Final answer:
It is true that saving the equivalent of a car payment each month can enable a person to buy a car with cash, thereby saving on interest payments and potentially getting the car for a cheaper overall price. This method requires discipline and patience but offers long-term financial benefits.
Step-by-step explanation:
The statement suggests that if individuals saved the equivalent of a car payment each month instead of spending it on payments and interest, they could purchase a car with cash and potentially pay less. This is true. By avoiding interest on a car loan, you essentially save the money that would have been paid in interest over the term of the loan. For instance, if a typical car payment is $300 per month, saving this amount over two years would result in $7,200, which could be used to buy a reliable used car outright. Additionally, saving for a car allows you flexibility in choosing when to buy and increases negotiation power, as cash buyers often have leverage for discounts.
It's important to note that budgeting and saving requires discipline and patience. Making decisions such as avoiding or minimizing loans can contribute to long-term financial health. The trade-off of not having instant gratification of a new car might be overshadowed by the benefits of being debt-free and accruing savings, which can grow over time if invested wisely.