Not doing that either, but from what I understand after two years cars get you the most bang for buck. So economically it makes most sense to trade it in after two years for a new one. But of course you’ll need to keep doing so to keep that *advantage "…
It only works if you paid for the very first new vehicle in cash. Save up for 2 years and cash out the subsequent vehicles as well. Then the numbers pencil out.
If you to take a loan out it’s fucking stupid.
After 2 years at 10k miles per year, historically you have lost 20% or so of the value of the car. With a 5 year loan you have paid the principle down to around 63-64% of the original value.
This means you can trade in the car for more than what you owe on the loan. The difference is a partial or total down payment on a new vehicle.
Lenders strongly encourage this behavior. Due to the amortization schedule 2/3rds of the interest is paid during the first 2 years. So people who do this with loans are always paying the highest intereston their vehicle.
The best thing to do finacially is to buy a car with 20-30k then run it for as long as possible. Once the cost of a common major repair is more than the value of the car, get another low mileage used one.
from what I understand after two years cars get you the most bang for buck
If you mean buying a two year old car, maybe. If you mean buying a new car every two years as implied by the previous commenter, absolutely not. Cars lose a ton of value in the first couple years.
Had an uncle who did that, learned it from his dad. I never understood that.
Not doing that either, but from what I understand after two years cars get you the most bang for buck. So economically it makes most sense to trade it in after two years for a new one. But of course you’ll need to keep doing so to keep that *advantage "…
It only works if you paid for the very first new vehicle in cash. Save up for 2 years and cash out the subsequent vehicles as well. Then the numbers pencil out.
If you to take a loan out it’s fucking stupid.
After 2 years at 10k miles per year, historically you have lost 20% or so of the value of the car. With a 5 year loan you have paid the principle down to around 63-64% of the original value.
This means you can trade in the car for more than what you owe on the loan. The difference is a partial or total down payment on a new vehicle.
Lenders strongly encourage this behavior. Due to the amortization schedule 2/3rds of the interest is paid during the first 2 years. So people who do this with loans are always paying the highest intereston their vehicle.
The best thing to do finacially is to buy a car with 20-30k then run it for as long as possible. Once the cost of a common major repair is more than the value of the car, get another low mileage used one.
If you mean buying a two year old car, maybe. If you mean buying a new car every two years as implied by the previous commenter, absolutely not. Cars lose a ton of value in the first couple years.
Pretty sure he means after 2 years it gets a lot harder to sell. So they’re selling at the moment when they’ve had a “new car” longest.
Not saying it’s a good idea, just that there’s a logic to it.