In early 2013, my husband and I paid off our auto loan six months early. Not surprisingly, shortly after some friends and family learned we had paid the loan off, they started asking if we planned to get a second vehicle. Most people seem to think that we should jump right into a new loan simply because we paid the old one off. However, it doesn't make financial sense for us to do that.
This is why we aren't buying a new vehicle, and what we are doing with the savings.
Why we aren't buying a new car now.
There are a few reasons we aren't investing our money into a new car, and all of them are all financial.
- First, there is the cost of the downpayment and monthly payments. If we were to buy another car it would become our second vehicle, which means we wouldn't have anything to trade in to lower the downpayment. In our area a downpayment on a vehicle ranges from a few hundred dollars for a used car to a few thousand dollars for a new car. Also, we would likely have to pay monthly payments again, which means I would have to totally rework our budget to accommodate an expensive monthly payment.
- Next, there is the cost of upkeep. When I think about the cost of oil changes, gasoline, tuneups, and tire rotation it is a little overwhelming. Supplying these things for our current vehicle cost us around $2,900 a year, and I fully expect a second vehicle to cost around the same.
- Lastly, there are the costs for insurance, taxes, and registration. These currently cost us $970 a year, but adding a second car would increase that total. Without knowing what year, make, and model the new car would be I can only guess it would add at least $450 a year to this total, and that's a conservative estimate.
Working with rough estimates, I believe a second vehicle would raise our yearly expenses by at least $5,000 a year.
What we are doing with our auto loan savings.
We are currently savings no less than $310 a month because we do not have an auto loan payment. We initially used that money to pay off my husband's credit card, but are currently using it to make some much needed updates to up our house.
After looking at the overall expenses, it's seems clear to me that investing in a second car now would be a mistake.
*Note: This was written by a Yahoo! contributor. Do you have a personal finance story that you'd like to share? Sign up with the Yahoo! Contributor Network to start publishing your own finance articles.More from this contributor:
- Consumer Discretionary
- Financials Industry