Option#1: Dealerships often offer tempting monthly payments to entice you into the showroom. They offer you $199/mo payments with only $999 down. While most people can afford $50 per week for a car, they don’t often realize how much they will actually have to pay. A 5 year loan would cost you a total of $12,939 before tax and $14,215.80 after taxes and fees. Suddenly that $199/mo payment has ballooned to $268/mo and you still have to hand over $999 before the deal is finalized.
Could there be a better option?
Option #2: What if you saved your money and put it toward an inexpensive used car? Instead of having a monthly payment, you could buy something with cash and enjoy being out of debt. Yes, an older car would require more upkeep. But if you can afford $268 per month for a car loan, you could also set aside money for occasional repairs.
It may seem strange to consider such an option, but there are decent cars that you could actually afford to purchase below $2,500. Check out these bargains from recent Craigslist ads in Ohio (11/14/2020).
2004 MINI Cooper – manual, 180k mi – $1,700
2002 Volvo V70 – 225k mi – $1,400