Why use your credit to buy a vehicle?
In the past 100 years Americans have purchased vehicles for their personal use in bigger and bigger
percentages each year. Everyone in America with a drivers license (and many without one) want their
own vehicle to drive. Personal transportation is probably more a important purchase than a home to most
people. However, even though the average cost of vehicles has steadily increased over the years, demand
has also increased so that the cost has actually forced most people to finance their vehicles because they
can not afford to pay cash. As demand for vehicle financing increased, so did the the available payback
term. Today well qualified (good credit) buyers can finance most new or late model vehicles for up to 84
months. In the end however, it is not just extended terms or lack of cash that is the most important reason to use credit to purchase a vehicle. The best reason to use credit to purchase a vehicle is actually a basic economic principle. Never use cash to purchase a depreciating asset.
An asset as defined in traditional financial accounting is any item you ‘own’ that has monetary value (it can be sold for cold hard cash). (ALL) vehicles are depreciating assets, there are (NO) exceptions. No matter what you pay for a vehicle today it will probably be worth less tomorrow and certainly worth way less next year. By any meaning of the term “asset” a motorized vehicle is not a good one. In simple economic terms why in the world of sanity and logic would anyone pay hard cash for an asset guaranteed to be worth less no matter what, every day it is owned. This simple principle of economic reality is the basis of the most important reason to use credit (Other Peoples Money-OPM) to purchase a vehicle.