May 1996

Save Thousands
Buying Slightly Used

© Talbot Stevens

Most people know they can't depend on their employer or the government for their financial security. They know they need to maximize their RRSPs every year and map out a plan to ensure a secure retirement ... but they simply don't have any money left over to invest.

The truth is that, whether we make $10,000 a year or $100,000, everyone with an income can free up money to invest. We just don't realize it.

One obvious consumer strategy is to buy ‘slightly' used instead of new. This is one of many simple ways to free up money without any noticeable sacrifice.

The strategy can apply to anything, but makes the biggest difference for larger purchases like furniture, appliances, and cars.

According to the Canadian Automobile Association, the average cost of running a vehicle is between $7,000 and $8,000 per year. The easiest way to save thousands of dollars in this area is to simply buy a one or two year old car, instead of a new one.

Everyone knows that cars depreciate about 25% to 30% a year, yet the difference in appearance between a new car and one that is a year old is almost undetectable, except for one thing . . . how much you pay for it.

Generally, you'll find the best deal from private sales, those advertised in the Auto Trader or the classifieds, and since you won't get a warranty, it's a good idea to have a mechanic check it out thoroughly before negotiating your best price.

For those concerned about inheriting a ‘lemon', realize that by buying a one or two year old vehicle, you still have the original manufacturer's warranty to protect you.

Another more convenient option than buying privately is to buy a demonstration vehicle from a dealer. In this case, you will get a warranty and should still save 10% to 20% off the price of a new one.

If, instead of buying a new $20,000 car, you bought one that was one or two years old, you would save approximately $8,700.

Savings on $20,000 Car
Depreciation (30%) $6,000
Interest (10%, 5 yr) $1,600
GST/PST (15%) $900
Insurance (per yr) ~$200
Total Savings $8,700

Over time, the savings are even greater. By acting on this one simple strategy once, a 35 year old who invests the $8,700 at 10% would have an extra $150,000 at retirement.

Everyone can free up money to invest. We're just giving it away to people we don't even know, instead of investing it for our own future.

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