The Smart Savings Strategy That Should Be Hurting Ford and GM, but Isn't


In a world where stars spend millions to keep up appearances, actress Teri Hatcher has said she'd rather drive her car for 10 years than spend on a fancy new sedan. A smart savings strategy, to be sure, and one more Americans are adopting.

938,000 miles! Source: Motor Trend Magazine.

According to Polk Research, the average age of vehicles driving on U.S roads is 11.4 years. I've been driving a Mercury Mountaineer for 13 years. Holding on like this eliminates costly interest payments while creating opportunities for repair shops.

And what of Ford Motor and General Motors ? Have they been hurt by the trend? Not according to the latest data. U.S. automakers reported a 12% increase in sales in August, with both Ford and GM eclipsing the average.

You would think that would have more Americans taking on debt. And we are, sort of: New auto financings are up 10.9%, according to data compiled by Equifax. The good news? Credit card delinquencies are down 11% and home loan write-offs declined 22% over the past year. As a nation, we're becoming more financially secure.

Perhaps that's why more of us are "trading up" to new vehicles after cutting back in the wake of the 2008 financial crisis? All we know for sure is that Hatcher is right. The best savings strategy is to not spend. Drive your vehicle for the full length of its useful life, and then sock away the cash you'd spend on payments for something fun.

Or maybe you'd rather invest the proceeds? Ford is one of three stocks our analysts see as excellent plays for a global economic recovery. Click here now for access to a free report that reveals the other two names they'd invest in, and why.

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Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He didn't own shares in any of the stocks mentioned in this article at the time of publication. Check out Tim's Web home and portfolio holdings, or connect with him on Google+, Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.The Motley Fool recommends Ford and General Motors and owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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