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Whether you want to upgrade from a Pinto to a Pathfinder, or from a Ford to a Ferrari, many of us dream of driving a better vehicle. However, I think you’ll agree with me that making the dollars and cents work to upgrade your car can be challenging.

The problem is, this doesn’t stop people from buying crazy expensive cars. In fact, the average new car sold in 2017 rang in at over $36,000.

With the average salary tipping the scales at around $50,000, you or any mathematician with a 5th grade education can figure out that the numbers just don’t work.

In order to overcome these mathematical deficiencies, we pay for these fancy rides by making monthly payments over LOOOOOOONG periods of time, as long as 84 months in many cases.

Still, in spite of these long term loans, the payments are still astronomical, with monthly installments of $480 in the US and $650 in Canada (similar amounts when the currency is converted).

This is a stupid decision.

DUMB. Like go stand in the corner with a dunce cap on DUMB.

Especially when you consider that if you follow these 7 simple steps, you can upgrade from a beater to a KILLER ride relatively quickly.

Assumptions

We’re going to need to work based on some assumptions since there are lots of variables to consider such as cost, payment amount, payment length, etc.

1) You’ve got a car payment.

If you don’t, you rock. You can start saving to upgrade your ride and skip right to Step 3.

If you’re like most people, you do have a vehicle payment. And the averages say you’re pouring around $500 ($640 Canadian dollars) a month into it.

2) Car depreciation – We’re going to use 10% as our number. Depreciation rates vary wildly from years 1-5; after year 10, they slow considerably. 10% is relatively high, but I’d rather overestimate this than come in under.

3) We’re also going to assume that you put away $100/month to cover any car repairs (average cost of repairs is $99/month according to AAA).

YEAR 1

Step 1

Sell your current vehicle and pay off your loans (we’re assuming you’ve got a payment). If you don’t have the money to pay it all off, sell your car anyway and add the balance you owe to the $1000 you’re about to spend on your set of hot wheels.

Step 2

You should go out and buy a $1000 beater.

If you don’t have $1000, that’s fine. Get a loan. You’re going to have it paid off in a couple of months or so with the $400 from your car payment you don’t have any more (remember, from the original $500/month payment $100 is now being set aside for repairs).

If you were able to sell your car for more than you owed, use the proceeds to buy a vehicle and don’t get a loan.

Here’s what you can get for $1000.

I know, it’s not glamorous.

Far from it.

But this isn’t about having a stylin’ ride…NOW.

That’s what everyone else is doing.

You’re not like everyone else. You’re different. And for you, it’s about saving money (as the ad says!!) and getting into a stylin’ ride…EVENTUALLY. It’s about delaying gratification.

Ya know, being an adult.

With the money from the $500 car payment you’ve kicked to the curb, you can pay off the beater in 2 months or so.

Step 3

Now that your sweet ride is all paid off, you can save $400/month (again, $500 minus the $100 you’re saving to pay for any repairs on your dream ride).

In 10 months, you’ll have $4000 saved.

Step 4

Unless you’ve become really attached to your aquamarine Cavalier, sell it. After one year, you should easily be able to get $900 for it taking into consideration a 10% depreciation.

Step 5

Take the $4000 you saved and the $900 from the sale and go out and buy a $4900 vehicle.

Here’s what you can get for $4900

Step 6

Drive that PAID FOR beauty for 1 year.

Step 7

REPEAT Steps 3-6 over YEAR 2 .

Here are the numbers for Years 3-6:

Vehicle Upgrade $ =$400 saved/month for 1 year + (Value of current vehicle – 10% depreciation)

YEAR 3

Vehicle Upgrade $ = $4800 + ($4900 – 10% depreciation) = $9,210

At the end of year 2, go out and buy a $9,210 vehicle, drive it for one year.

YEAR 4

$400 x12 months = $4800 + $8289 = $13,089

YEAR 5

$4800 + $11,780 = $16,580

YEAR 6

$4800 + $14,922 = $19,722

BOOM!!

From driving a beat-up aquamarine 1997 Cavalier to a shiny black 2016 BMW in 6 years!!

And you OWN IT!!!!

On the flip side, what most people do is take on a $500 car payment for 6 years. They shell out $36,000 for a vehicle that at the end of the 5 years is now worth $14,000 (I speak from experience. I made this stupid mistake).

Upgrade Your Car For Life

After you’ve worked the plan for a few years, you’ll realize that the sweet spot in which to buy cars is in the 3-5 year old range. This is where they’ve lost the majority of their initial value but they haven’t been driven into the ground.

You can still find REALLY nice vehicles at great prices. Drive them for a few years while putting a little money aside to replace them, and after then pick up another 3-5 year old steal of a deal in a couple of years.

Using this method you can drive NICE cars for the rest of your life without having to pay the ridiculous new car sticker price, all while avoiding the nasty depreciation that happens in the first few years.

Bringing It All Together

So why don’t more people opt for this 6 year plan to upgrade your car?

Maybe they haven’t run the numbers. That’s possible.

But more likely, it’s because it takes 6 years. And 6 years isn’t 6 seconds, the time in which we’re used to getting what we want these days.

It also takes self-control and discipline, character traits that must be exercised over 6 years.

And that’s hard.

Not impossible, but definitely hard. And most people don’t have the willpower to do it.

But if you do, if you can focus on the long term benefits of using such a plan, you can upgrade your car and set yourself up for riding in style for a long time at a fraction of the cost most people pay.

How have you made the math work to upgrade your car? Please share in the comments below or on Twitter @method_money or my Facebook page Method To Your Money. You can also find me on Pinterest. Want more great ideas for mastering your money? Sign up to receive my weekly emails detailing how to keep more of your hard earned cash!