Home » MONEY FORUMS » Transportation » What are good strategies for financing a car while still in college or soon after graduation? Is it a worthwhile investment? How does buying used work with insurance?
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Posted by Aiury Cavallo (MONEY FORUMS: 5, Answers: 0)
Asked on November 23, 2015 1:28 pm
Any asset that depreciates in value over time is not an investment, just as Beth says. New cars, in particular, lose significant value the moment you drive from the dealership. The smart move, while not exciting, is to buy an affordable used car if you need one now. Then start putting money away for your next car with the goal of paying cash for nicer cars you buy in the future. Borrowing money to buy a depreciating car significantly increases your transportation costs and reduces funds available for other living expenses and investing for financial independence.
On insuring a well-used car, if you don't have a loan on the car consider if the car is really worth insuring for collision damage. You absolutely do need liability coverage, but the costly collision coverage that pays for damage to your car is not required if you don't have a loan on the car, and maybe not worth buying depending on the value of your car. By the way, you can also drop collision coverage you've had on a policy but keep the liability coverage --- worth thinking about if you keep a car long enough that once needed collision coverage no longer makes sense based on its current value.
I would not consider a car as an investment, especially if you are in college. If you need a car, you figure out a way to buy or lease one. How you finance the purchase depends on what your financial situation is, for example, do you have any savings to use, do you have good credit to get a loan? Used cars are the way to go, and what you can afford determines what you can buy. Insuring a used car is no different that insuring a new car (except cheaper).