Why Used Cars Are Smarter

Why Used Cars Are Smarter


Hey this is Jeremy with Strength in Numbers. Your new car is costing you a lot more than you think. I’m going to show you how exactly today. And why a used car is a smarter way to go. (upbeat music) I’m going to walk you through today exactly why a used car is preferable to a new car and how much you’re losing with a new car. Now at the time we’re recording this in early 2018, the 2017 average sale price for a new car was just under $35,000. A lot of people are aware of the fact that a new car depreciates as soon as you drive it off the lot. But they don’t realize that it keeps depreciating quite rapidly and at what rate it depreciates. So I’m going to walk you through that here on the whiteboard today. Now, when you drive that brand new car off the lot and the sucker is one minute old, it has instantly lost 20% of its value. That’s right, in that first year it’s going to go straight from 100 down to 80% in value. And so, in this example with the average car of $35,000 you just lost $7,000 by driving it off the lot. Ouch! Ouch! And Kelley Blue Book, KBB.com, they agree that over time, every year after that first year of 20% it’s going to lose somewhere between 15% and 20% more for a total of about 60% in the first four years. So let me graph that out for you here. So, you’re going to have here the 100, down 80, and then it’s going straight down like this until it gets right about 40% value. So the first four years it’s lost 60% of its value and then just continues a slow decline after that. And so, it’s depreciating really fast. You’re losing a lot of its value right here in the first four years, you’re losing 60% of it. And a lot of people are not experiencing the effects of that because what they’re going through is they’re seeing not that effect, they’re seeing this nice steady trend, hopefully that’s a pretty straight line, of the payments. Because they’ve got this process going on where they’re just making a payment every month, which according to current numbers based on this recording, the average American car payment right now is somewhere in the $440 or $450 mark for seven years, actually. So longer than this six years. That is a tremendous opportunity loss. And so, what’s happening here is that most people are trading in their cars here at the three year mark and then they’re going up to a new car and this difference between what the car is worth and what is owed on it is then rolled into a new loan and they find themselves stuck and getting farther and farther and farther behind in how much they owe on that current car. And I see that all the time with my clients. And that gap between how much is owed and how much that car’s worth can be astronomical. It can be $2,000. I’ve seen it all the way up to $13,000. Ouch! It all depends on how much the car is worth and really, honestly what kind of car it is. Some cars retain their value better than others. And things like that. But there’s a tremendous gap there and what’s happening that I’m seeing with my clients is that some time before the two year mark or right at the two year mark is when things are flipping upside down and they now owe more than the car is worth but they’re not waking up to it until about the two and a half, sometimes the three year mark when they’re getting ready to get another car or they’re thinking about it. Or they’re noticing the crunch of making these payments, realizing they can’t make these payments anymore. And they’re going, “Oh, crap! But I can’t sell it, because I can’t get enough for it, because it’s worth less than I owe on it”. And they find themselves stuck. I do not want that to happen to you. So what’s a better plan? Well, take half of that amount for the car, not even actually, take $15,000, buy a good quality paid for with cash car. Don’t have $15,000? That’s okay. Buy a $5,000 car and work your way up. And if you saw my most recent video, you saw how I walked you through getting a smaller car working it up, improving the quality of it, and then saving the average car payment and making that money work for you. And that’s another video. ‘How to Get Free Cars for Life’, make sure you watch that. But let’s just say that you did take this $15,000 car. That’s $20,000 of opportunity cost you just saved in this $35,000 average new car example. What could you do with $20,000? You could take two adults to Fiji for a week for $20,000. You could take 10 people to Disney for a week. You can put that in retirement. Oh my gosh, there are so many more things you can do with that. And this is the money that you’re losing with these car payments. There’s a quality used car out there for you. Don’t fall into the myth and the lie that new cars are always better, safer, more reliable. That is simply not true. There’s an oversaturated market of available used cars out there and you just need to know how to navigate it and find the right car for you. If you need those tips, maybe I’ll do another video on that someday. But right now, just give me a call. Reach out to me on Facebook. Reach out to me on my website, something like that. And I’ll gladly hook you up with all the steps, a checklist and everything you need to make sure that you buy a quality used car that’s not a lemon and you don’t pay top dollar. This has been Jeremy with Strength in Numbers. Helping you keep your wallet heavy and your heart light. (upbeat music)

About the Author: Michael Flood

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