BUY USED !

I have always been amazed by how much money broke people throw away on new vehicles.

A coworker (who is flat broke) recently told me that he was buying a new car because the payment was the same as the used car he was looking at. What he didn't realize is -a) he wasn't getting a good price on the used car (paying almost double its value after financing) and -b) the payments on the new car were for twice as long those on the used car.

When I suggested paying cash he looked at me like I was crazy....but with a little PATIENCE he could save himself a lot of money...let me explain.

He was driving an old clunker that needed some major repair but was worth about $1000. He was planning on putting $1000 dollars down and paying about $350 per month.

If I were in his shoes (and I have been) I would drive the clunker as long as I could while saving the $350/month and trying to sell the clunker. If he could hold out for 2-3 months he would have $3000 with which to buy a used car in fair condition (1000 from clunker, 1000 cash, and 1000 saved). Now this car will have some flaws and may not be pretty. It probably won't be one he wants to keep for long but contrary to popular belief a reliable one can be found for 3K. I know because I have done it.

I recently bought a 10 year old Toyota Camry in excellent condition from a reputable dealer in my area. I paid $3800 drive out and have spent less than $100 on it since. That was 16 months and almost 30,000 miles ago.

If my coworker drives this car for about 6 months while continuing to save the 350/month he will have another 2k saved. Put that with his used car (which hasn't dropped much in value and can usually be sold fairly quickly) and he has 5k with which to buy a nicer used car.

If he continues this process every 6 months he will be in a $14,000 car in 3 years. If he buys the new car instead he will have 2 more years of payments and still be in a car that is worth about $14,000.

I have followed this process myself and currently have 3 vehicles completely paid for. They have 80K, 90K and 350K miles on them but are all extremely reliable and comfortable to drive. My next post will be on how to find good buys on reliable used cars.