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what is the drive free method of purchasing a car

by Arch Ziemann PhD Published 3 years ago Updated 2 years ago

Explain the Drive Free Method of purchasing a car. Instead of making car payments, pay yourself that money and do it again and again and put that amount into a good mutual fund. The interest you will earn will pay for your cars for the rest of your life.

Explain the Drive Free Method of purchasing a car. Instead of making car payments, pay yourself that money and do it again and again and put that amount into a good mutual fund. The interest you will earn will pay for your cars for the rest of your life.

Full Answer

What does “drive free” and “retire rich” really mean?

Essentially, the basis for “Drive Free” and “Retire Rich.” According to Dave Ramsey, most Americans take out a car loan to buy a car. For a typical $26,000 car, the average monthly payment is $475 at an average interest rate of 9.6%. And after 6 years of ownership, you’ve paid almost $33,000 for your $26,000 car, which is now worth maybe $6,000.

How can I save $475 a month to buy a car?

Let’s say you have a car that’s worth $1,500 today. Instead of going out and buy a new car, save the $475 for 10 months, and you’d have $4,750. Add that to the $1,500 and you could upgrade to a nicer car that’s worth $6,250. You can keep going an in another 10 months trade up to a car that’s worth $11,000.

Can you afford to buy a new vehicle?

When considering a new vehicle purchase, the lines of affordability can easily become blurred due to the varied financing options available. A wise buyer shops for a new vehicle based upon what he or she can truly afford. Keep an open mind and you could be pleasantly surprised by the list of vehicles within your price range.

How can I buy a used car without meeting the seller?

Concierge services for buying used cars, such as Carvana and TRED, allow buyers to handle most aspects of a used-car sale without meeting with the seller. There are also automotive brokers that could possibly buy and deliver a new car to your home in some states—in exchange for a big fee.

How does the drive free method of buying cars works?

Explain how the "drive free" method of buying a car works. First you save your money, invest, and use the proceed to buy your cars. After a while, you will accumulate enough money to make your car purchases self-funding for life, leaving you with enough cash flow to fund your retirement.

Which of the following is not a recommended step in the drive free method of purchasing a car?

Which of the following is not a recommended step in the Drive Free method of purchasing a car? get no more than a 15-year, fixed rate mortgage with a down payment of at least 10%. Which of the following is the most cost-effective option for purchasing a home?

What is the most expensive way to finance and operate a vehicle?

LeasingLeasing generally is the most expensive way to drive a new car. To see why, consider that leasing is just another form of financing. Whether you lease a $30,000 car or take out a loan to buy it, you're borrowing $30,000. And you'll pay interest on the entire amount minus whatever you pay back.

How do you do a snowball debt?

The "snowball method," simply put, means paying off the smallest of all your loans as quickly as possible. Once that debt is paid, you take the money you were putting toward that payment and roll it onto the next-smallest debt owed. Ideally, this process would continue until all accounts are paid off.

Does a debit card work like a credit card?

Debit and credit cards allow cardholders to withdraw cash and make purchases. Credit cards are debt instruments but debit cards are not. Debit card users can only spend the money available in their bank account unless they have overdraft protection.

Can you go into debt with a debit card?

Debit card debt isn't a type of debt you hear much about. Since debit cards are a vehicle for spending the money in your bank account, it's not common for debit cards to lead to debt – but it is possible.

Which is more expensive leasing or financing?

Monthly Payments Loan payments are usually higher than lease payments because you're paying off the entire purchase price of the vehicle, plus interest and other finance charges, taxes, and fees.

Why co-signing a loan is never a good idea?

The long-term risk of co-signing a loan for your loved one is that you may be rejected for credit when you want it. A potential creditor will factor in the co-signed loan to calculate your total debt levels and may decide it's too risky to extend you more credit.

What is the average car payment in the USA today?

The average monthly car payment for new cars is $644. The average monthly car payment for used cars is $488. 58.66 percent of consumers financed used vehicles in Q4 of 2021. 41.34 percent of consumers financed new vehicles in Q4 of 2021.

What are the 3 biggest strategies for paying down debt?

In general, there are three debt repayment strategies that can help people pay down or pay off debt more efficiently. Pay the smallest debt as fast as possible. Pay minimums on all other debt. Then pay that extra toward the next largest debt.

Does the snowball method work?

