re: Car Guys: Keep, Sell, or Trade

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That's assuming you are spending the 378k now, not over your lifetime.

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No. That's assuming you spend $500 per month on a car note.

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Buying a used car and paying cash isn't free either.

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No, but you do not have the power of compound interest working against you.

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If you can get a decent rate, sometimes it makes sense to take a note and invest your money instead(my last rate was 3%, I wasn't in any rush to pay that off).

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Even if the money is interest free, you're still spending $500 a month on a depreciating asset. Just think of the income stream that $500 a month can produce FOR you in just 4 or 5 years? Rather than just feeding the machine anew every 4 or 5 years.

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I'm not disagreeing with your arguement, but it's got plenty of holes.

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Not on the financial side of it, it doesn't. Look - I'm not trying to talk everybody out of buying cars - I'm just saying to not pretend you're "saving" money by spending money. You're buying a rapidly depreciating asset (with borrowed money in most cases, with interest in both cases) instead of making your money and compound interest work for you.

Obviously it is a better "financial" decision to amp up your 401k, rather than go to Hawaii for your 10th wedding anniversary - there are other benefits to going to Hawaii - just don't pretend you're making a good financial decision.

If you delay gratification - let's assume you make the commitment to buy a new car, drive it 10 years (rather than 4 or 5), and buy new cars every time - that decision - alone, pretty much regardless of interest rates - means you buy 6 cars in 60 years instead of 12 - so that's $200k, plus compounded interest - just on the cars you didn't buy. And that's still buying "new" cars every 10 years. Stretch it to 12, buy lightly used cars instead, pay for the car in advance so that you save depreciation and interest on the cars you do buy, means and extra $1 million or so lying around in your 80s to pass on to your grandchildren, travel the world - whatever.

Simply by being a little bit smart on this decision, rather than spending, effectively, millions of dollars on what is, essentially, a 5 year old car when you are 85 years old.