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The Lifetime Financial Upside to Buying Used Cars
   December 2012 by RPM Owner

With the economy in a worldwide slowdown, buying a quality used vehicle makes more sense than ever. What has happened due to the massive layoffs by corporate America (9 million jobs lost), many families that had two or three cars are now making it work with one or two cars in the family. This had brought into the used car market, a pleasant supply of high quality used vehicles which were serviced and maintained with the hopes of being held onto by their original owners for a long time.

Of course, when buying any new car or truck, there is that immeasurable (at time of purchase) piece of the puzzle that most tend to ignore: depreciation of the new vehicle. Depreciation of the value of a new vehicle is and has been a "wealth killer" in this nation for many generations. If we all had back the depreciation that we experienced from all of our new car purchases in one lump sum today, the numbers would be staggering.

Many of my friends buy or lease a new car every two or three years. It doesn't matter what your tax status is or the amount of enjoyment you place on smelling that new car smell all of the time. From a financial standpoint, this is financial suicide! If you instead purchased a used vehicle of two of three years old, most likely 40-50% of the depreciation has been lost already on the vehicle and your risk is much lower due to the fact that depreciation slows significantly after the first two years of a new vehicle's lifetime. Not to mention the cost of the used vehicle is 40% to 60% less than that of the new vehicle. These numbers when added up over a lifetime of car buying that would make your 401k look like peanuts compared to what it could have been.

The average new car buyer in my opinion loses between $7-$10k per year in vehicle depreciation (not including luxury vehicles which are probably double these amounts). Then, they go out and borrow money and add interest charges to finance or lease this depreciating asset! Who is advising these people? I think it must be The Jones' next door or the too many new car commercials we see on our televisions every time we turn your tv on! The buyers of pre-owned vehicles, in my opinion, lose approximately $1k to $2.5k per year in depreciation on average (not including luxury vehicles). What a difference this would make over the average vehicle ownership lifetime of roughly 50 years for you and the same for your spouse.

This topic, in my opinion, should be the number one financial subject of all children in high school today to make sure that they do not depreciate their hard working dollars into thin air by a rarely discussed topic know as vehicle depreciation 101. If you take an average couple in today's numbers who lease or purchase a new vehicle every three years, they can easily lose $400k each over their 50 year lifetime of car ownership each plus the time value of the money lost being invested would come out to about $2M+ lost in just depreciated new vehicles! This could be $2m+ more dollars in their IRA's, 401k's, property ownership or just plain cash which is king right now! These are numbers that cannot continue to be ignored.

If you are a sensible person at any age, now is the time to stop the bleeding of new car depreciation! When in the market for your next car, go to a reputable used car dealer and find a nice, clean pre-owned vehicle with a warranty that will save you, your retirement and your heirs much needed monies for you and your children's future.

Look for these tell-tale signs to help determine if a car was in a flood:

People are starting to catch on. The estimates for 2010 vehicle sales are: 10.5-11 million new vehicle sales in the US and 36-38 million used vehicle sales in the US for 2010. Don't be on the wrong side of this trend for your financial sake!
 


Robert Taurosa

General Manager

Rpm Auto Sales NJ

980 RT. 9

Bayville, NJ, 08721

ph 732.269.1800 

www.rpmautosalesusa.com

732.269.1800
 

 

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