Answer: both! The truth about the debt snowball method is that it's a motivational program that can work at eliminating debt, but it's going to cost you more money and time – sometimes a lot more money and a lot more time – than other debt relief options.

Why is avalanche better than snowball?

The snowball and avalanche methods are two popular strategies for paying down debt. The snowball method tackles your lowest balances first, offering small, more immediate wins. The avalanche method prioritizes higher-interest debts, reducing your long-term costs most. Read more stories from Personal Finance Insider.

How long does it take to buy a car?

It depends. While the timing can vary, many dealerships have streamlined the process of buying cars since the COVID-19 pandemic. But once you know...

Can I buy a car with bad credit?

Yes, it’s possible. Car buyers with poor credit scores manage to get approved for vehicle purchases on a regular basis. It takes some thoughtful pl...

Can I buy a car with cash?

Yes. But, there are pros and cons of paying cash for your vehicle purchase.

What to do before buying a new car?

Before considering the purchase of a new car, it is wise to establish the amount you are willing to spend, or to calculate the monthly loan payment. Don’t forget that, after negotiating the final price of the car, you will need to allow some extra cash to cover tax, title and in some states, registration.

What are some options that may get you discounts to buy?

Options that may get you discounts to buy: Out-of-season vehicles, such as a convertible in cold weather or the winter season. Late model vehicles: in the year before the body-style change. Overstocks, or mass-market vehicles come with a customer cash incentive that can be higher in the summer and winter months.

What is MSRP in car sales?

The MSRP, or Manufacturer’s Suggested Retail Price, is actually set by the manufacturer and means just what it implies — a “suggested” price. By law, this price is displayed on every vehicle sold in America.

What is the process of preparing a car for resale?

This process usually includes mechanical and smog inspections as well as repairs to make the car ready to sell to the next owner.

What does "good deal" mean?

The good deal means different things to different people. With the help of Fair Purchase Prices, you can be confident that you are paying the best possible price. But remember, price isn’t everything. Knowing what you want to accomplish is the other half of the battle. Before you close the deal, ask yourself:

What counts when buying a car?

When considering the purchase of a car, everything counts: Number of seats, number of doors, size, performance, color, style, comfort and sometimes even towing capacity.

Can you get as much for a car if you trade it in?

Understand that if you trade it in, you will probably not get as much for it as if you sell it yourself. The biggest issue for most buyers is the price of the new car. Fortunately, determining the MSRP is easy, and figuring at least a range for a realistic transaction price is also not terribly difficult.

What are the best tools for car buying?

Knowledge, friendliness, patience, and your ability to walk away are your best tools in the car-buying process, and they can make the difference between getting a bad deal and an excellent one. Your confusion, impatience, and lack of confidence can give professionally trained sales consultants the upper hand.

What is the last step in the car buying process?

The last step in the car-buying process is usually a trip to the dealership’s finance office to sign the final paperwork. While it is critical to make sure your new ride is a good fit for your kids, in the finance office you’ll want to concentrate on the documents that you are signing, without any distractions.

What is the greatest power of a car buyer?

A car buyer’s greatest power is their willingness to walk away from a deal that isn’t right. It’s also the dealer’s greatest fear. Surprisingly, most customers are afraid to get up and leave the table for fear of losing the time that they have already invested in the deal, or fear of embarrassment.

Is buying a car an emotional experience?

Finally, buying a car can be an emotional experience, but emotions and excitement can get in the way of getting a great deal. Be friendly but firm, and don’t be the person that they want to gouge because you’re acting like a jerk.

Is buying an automobile a business transaction?

Remember, at its core, buying an automobile is a business transaction, and it is one of the last purchasing experiences that still requires consumers to haggle. The more emotion you keep out of it, the better the final result. Knowing the buying process and how to navigate it is your best path to a smooth buying experience.

Is it bad to pay cash for a car?

Paying cash for a car is a great thing to do. However, telling the dealer that you plan to is a bad idea. Since much of the dealer’s revenue is made through financing, they’ll have less incentive to make you a deal if they know they won’t make any money on your car loan.

Is it worth saving $20 a month to buy a car?

Instead, look at the total cost, including interest payments and other fees over the life of the loan. It’s simply not worth saving that $20 per month if it means making payments for another year.

Tips to Buy a Car Today

Getting a great price on a car today is a daunting, but not impossible, challenge. It starts with preparation and involves compromise and a bit of extra legwork.

