This time of year many people’s fancy turns to owning a new shiny car during the upcoming New Year. Dealers will need to liquidate their current year inventories to clear space for the new models.They will be pulling out all the stops including colorful free brochures, demonstrations, and pitches by beautiful ladies telling you all about the New Year models. Be careful not to get sucked into these sweet offers. A new automobile is one of the biggest wealth drains for you and your family. However, that being said, a car is very close to mandatory to survive and thrive in most areas of the country. Let’s talk about some tips on how to save a fortune on every car you ever own over your lifetime. Many families own at least two cars, which means you are getting robbed twice as fast. Use these simple yet powerful tips to take control of this expensive item.

• Buy the car you want but only after it is at least two years old, and three years old would be better. When you choose this option you automatically will save yourself hundreds of thousands of dollars over your lifetime.A very real life example of this comes from my own life.When I was 23 years old I decided I wanted to buy a nice 4 door sedan and I was drawn to the Cadillac STS model and began doing some research.The brand new model year of that car was stickered at over $50,000 and with any kind of little extras the sticker was almost $55,000.I was very fortunate to be doing very well financially at a young age but I was not doing that well to blow 50 grand on a new car.I was thumbing through my local paper (yes this was before the internet changed everything) and saw an ad for a 2 ½ year old Cadillac STS for $19,500.The car had less than 40,000 miles on it and came with an extended warranty to 90,000 miles.It was gorgeous, shiny, and just serviced.Of course it seemed too good to be true but then someone shared with me the secrets of buying automobiles.The largest depreciation losses on cars occur in the first three years.According to Edmunds.com the average car will lose 11% of its value the second you roll it off the lot and additional 15 to 20% the first year you own the vehicle. That makes your first year loss of value 30%!The second year depreciation (loss) is another 15% for a total first two year loss of at least 45%!

It is important to keep in mind that the depreciation is usually calculated off of the base price and does not take into account all the extras you pay for when the car is new.This could be the sport package that raises the price $10,000 but only gives you $2,000 back after the first year or two.So it is very possible to find beautiful cars with manufacturer warranties still in place and pay 35 to 50% less than the first owner did when purchased new.Since the biggest percentage of depreciation occurs in the first three years, let someone else eat the depreciation and buy it used (or pre-owned as the car dealers like to say) after the second or third year.

I was able to drive a gorgeous car with a warranty for far less than it would have cost me new and I drove that car for 4 years and still sold it for $3,500 and had very little repairs during my ownership that came out of my pocket. This strategy works with exotic cars as well.When I was a young man one of the dream cars then was a Ferrari Testarossa and its price tag was around $200,000.You can buy one now for right around $50,000 and most don’t have that many miles on them because they are babied by the owners.

• Another way to save a lot of money is to try and keep your term for your loan (assuming you finance through a bank or finance company) for no more than 36 months to build equity in the car faster and save on additional interest. This will be the most difficult suggestion for most people to utilize because of that seemingly large payment if you finance it for 3 years instead of 6 or instead of just leasing the car new for less money per month.  If you finance $25,000 with a bank at 5% interest for 3 years your payment will be $749.27.If you extend that loan out to 6 years your payment drops to $402.62 which seems much more reasonable and affordable.It may be more affordable monthly but will cost you much more in interest and less loan buy down.You could also lease a newer model of the car for even less monthly (read part two of this article to see why you might not want to do that even though on the surface it looks attractive)

If you pay over 6 years you will pay out $28,989 vs. $26,974 for a difference of $2,015 more out of your pocket to own the car.In addition, by financing it for the 6 years your loan pay down is going at a much slower pace than the depreciation on the vehicle creating an “underwater situation” on the car almost from the initial purchase date. (Assuming you buy the car with a small down payment) During the 3 year program you are paying down the car faster than it is depreciating giving you options if you should have to sell the vehicle.If you truly can’t afford that 3 year payment take out the 5 year option and try to send a little extra every month toward the principle to pay it off sooner.

There are several other ways to save loads of money when purchasing an automobile that we will discuss in part two of this article.