SAVING FOR A CAR REPLIES
Reply to Tyler
I support your idea of how you would use $10,000 to purchase a used car. Your compound interest calculations are also correct. Another way you can save for the used car is by choosing a simple interest option instead of compound interest. Several banks such options and the amount after two years would have been lower compared to that of compound interest. Assuming the interest rate is similar to that of the Chase bank you chose, 0.02%. The future amount would be A= P (1+rt), that is, 10000(1+0.02%*2) = 10,004. The total amount after two years would be $10,004, which is lower compared to all the CD compound interests you have calculated above. Therefore, in case you have to choose in the future, always look for banks that offer simple interests and low-interest rates to save as much as you can. If you want to buy a new car in the future, you can sell the old car, top-up a few dollars and purchase a new one.
Reply to Joshua
I agree with your computations on the different types of compound interest. In case you want to buy a new car, you have the option of selling the old one, top-up some dollars and purchase a new one. Always buy a vehicle that you can afford. Aim of saving 20% for a new car and 10% for a used car. You must always plan your budgets well, and review several available loan options, calculate the costs and opt for the best choice. Cut on your spending to save more for your car, and use automated savings. Saving is essential because it reduces the amount of loan you have to borrow. If you have the option of using simple interest loans instead of compound interest, then always choose a simple interest. In addition, you need to review several bank options and chose the best option that fits you.