Wednesday, October 8, 2014

Financial Thought of the Day October 8, 2014: New Cars Cost More than You Think

Buying a new car for say $25,000 is fine and dandy when you bring it home. The neighbors are impressed and they look at you with jealousy and envy of your new toy. However, if you buy a car for $15,000 you save $10,000. First, a person may be more apt to pay cash for a car that is just $15,000 saving interest cost on a loan. Also, if you are person who can pay cash for the $25,000 then the $10,000 can add up over time. If you take that $10,000 and invest it in an index fund that earns 8% per annum for the next 30 years that $10,000 becomes $100,626.57 (see calculations below).

$10,000 x (1.08^30) = $10,000 x 10.0627 = $100,626.57

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