Mary and Sue were best friends. They had gone to grade school together, high school and now they were graduating from college. Neither had a lot of money at this time in there lives, and both needed transportation.
Mary figured that since money was tight she would look for a three-year old vehicle in good condition. She found a vehicle and had it checked thoroughly. She carefully studied the maintenance requirements reasoning that she could not afford a break down.
Sue decided to buy a new vehicle thinking she would not have to worry about repair cost and thus save money. She would keep it three years, until the warranty ended and then trade for another new vehicle. This way she would not have to worry about repair cost.
Sue paid $20,000.00 for her new car, with tax, title and licence it came to just over $22,000.00. She drove it for three years and traded it on another new vehicle. This new vehicle cost $22,000.00 also and she received $8,000.00 trade in. She also drove this vehicle for 36 months and then traded it. Her cost for driving six years was $22,000.00 purchase price less $8,000.00 trade in, $14,000.00 times two vehicles or $28,000.00.
Mary paid $10,000.00 for her three-year old vehicle, with tax, title and licence. She drove it six years and spent about $4,000.00 on repairs and maintenance over the six year period. She then traded the vehicle for another three year old vehicle. Trade-in was $2,500.00 making her cost $10K purchase price plus $4K in repair and maintenance, minus $2,500 trade in. Her six years of driving cost $11,500.00 which is $16,500.00 less than Sue’s cost.
Mary invested the extra money at 6% interest and now had over $23,000.00 which she used as a down payment on a home. Sue is still renting and just can’t understand how Mary can afford her lifestyle . . .
