After home mortgages, car loans are the largest debts most people carry, and are one of the biggest roadblocks to financial freedom. More than 70 percent of all cars purchased are bought with borrowed money.
Most people never get out of automobile debt. Here’s why…
Just when you get to the point of paying off a car, dazzled by the thoughts of a new model, you trade it in and purchase the new one with credit. Unlike a home, which usually appreciates in value, the moment a car is driven off the lot it depreciates in value. Most car owners are “upside down” on the car loan, meaning they owe more for the car than it’s worth. If you had to sell it, you couldn’t get enough to pay off the loan.
Even worse, is rolling any outstanding debt from car #1 into the purchase of car #2, so forth and so on. It just piles up and up, and you can never pay it off.
The average American spends between $240,000 and $350,000 on automobiles during their lifetime. This includes vehicle purchases, fuel, insurance, maintenance, repairs, and license and registration fees. Two-and-three-car families, and those who buy luxury sedans, as well as those who trade their cars in every two or three years will spend even more!
Here are three reasons why it’s so easy to get trapped in auto debt:
1. The cost of cars as become outrageously expensive.
2. Advertisers have done a masterful job of marketing an expensive image – their ads promise status and sex appeal.
3. The cost of financing has risen too. Lenders now offer loans for up to 7 years for a new vehicle!
My last automobile was fifteen years old with 225,000 miles when it finally died. I bought it used (2 years old) and kept it nine years longer than the life of the loan. After I made the last payment to the finance company, I kept making the payments BUT TO MYSELF! I put that car payment money in my savings account for nine years.
Don’t let your car drive you to the poor house.