|Nothing quite as irresistible as a shiny|
new red car - until the loan repayments
Car loans - everyone has them apparently. It is just part and parcel of the new consumerist culture. Mostly everyone I know has a car loan or lease...or two. Sometimes three.
It is totally normal these days for a young person to buy a new or near new car using a car loan soon after they get a job. Car loans are usually over a five year term. Incidentally cars seem to start to need serious mechanical attention by the five year mark and this normally prompts folks to flog it off and buy a new one....using yet another loan or lease. This cycle repeats every five years for the rest of their working life, each five year loan playing 'tag' with the next.
|My first car - a 1976 Alfa Sud Ti.|
Lemon in colour, lemon all round really!
It seems totally normal.....so what?
So what? Here's so what - let's do the math. If you took the average amount of a car loan ($395 per month) and invested this amount conservatively for your working life....guess how much you would have at the end of your working life?
Answer: At least 4 MILLION DOLLARS.
That's so what!
Double that if you are running two car loans/leases.
|If only my father had never sold his 1961 barn-door VW Kombi !|
Worth a mint these days I am told.
Folks, not only is planned mechanical obsolescence prompting us to replace a car every five years or less, so is the pressure of fashion, the illusion of safety-in-newness, the unspoken 'success' markers of a new car and the relative simplicity in getting a car loan.
Those that turn their back on this sinister car loan racket are wise.
Those that take the equivalent amount and invest it over a working lifetime are wise and wealthy.
|My grandfather's Chrysler (1937??) with a broken axle. This happened in|
the 1940's as he and Nan were driving to Brisbane Queensland.
That was back when the Pacific Highway was gravel all the way.
If you need a new car - do this instead.
1. Put away $20 per week for five years into a high interest bearing bank account
2. At the end of 5 years you will have about $5600 saved
3. Purchase a low mileage car for $5000 or less (use a local car sales internet site and sort by mileage lowest to highest with a filter on cars maximum price $5000 - you be surprised what you'll find)
4. Use the $600 to pay for stamp duty, rego transfer, insurance etc
5. Continue to put away the $20 per week and repeat this process every five years
|One little boy socialised very young on the excitement of owning a new|
shiny car of his own.
Paying off your car loan is NOT enough
If you have budgeted and scrimped and been frugal and paid off your car loan - WELL DONE.
But beware, you are still at HIGH risk of falling back into the car loan trap. As soon as your car hits the point where it is needing lots of endless repairs, you will be (by pure necessity) lured back into a car loan/lease cycle because you do not have a choice.
Start TODAY to put away for a replacement car. The weekly amount required to replace your car (paying cash) every five years should be ABSOLUTELY part of your budget - no matter what.
99% of folk fail to write into their budget that weekly amount required to replace their car every five years, paying cash.
Without that money sitting there saved, you will be at extremely high risk of falling back into the sinister never ending whirlpool of a lifetime of car loans.
Don't lean into this one folks - jump in both feet.
Take care and stay nice folks