After I published last week the article “Should I buy a financed car and keep investing? “I received dozens of emails and comments with testimonials where readers regretted the purchase of the zero-financed car for various reasons, ranging from being unable to pay the installments to interest in making an investment that generates income, and not expenses.
The worst part is that most people buy their cars with long financing (over 48 months) and while paying for the installments, the car only devalues. Moreover, many deprive themselves of leisure or superfluous activities because they are unable to do anything but pay for their car.
The purpose of this article is to show how much it costs to finance a car, give some examples of car depreciation and explain why it is not worth buying a car to take financing.
How much does financing a car cost?
In addition to all the expenses necessary to maintain a car, I explained in the article “How much does it cost to have a car? “There is also the amount we pay interest on the financed amount.
Just as an example, if you finance at $ 38,000 car in 36 months, with interest of 1.5% per month, you will pay monthly installments of $ 1,373.79 during that period. By the end of the period, you will have spent almost $ 50,000!
And the devaluation?
As if that wasn’t enough, the car still devalues itself. In the end, you end up almost double the value of the car after 3 years. Do not believe it? Let’s go to a real example.
The Citroen C3 has been massively bombarded during commercial TV breaks with the (excellent?) Suggested retail price of $ 37,990. If the consumer chooses to take a loan with no down payment and in 36 months, the interest rate is around 1.5% per month. Therefore, the value of the installment would be $ 1,373.83. After 36 months, the buyer will have disbursed R $ 49,443.36.
If we look at the value of a Citroen C3 2008 through the table Fipe, we see that this model is worth approximately $ 27,866.00. By the way, who has a 2008 C3 knows that hardly a dealership would pay more than $ 24,000 in this model.
In the end, you would have paid almost $ 50,000 for a car that costs $ 38,000 and that after 36 months (financing period) would be worth about $ 25,000. What a nice bang in your pocket, huh?
Is it worth buying a car to take financing?
Apart from a few rare exceptions where the vehicle is really needed, the answer is no. And if we only consider the financial side, there is nothing to discuss. Once again I make a point of warning about the expenses for the purchase and maintenance of the car and also for the devaluation of this good, especially when buying a zero car.
My suggestion is that you don’t get carried away by the excitement and anxiety of buying a car, from all the math before making a purchase, talk to people who have bought a long-term car and only then decide to buy the car.
If you are really determined to buy it, consider a semi-new car (it is possible to get great discounts on zero car price) and buy it in cash or giving the biggest possible entry. Only those who have been squeezed after long financing know how costly (not just financially) this operation is.