What is the financial cost for buying a new car every 2 years versus every 8 years?
Before getting into any Phoenix auto repair details, let me give you a brief background about myself and investments. Back in a prior life, I was a Financial Planner. Early-on, I learned the time-value of money through managing and growing a multi-million dollar portfolio. In this day and age of high unemployment and limited economic growth, it is essential that we carefully consider where our hard-earned money is spent. As we all know, financially speaking, automobiles are almost always a bad investment. Typically, when we purchase a new vehicle, it loses 11% of its value the moment we drive it off lot and 20-25% thereafter each year we own it. 1-www.edmunds.com.
Knowing that we lose money when we purchase a vehicle, the objective now becomes, how do we minimize our losses? It’s simple, hold onto and maximize the use of our vehicles by repairing them. Missing something as simple as a Phoenix oil change could have a great impact on the overall health and longevity of a vehicle. If one part of the machine starts to deteriorate, the rest of the vehicle has to compensate for the lagging item. This then causes increased wear on all other components. This is often seen in older vehicles; when one part fails, many others follow.
Without a doubt, buying a new car every couple of years can give us a sense of pride, but as you’ll see, if you do the math, it just doesn’t make sense. So first, purchase something with the intention of driving it for 8 or more years. If this doesn’t sound appealing, then maybe this will convince you...
This example is best illustrated using the time-value principle; so let’s see just how much you’ll save over a lifetime. Beginning at age 18, if you purchase a new car in Phoenix every two years until age 68, you will have spent approximately $800,000. This conservative estimate assumes that your trade-in has no negative equity plus, every couple of years, I’ve increased the purchase price by 3.5% to be in pace with inflation. Having said that, if you were to have these same assumptions but trade in your vehicle every 8 years, over a 50 year time span you would have spent about $400,000 (this even includes incorporating in an extra $1,000 per year for maintenance since the vehicle will be older. That’s a $400,000 savings! If a savings of $400,000 isn’t impressive enough, just wait.
Getting back to the time-value of investments, if you were to take that $400,000 you saved and divide that by 50 years, it breaks down to $8,000 per year or $667 a month. Take that $667 per month and invest it into the S&P 500 Index over 50 years (with a historical growth rate of 10.2%) and 50 years later, you should have just over $10,000,000! Yes, you read that right, $10 Million Dollars. Granted, there were several assumptions that brought us to this number, and this scenario lapsed over a lifetime, but it is still very realistic. The moral of the story? Keep your vehicle longer, keep your vehicle’s service needs it up-to-date, and keep saving money. We at Bays Auto are committed to helping you achieve these goals and get a piece of that $10 Million with our Phoenix car repair.
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