In a previous post I mentioned that I financed my car over 5 years. I also financed that car with my own money that was put into CD's. The CD's were then used to garauntee the loan and not the car itself.
One clarification I would make about auto loans is that you should really consider whether or not you can afford a car. As a very good general rule, you should only finance a car over 3 years.
Yes, I said 3 years - that's three, not four or five or even more.
If you cannot afford a car payment with the car being financed over 3 years, this is a good indication that you can not afford that particular car. You cannot afford the car payment within your current budget, and you may not be able to afford the maintenance on that vehicle that will begin after the payments end.
If you live in a metropolitan area, your brakes will need to be replaced approximately every 23,000 to 28,000 miles. The price of gas, while lower this week, will continue to increase in your budget.
In the area where I live, 3 year financing seems almost impossible. However, after taking more time to look for a car, I found very good used cars that fit into my 3 year price range and I purchased one. I still financed the car with my CD's, but I will pay myself back within a 3 year time period.
The good news is that I plan to drive this car for at least 5 years and hopefully at least 100,000 miles. If I continue to make car payments continuously, I will have money set aside for maintenance on this vehicle and I will also be setting aside money for the next vehicle. Either way, I win by not paying interest to someone else and staying within my current living expenses.
Grace to you as you live within your means -
L. Taylor
10/15/2008
Wednesday, October 15, 2008
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