I know it sounds radical to say that the old worn car you are driving is costing less than the much marketed and politically correct greater fuel efficient models out there! But payments are huge~and especially if you have to make them when you didn't have them to begin with. I recognize the benefit of purchasing new cars or newer used cars IF you have the cash to make the deal. Cash or a great amount if it for a lower down payment plus shopping the market can yield the best deal going. Without a great deal, even with the government rebate, the payments will be huge and quite a challenge when one never knows from day to day if we will have jobs...but if we have cash, to trade in that "clunker" then go a head and buy a better fuel economy vehicle if the costs will be less. Buying with cash, AFTER you check out all the pricing by comparing all the features to other prices and features can get you the best value for your hard earned buck. The theory was to stimulate our economy with car sales, save on fuel consumption and get old "clunkers" off the roads, but is it really a DEAL?
If you have to make payments, and the dealerships have either raised the prices or are not lowering with other rebates, then the overall price, while it initially might look like a bargain, may not be, but pricing spread out over time! If you acquire a payment~can you really afford it? THIS IS THE HUGE QUESTION.
So I went looking at fuel efficiency for a cost per year analysis of whether or not trading in the old clunker would benefit over the cost of payments for the new and improved car.
I found a calculator for fuel costs at Walmart.com http://instoresnow.walmart.com/Community.aspx?id=105 to calculate a yearly savings. It showed a vehicle driving 12,000 miles per year at 20 miles per gallon costing $2340.00 year in fuel, while a 30 mile per gallon vehicle would cost $1560.00 per year with an annual saving of $780.00 on gas. NOW I ask you this: CAN you pay car payments that cheaply? Car payments average much higher than $65.00 per month than the costs of the additional fuel costs!! Just a thought and one to consider when thinking of such a purchase~CONSIDER all the factors! The only real cash for clunker stipulation is that it had to be drivable onto the lot. Remember that car maintenance is an issue with ownership not just fuel pricing. The maintenance of a vehicle is costly and older vehicles do require more, but do these costs justify high payments?
A SAVING STRATEGY:
If you do not currently have payments, look for ways to begin tucking back and saving money for the inevitable need to replace your vehicle. Designate funds especially for a "new car fund" so that you can be ready to, if at all possible purchase with cash. Buying with cashing will give you are bargaining chip that is a great asset in negotiating prices and there are no payments. It's a win win for sure! But if your vehicle is not going to last long enough to save up the total amount needed, then save what you can, and begin shopping. . .SHOPPING but NOT BUYING~don't let the salesman talk you into a car...just look and look and look...watch the papers, look everywhere and keep saving. Don't get hooked into being a certain salesman's customer either. In shopping your loyalty is to yourself. I hate to say that, but it's a sales tactic to get us to purchase sooner rather than later~remember salesmen need to make money, and the money they hope to make is ours! So beware and keep looking, but offer no hope of any sale any time soon while you are gathering features and prices. Look online too for prices. I know people who shop all over their state and in other states for best prices. Consider all the options. Credit scores won't apply if you are buying with cash! AND if you still have to borrow, save as much cash as you can, as you shop, THEN purchase!
Just some thoughts on this "cash for clunkers" deal that could really cost people MORE in the long run than any kickback the government is offering!
Still hanging onto my money~taking care so it won't leave me!