u/NeonZapdos

Mortgage rates rose almost a full point in the past 12 months (6.34% -> 7.28%) while asking home prices have decreased by $5,750. I wanted to see what that rate jump really costs for the average home price for each time period.

This year's price discount was completely wiped out by about $205/month in extra payment cost. Over 30 years, that extra payment, plus what it would have earned invested at an 8% average rate of return, costs $280K.

• Last year's deal: about $2,021 of the first $2,378 payment is interest.
• Today's deal: about $2,289 of the first $2,582 payment is interest.

Savings aren't fixed: the scenario invests whatever's left after taxes, living costs and the mortgage, about $5,500–$7,000 a year at 6.34% vs $3,100–$4,600 at 7.28%, so the higher rate cuts what they can save by about 40%.

Sources: FRED and Freddie Mac (prices, rates), Census (income)

Tool: A Million of Me financial simulator (self-made). Happy to adjust assumptions if anyone wants different rates, down payments, or investment returns! Not financial advice.

I wanted to see what the classic advice, "buy a 3-year-old car with cash," is really worth over a lifetime. So I ran four versions of the same life through a year-by-year simulator.

- Age 22 to 62, earning $62,000/yr (about the US median for full-time workers), with no raises beyond inflation
- $1,500/mo rent plus about $2,350/mo of everyday spending. That leaves roughly 8% of take-home pay to invest, before any car costs.
- No debt. Starts with $26,200 cash (the price of one new car). Everything left over is invested at 6.5%/yr.
- All amounts in today's dollars

The car: the average of the five best-selling sedans in the U.S. (Camry, Civic, Corolla, Accord, Elantra)

- New: $26,200 (2026 average price paid, base trims)
- 3 years old: $20,700 (about 79% of new)
- Trade-ins at 15% under resale value: $14,900 for a 5-year-old car bought new, $12,000 for an 8-year-old car bought used
- Repairs: two $1,000 repairs per new car, three per used car
- Every version replaces its car every 5 years (8 cars total) and still owns one at 62

Financed versions: 3-year loans at prime-credit rates (6.15% new, 7.4% used). The first car is financed with $0 down. After that, the trade-in is the only down payment.

Takeaways

- Used beat new either way. Paying cash for used ended about $100k ahead of paying cash for new.
- Cash beat financing for both new and used. Even so, financing a used car still beat paying cash for a new one.
- The interest itself was small: about $10k over 40 years for each financed path. The real cost is what that money would have grown to, which turns about $10k of interest into a gap of about $40k.

Caveats: Insurance and gas are the same in every version. Toyotas and Hondas hold their value unusually well, which shrinks the used-car discount. Real dealer promo rates (0.9–3.9%) would make new-car financing look better. Interest rates vary person to person. Prices are base trims, and most people buy a trim or two up. Inflation and wage growth are assumed equal.

The tool: I ran this in A Million of Me, a free financial simulator that runs in your browser. You set up a starting point, add life events (here, car purchases and repairs), and compare branches side by side. Disclosure: I built it. It's a simulator, not financial advice.

Sources: car prices from TrueCar; depreciation from CarEdge and iSeeCars; loan rates from Experian and Bankrate.