Cars can be associated with intense passions for many people. There are different financial implications of owning a car. People often put money down when they want to purchase a car. If they can’t afford to pay for the monthly car loan bills, they could occasionally lease a car during specific situations. Many people also actively trade their cars with a newer one, by paying specific amount of money. Many people purchase cars every 3 or 5 years. They may also roll previous car debts into a new one. When we put money down on a type of car that we prefer, this will translate into some amount of equity. However, we should know that significant value of the car has disappeared when we sign the purchase agreement and drives the car off the lot. Among many assets that we own, cars are among things that depreciate the most. In order to prevent significant loss of money, we should choose car models that depreciate the leas.
Insurance is also a financial implication of owning a car. However, we should know that it is very rare that an insurer will pay more than a car is worth. In fact, we are lucky enough if we are paid equal to the present value of the car. We may purchase a new car for $25,000 and we could wreck it during the first year. Unfortunately, it is quite likely that we will obtain only the car’s residual value. If the residual value of the car is only $21,000 and we owe $30,000 including interest and fees in car loans; then we could lose about $9,000. The car depreciation could mean a financial calamity for many people. In this case, we should choose car models that seem to retain their overall value. When purchasing a new car, it is important to make sure that we get the best possible deal. If our budget is limited, it is a good idea to choose used cars instead. In this case, the original owner has paid for the significant early deprecation. Second or third owner of the car will be less affected by the depreciation.
Before and after we purchase a car, we should save like a fiend. This will allow us to significantly reduce the overall problems. It is clear that owning a car, even a used one can be quite expensive. In many cases, we only need to drive car occasionally. This is especially true for people who live in big city and they can depend almost entirely on public transportation. In this case, renting a car is a better solution, if we need to drive outside the city. Occasionally, the family may need to take a vacation and by renting car; they can spend the whole weekend for an outdoor excursion. They may rent the car only twice a month. The overall cost will be much lower. We only need to pay for a small portion of the depreciation and repair costs of the car.