How A Lot Does That New Mustang Really Value At 5 Years And Retirement

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A 28 12 months old engineer walked into my workplace the opposite day with a query about his personal funds. Joe (not his real title) was the owner of a 2002 Mustang GT which he had finally paid off after five long years of payments. I had helped Joe along with his taxes a number of weeks in the past. I had saved him a couple of bucks and extra importantly gained his trust. He actually needed to trade in his Mustang on a new one, however wished my monetary opinion on the matter first. My intestine reaction was that it was a lot more expensive to drive a new car than a used car. Being an engineer Joe didn't need a "intestine" reactions as an alternative he wanted information. I decided that it could be a fun train to run the numbers and discover the true price of the car both for the time period of the loan and the long run effect at retirement. We began by defining some variables. The commerce in worth of the existing 2002 GT Mustang is $7,300 based on Kelley Blue Guide. The younger man has respectable credit and was able to obtain a 9.5% finance rate on the potential new car purchase. Joe had the selection of buying the new car and trading in his old one or protecting the previous car and investing the associated fee difference. He figures that it will price an additional $eighty a month to pay to put aside for the increased restore cost of the used vs. One last variable is the complete protection insurance which can be $290 for full coverage as in comparison with $ninety a month for legal responsibility solely. The worth of the $623.37 difference invested in the Fidelity Mutual fund with a fee of return of 12.64% after five years might be $51,778.72. Now at car for life would have a ten year previous Mustang price $4,900 and mutual fund worth $51,778.Seventy two for a net value of $56,678.Seventy two whereas if he would have bought the new car it could be worth around $8,000 with no mutual fund. 2002 car worth 56,678.Seventy two or just a 2007 car worth $8,000. I requested him if it was worth $48,678.72 dollars in 5 years to personal a brand new Mustang reasonably than driving his previous one. The answer was apparent he would keep the his Mustang. 51,778.72 within the mutual fund and did not add one other dime between 33 and retirement age of sixty five he would have $2,885,514 more than sufficient to retire on. When I think of these numbers the new car smell does not smell as sweet.