Have you ever sat down and thought about what your new vehicle has cost you? If we finance a vehicle we tend to think the cost is our monthly payments. What about your down payment or the trade equity you had from your old vehicle? What about the interest on your loan? The rebate we received for buying the vehicle? That was your money, as well.
The payments and down payments are just how we pay for the second biggest investment most of us make, our vehicle. Sure those factors are money out of your pocket but they are paying for an investment, a vehicle and the cost of transportation. Hopefully the vehicles value will replenish at least some of our transportation costs when it’s time to get the next vehicle, but how much do you recoup?
You know the equation, Initial cost and up keep, minus the vehicle’s current value, equal the cost over any given period of time.
Here is a simple number example. Let’s say you buy a vehicle for $20,000 and five years from now it is worth $4000.00. The cost over five years was $14000 plus any repairs, interest, gas, etc. What if the resale vehicle was $7000.00 after five years? The extra value means your expense would be an average of $50.00 a month less, every month, over that five-year period. Resale value in this case represents $3000.00. This single item accounts for more than any other single item other than the actual vehicle itself. If you could somehow count on good resale value, you could cut your transportation cost by as much as 15%, 20% possibly 25 % over time.
Resale value is a huge factor in vehicle ownership, maybe the biggest. When deciding what to buy, give some thought to resale value. Maybe even research the resale history of a model or a make.
(What if you could control resale value and avoid repairs?) That’s another subject for another blog post
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