So You Want To Buy A Car

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So You Want To Buy A Car

  1. 1. Buying A Car<br />
  2. 2. Let’s Look At A Simple Case<br />
  3. 3. Assumptions<br />Time span: 44 years<br />Car purchased every 4 years<br />Total cars purchased: 11<br />Cost per car: $10,550<br />Interest rate: 8.5<br />No down payments<br />No trade-ins<br />No inflation<br />
  4. 4. Option 1: Financing<br />Borrowing Money To Buy<br />
  5. 5. Cost to Finance<br />Base Cost: $10,550<br />4 Year Interest Cost: $1,932<br />Total Cost Per Car: $12,482<br />Total Cost of All Cars (11): $138,000<br />Total Interest Paid: $21,252<br />
  6. 6. Option 2: Using A Self-Funded CD<br />Using Your Own Money<br />
  7. 7. Using A Self-Funded CD<br />Current Value of CD: $41,071<br />Assumes 7 year capitalization @ $5K/year<br />Annual Car Payments: $3,030 <br />APR: 5.50%<br />Tax Bracket: 30%<br />Post Tax APR: 4.00%<br />Withdrawal every 4 years for car: $10,550<br />Balance in CD at Age 69: $258,927.37<br />
  8. 8. Option 3: Using A Self-Funded, Tax-Free Account<br />Using Your Own Money<br />
  9. 9. Using A Self-Funded Non-taxable Account<br />Current Account Value: $35,960<br />Assumes 7 year capitalization @ $5K/year<br />Annual Car Payments: $3,030<br />Withdrawal every 4 years for car: $10,550<br />Total in account At Age 69: $964,638.00<br />Nope, there is nothing wrong with your eyes!<br />
  10. 10. What Would You Choose??<br />Bottom Line For The 3 options<br />
  11. 11. Summary<br />Cost of financing cars: -$138,000.00<br />Private Financing <br />with a Self-Funded CD: +$258,928.00<br />with Self-Funded Non-taxable Account: +$964,638.00 <br />
  12. 12. That Was A Hard Choice!<br />Ron Doerksen<br />Sustainable Finances<br />360.306.5642<br />SustainableFinances@comcast.net<br />

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