Tom and Bob were best friends. They had known one another since grade school and now were graduating from college. Neither had a lot of money at this time, and both needed transportation.
Bob figured that since money was tight he would look for a three-year old vehicle in good condition. He found a vehicle and had it checked thoroughly. Bob also realized the car would need to last. He carefully studied the maintenance requirements reasoning that he could not afford a break down.
Tom decided to buy a new vehicle, thinking he would not have to worry about repair cost and thus save money. He would keep it three years, until the warranty ended and then trade for another new vehicle. This way he would not have to worry about repairs or maintenance.
Tom paid $29,000.00 for his new car, with tax, title and license it came to just over $32,000.00. He drove it for three years and traded it on another new vehicle. This new vehicle also cost $32,000.00 also and he received $12,000.00 trade in. He also drove this vehicle for 36 months and then traded it. His costs for driving six years was $32,000.00 purchase price less $12,000.00 trade in, $20,000.00 times two vehicles or $40,000.00.
Bob paid $12,000.00 for his three-year old vehicle, with tax, title and license. He drove it six years and spent about $4,000.00 on repairs and maintenance over the six year period. He then traded the vehicle for another three year old vehicle. Trade-in was $4,500.00 making his cost $12,000 purchase price plus $4,000 in repair and maintenance, minus $4,500 trade in. His six years of driving cost $11,500.00 which is $28,500.00 less than Tom's cost.
Bob spent the $28,500.00 he saved as a down payment on a home
Tom is still renting and just cannot understand how Bob can afford his lifestyle . . .
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