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“BuT It’S JuSt $500/MoNtH FoR My CaR”
I’m going to do a deep breakdown of the true cost of a car payment vs investing that money
Sit back, and check this out
(thread)
I’m going to do a deep breakdown of the true cost of a car payment vs investing that money
Sit back, and check this out
(thread)
Here is the backdrop of the thread:
and 
just graduated college and have their first jobs
Both of them have a car...
BUT
wants a new one to look “cool”
loves what she drives
Okay, ACTION
and just graduated college and have their first jobsBoth of them have a car...
BUT
wants a new one to look “cool” loves what she drivesOkay, ACTION
So let’s start with a car loan
takes out a $27,000 note with 4.25% interest rate would be a $500/month payment over 5 years
for a 
I want to make this clear... that’s $500 EVERY MONTH for 5 years
So after 60 months, the total that paid would be $30,018...
takes out a $27,000 note with 4.25% interest rate would be a $500/month payment over 5 years for a I want to make this clear... that’s $500 EVERY MONTH for 5 years
So after 60 months, the total that
paid would be $30,018...
You may be wondering, “But DI, the loan was only for $27,000... why is the total paid $30,018”
This is where interest comes into play
The bank isn’t going to loan money for free... so, they charge him a 4.25% rate (depends on credit/other factors) to borrow their money
This is where interest comes into play
The bank isn’t going to loan
money for free... so, they charge him a 4.25% rate (depends on credit/other factors) to borrow their money
So after 5 years, for $30,018, all has left to show for it is his
BUT
Remember, cars are depreciating asset... and after 5 years, cars can lose up to 60% of their initial value (nerdwallet)
So that $27,000 is now only worth $10,800 after 5 years
has left to show for it is his BUT
Remember, cars are depreciating asset... and after 5 years, cars can lose up to 60% of their initial value (nerdwallet)
So that $27,000
is now only worth $10,800 after 5 years
So not only did purchase a $27,000 car, spend $500/month for 5 years, but now his is only worth $10,800
Now let me introduce
decides to stick with her current ride
And decides to invest that $500/month she saves in car payments
purchase a $27,000 car, spend $500/month for 5 years, but now his is only worth $10,800Now let me introduce
decides to stick with her current ride And decides to invest that $500/month she saves in car payments
is new to investing, so she puts her money into $SPY Historically, $SPY has returned 14.33% in the last 5 years
But to play it safe
decides to calculate on a 8% return Let’s see what she will have after the same 5 years that
was paying off his car
In 5 years, could have a portfolio value of $36,738
While has a worth $10,800 + $0 in investments
Here is a quick lesson:
Many people will think is wealthier than because of his car, but little do they know, has over $25,000 more
could have a portfolio value of $36,738While
has a worth $10,800 + $0 in investments Here is a quick lesson:
Many people will think
is wealthier than because of his car, but little do they know, has over $25,000 more
I just wanted to share an example why those $500/month in car payments really eat away at your chance to build wealth
I’m not saying you can’t have a nice car, but let’s have your dividends pay for it
I hope you enjoyed this thread!
Thanks for reading
@DecadeInvestor
I’m not saying you can’t have a nice car, but let’s have your dividends pay for it
I hope you enjoyed this thread!
Thanks for reading
@DecadeInvestor
