My father works for a reputed company and we are fairly well off, but when I was a kid I never could figure out why my Dad never managed to buy a brand new car when we could very well afford it. He always bought used cars and I was under the impression that may be were going through a bad time or maybe we were simply poor. But now since I am grown up, I understood it was all part of his wealth planning techniques. So the question that might be running in your mind may be is that did this plan work for us? Well he has retired comfortably and safely and he is still wealthy and we still use used cars.
Then as a kid I never understood the term depreciation and its significance, but now I have figured out that as I have grown older and wiser now and now I have come to realize that if we buy a new car and then drive it for a long time then after some time the value for the car depreciates ultimately. A new car would ultimately lose 30% of its value in the initial two years itself. So for my dad it was completely illogical at that time and even now it does not make any sense. So isn’t it better to buy a somewhat used car and let someone else bear the 30% loss?
Dad gave me a simple tip back then to understand the working of money saving policy he simply said that make a habit to pay cash for things that would depreciate and use the credit of those things whose value will appreciate with time. A car would depreciate if you would pay cash for it and various things like real estate, antiquities, art and other investment would appreciate so for all these things its wise to lend the money.
I have yet to own a car and whenever I buy a used car I plan to buy a used BMW or a used Cadillac. As obviously I have inherited my dad’s money saving policy. Recently I bought a slightly used Cadillac. It did not have the aura of the brand new flashing car but still it had the smell of a new car, it had a low mileage and a great history. I instantly fell in love with the car and the whole experience of driving a used Cadillac. As I am self employed so all the tax bearings are on a write off and even if I hit hardship anytime even then I won’t have to worry about the vehicle being a burden to my expenses as it is an asset that can be sold at my disposal.
