Used Car Dealerships Humble Tx – So what happened – technology and innovation! As in the case of humans, this century has seen an exponential increase in vehicle life. Thanks to the convergence of various technologies such as computers, precision engineering, and biomechanics. Also, regulatory requirements regarding car maintenance such as the California Smog Check program are mandated and managed by the Automotive Repair Bureau. Someone who bought a new car today; can hope the car runs trouble free in the 2030s. So why is the standard for renting cars 3 to 5 years?
Welcome to how car dealers make money. The dealer does NOT make money from the spread between the purchase price and the selling price. The period is very competitive, plus the internet has made shopping prices very easy for buyers. That means the negotiating power is now in the hands of the buyer, not the dealer. This causes dealers to rediscover the way they make money. They make money for repairs, sales guarantees and financing – financing is the core of this article.
Used Car Dealerships Humble Tx
This works in one of two ways:
a) Buyers own a car, and finance the purchase price through a company affiliated with a dealer. Usually an automatic loan runs 5 to 10 years (unlike a home mortgage that runs 15 to 30 years, with 30 years being the most common).
b) The Buyer NEVER owns a car; essentially the buyer pays “rent” for car use. The leasing company owns a car.
Let’s look at the problem with car rental in a mathematical way:
· The average age of a car is 15 years.
· Say a consumer has been driving a car for 60 years.
· The average price of a car is $ 30,000.
Cars that have a lifetime = 60 divided by 15 = 4 cars
Ownership cost = 4 multiplied by $ 30,000 = $ 120,000.
The car is rented for life = 60 divided by 4 years per rental = 15 cars
Rent amount = 60% of total value = 60% from $ 30,000 = $ 18,000
Rental costs = 15 cars multiplied by $ 18,000 = $ 270,000.
The difference of $ 150,000 (rent vs. self-owned) is what consumers spend on average extra. That means, the average consumer spends more than double the amount by renting, as opposed to having! No wonder my car dealer was very interested in giving me a “special” to influence my decision on a new rental J
Indeed, leasing gives a new car every four years – but given the age of a car, isn’t that in vain ??
Now this is where it becomes very interesting – if you take the midpoint of savings ($ 75,000) and midpoint (30 years); reinvest money with an 8% annual return plus – you’ll have an additional ~ $ 500,000 in retirement!
Back to the topic of the article – the biggest wealth destroyer in America – that takes half a million dollars from your golden years – rent a car!
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