Don’t Finance Vehicles: Expand Their Value
Craigslist: The Great Equalizer
Before Craigslist.com and related options became available, it wasn’t very easy to make money flipping cars. Even with Craigslist, this can be difficult—but there are things you can do to make the process easier.
Also, such a paradigm can help you acquire increasingly better vehicles very quickly. The key is understanding several things. One, the value you get out of a vehicle between buying and selling it. Two, how much value you can add to a vehicle after it’s been purchased.
For example, if you buy an RV from the early 80s for $2,200, live in it full-time for a year (cutting room and board costs, and combining them with vehicular expenses), and install a solar panel, in a year’s time, if you maintained it, you could sell it for around $1,200. You’d want to list it at $1,500+ on a site like Craigslist, expecting buyers to talk you down.
You can do the same thing with a basic car, and not have to live in it full time. Find a vehicle being sold around $4k, do about $1k of work on it, list it for $8k and sell it for $6k. Keep at it, you’ll be running a used car lot before you know it—but this is a digression. The point is, there are ways to augment vehicular value with a little cleverness.
Increasing Vehicular Value
Does your vehicle have a tow-hitch? This is valuable in terms of resale, it’s valuable in terms of vehicular utility, and it’s valuable for an emergency; whether you’re doing the towing, or getting towed. Here are available towbars nearby you might want to consider. Installing one could allow you to sell your vehicle for more, turning the money into a better one later.
When you’re looking into getting a new vehicle, it’s integral to avoid as much debt as you can, as described in this article. Vehicular debt is pernicious because the value of vehicular property drops drastically right when you buy. A new car drops in value the moment it rolls off the trailer into your driveway, or the second you drive it off the lot.
If you buy a car for $3k, then turn it around for $5k after $1k investment within three months, doing that four times can transform $3k into $7k. Doing as much over three years can turn $3k into $12k. Suddenly you’ve got enough to buy certain new vehicles outright while sidestepping debt.
Breaking It Down
If you’ve got a choice between financing a new vehicle, or buying a used one outright, buying used saves you money. The reason is primarily interest. Let’s do the math. If you’re paying $300 a month on a car, that’s $3,600 a year. Without any interest, that will require 8.33 years to pay off.
On average, you’ll put 15,000 miles on your vehicle annually. That’s going to be about 125,000 miles—well past most warranties. By the time you pay off your vehicle, it’ll be worth around a tenth what you paid for it, and that excludes interest.
With interest, that $30k can compound. At 4.5% interest, a $25k loan paid off at $466.08 a month likely will end up costing $27,965 in four years. Ironically, what you pay in interest over 8.33 years for a car will likely be more than what you can sell a car for at the end of that time.
So buy used, add value to the vehicle, and sell it swiftly for value; or simply buy used as a matter of course until you can buy a new vehicle outright and get enough utility out of it the sale won’t end up a loss. But avoid financing a vehicle; that’s bad debt.