TEMPLE, Texas — The average monthly car payment in America is now $726 for new cars and $533 for used cars. These are staggering numbers and, in many cases, lock the buyer into 72-84-month payment schedules.
So, should you buy new or used, and how might you save some money in the process? That's the topic of this Money Talks.
Inflation has hit every part of our lives and that has definitely crossed over into the vehicles that we drive. Financial Advisor Rolandus Johnson sat down with 6 News to discuss the pros and cons of both new and used vehicles.
"I drive a truck so you look at, you know, four or five years ago the same truck would have been maybe $29,000 and now it's $60,000 and it's the same exact deal," Johnson said.
With much higher car payments, especially with the new interest rates we have, Johnson said you might have to take notes, or monthly payments, out even longer to keep the monthly payment down.
"Again, I would look at your budget and say 'Hey, what do we want to pay?'" said Johnson. "Of course the longer the note, the longer the time than the smaller the note, but if you can find a way to pay that thing off in three or four years by making some extra payments along the way, by all means, go for it because locking in at a high interest rate over that long time frame is going to take a lot of money out of your pocket over that time frame."
Here's a big saver Johnson said he himself just found out about: Say your payment is $500 per month. By paying $250 on the 1st, you stop and satisfy the interest for the second half of the month, and then when you pay $250 on the 15th, it all goes to principal. You could shave as much as one year off the loan by doing this!
“Oh yeah, splitting the payments, paying twice a month, that was something that I learned two years ago now," Johnson said. "And I was like 'Oh wow, I didn't even know', and being a financial advisor that's kind of crazy. I was kind of like 'Wow, I could have paid off a couple of cars a lot sooner!'"
Keep in mind that the average electric vehicle is $20,000 more than a gas car, but is it worth it?
"All of the savings that they talk about with gas and this and you make up more than that in just the cost of the car in general," said Johnson.
But will you make all that money up for the cost of the electric vehicle? It probably remains to be seen what happens to fuel costs.
6 News posed the question to Johnson straight out, used car, or new car?
"If you want to save some money, if you are in the saving money aspect of your life,... Used car definitely," Johnson said. "A lot of the time Enterprise or rental cars, I’ve learned this over my time, is those guys don't even let you rent out a car unless it's like new. So, what you are getting from an Enterprise or a Hertz or something like that is a used car, but basically, the mileage and everything may be high, but it is like a new car."
6 News anchor Kris Radcliffe sat down with Johnson for an extended discussion on the new vs. used car debate. The full conversation can be viewed below and on the 6+ app.
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