only the residual value of a car accident, not the total loan amount on a car. Paying $ 20,000 for a new car and wreck in the first year, your car insurance, only the residual value of the vehicle. If the residual value is $ 15,000 and $ 18,000 you need to tell you on the hook for $ 3,000. Here are the basic things you can do to prevent this disaster and depreciation depends on your money:
1) buy only new cars that hold their value and negotiate the best terms you can
2) Only buy used cars (someone else has paid for depreciation)
3) Unless a devil, so you can “self insure”, ie. Cover the hole in the case of an accident
4) If you do not 1.2 or 3 buy GAP insurance, because it is tiny compared to the cost of a deposit bag
5) Let your kids drive your car
Rent a car
The reason to pay a monthly rental car lot less than the principal and interest on a car note is that the tenant is not the value of the car with the amortization period of payment. The tenant is the only time amortization of depreciation and interest paid to do! For example, if the 3-year depreciation of a car costing $ 20,000 car is $ 10,000, the monthly payment on the lease is based on 10 km with interest. Sounds like a good deal, I think, until you discover that the dealer gets a used car from the rear end of the lease that he intends to sell the full value of its brand and model . What this means is the purely physical condition and low mileage. If the car in anything but perfect condition, the tenant must pay in the form of severe sanctions mileage and wear. Rent a car back to back and you lose big time because you always have someone else with the cost of depreciation.
Trading a Car
Basically, my philosophy is that you buy the car the most reliable and powerful who can negotiate the best price you can pay and driving this vehicle for at least 10 years. Even if your vehicle is in perfect condition after 5 years and have one new, the dealer will give you the best of cases, 50 to 75% of the residual value of your car. The car dealership will make money twice: once on the new car you just bought back on your trade when they sell for a maximum amount of detail. It is wonderful to give money away, but to give to charity and take the tax deduction. Your car dealer does not need your charity. Here are some basic things you can do when you trade in a car:
1) Sell the car on Craig’s list or advertise in the newspaper the best deal you can for your car. Then you’re free to use the money any way you choose.
2) sell the car to dealer same brand. I did it. It works.
Buy a new car every 3-5 years
Buy a new car every 3-5 years means that you always be kept in principal and interest on something that always loses value. The only way to “win a car during the years when you drive this car to be free. At least you can spend your time pays himself the principal and interest, it is a form of forced savings that you can set to pay cash for your next car, or use the money you’ve always wanted to take vacation.
Old Car debt roll into a new car
I know people who are so far upside down on a car that they should look to see down. It is sad, really. A car dealer will use the rope to hang himself. I met a vendor who is willing to discuss with me to drive a car in another. I was so desperate to get rid of the car I had at the time. It was an SUV that had the bad habit of locking in the cold at high altitude. If I had driven to Phoenix, I never had a problem, but I insisted on driving to ski resorts in Colorado. Silly me. But I was desperate enough to have 22K on this car in another car loan on a roll of new vehicles. The truth of the matter is that most cars on the market will never take this kind of debt stock and debt in an old car new cars will lead to a cycle of debt with a car that is almost impossible break
I hope that now I have a broken illusions, a car is a plus. The traditional rules of money and payments extent applicable to the acquisition of real assets like property and businesses simply do not apply to a car. See a car for what it is, a transportation essential that you get safely from point A to point B. If the head of quotes that illustrate this article, passions, cars that distort reality and understanding of the correct pronunciation of the common currency 6 people continue to make mistakes with cars save you headache, heartache and money.
Tags: car gap, Cars, intense passions