Why Are There Shortages?

There are several reasons for the shortages in the automotive market. The one you hear of most often is the microchip supply crunch. Vehicles today are filled with computerized components, and all of them need microchips to function.

More Shopping Tools From U.S. News & World Report

It’s easy to save some cash on a new car purchase or lease with the U.S. News Best Price Program. It connects shoppers with local dealers, offering significant savings with pre-negotiated prices, home delivery, and online sales options.

How do I go about buying a car?

But at its core, it involves identifying and locating the vehicle you want, test-driving it, securing financing, negotiating a fair selling price, and closing the deal by signing the paperwork. Learn more.

How much down payment should I put on a new car?

Edmunds recommends combining a down payment of around 10% on a new car with gap insurance or new-car replacement insurance coverage. That lets you keep more money in your pocket without the risk of being underwater on your car loan. On a used vehicle, try for a down payment of at least 10% .

What is automaker site?

Automaker sites are useful for seeing more photos and learning more about features and options on vehicles. Use these tools and you should have little problem selecting the right car or SUV. Once you have a short list, it's time to figure out how you'll pay for the car. Edmunds Recommends.

How to find value of trade in?

The best way to find the value of your trade-in is to use the Edmunds appraisal tool. Use your smartphone so you can sit in the car and double-check whether you have options that affect the car's value — features such as heated seats or a sunroof. Be honest about the condition of your car.

How long is a car loan?

As you plan your financing, note that the most common loan terms are for about 72 months. Cars have become more expensive, and people tend to take out a longer loan to keep the monthly payments down. That said, Edmunds recommends a loan term that's no longer than 60 months.

What is the trade in value of a car?

When you're done appraising your vehicle, you'll see three figures. The trade-in value is what the dealer may offer you — that's a figure to keep in mind when you're at the dealership. The private-party value is what you might expect to get if you sell the car yourself.

Is buying a car a big step?

Buying a new car is a big step, but it doesn't have to be a daunting one. Here's how to research, locate, price and negotiate to buy your new car. Mobile technology makes these steps easier than ever.

How do I buy a car?

There are really only two ways for you to buy a car: Pay cash or take out a loan. If you’re paying cash, budgeting is pretty simple. But don’t spend all your savings. Remember to set aside money for registration and insurance — and possible future repairs.

What to do if you're buying a car from a private party?

If you're buying from a private party, and there is still a loan on the car, call the lender to find out how to close the deal. If the lender is a bank, offer to meet the seller in a branch office and sign papers there.

What does CPO mean in car sales?

But on new car lots, “certified” means the car's in a certified preowned (CPO) program, which have become very popular and make used car shopping a whole lot easier. CPO cars are thoroughly inspected and include an extended factory warranty. You really don’t need to take a CPO car to your own mechanic.

Why do people get preapproved for car loans?

It’s smart to get preapproved for a car loan because it simplifies the buying process and puts you in a stronger position at the car dealership. You’ll see later how preapproval fits into the process.

How much does a car dealership charge for a doc?

This “doc fee” is limited in some states. In others states, such as Florida, some dealerships charge as much as $700 for doc fees. Registration fees. A dealer has the ability to register the car for you, which is convenient.

How long does it take to register a car in your name?

When in doubt, check the state’s registry website for more information. Most states allow about 10 days to register the car in your name.

What does "certified" mean on a car?

On independent used car lots, you often see a sign in the window saying that the vehicle is “certified,” which can mean almost anything — and usually means nothing about the condition or reliability of the car.

What happens when you trade in a car?

When you're trading in a car, the salesperson will take information about your vehicle, including its current mileage and condition level, and make you an offer by phone. When the sales rep arrives to drop off your new car, there will be an inspection of your used car before you conclude the deal.

Can you get a personal delivery on a busy weekend?

Getting a personal delivery on a busy weekend is less likely to happen than getting one during a slow time at the dealership, such as a Tuesday morning. If you can be flexible with your delivery timing, chances are much greater that the dealer can come to you.

Do car dealerships deliver?

While many dealerships will deliver, not all are willing to do so. Some dealers believe that doing the deal outside the store may cost them money in the long run. Home delivery also may run counter to dealership policies and practices. And because car dealers rarely make profits on the car sale alone, they want opportunities to extend the business relationship — at the dealership.

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