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.
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.