The best strategy for a car buying fund? (bonds, cash, investment)

[kanhawk]

I bought my last car for cash 2 years ago and am now saving to buy another new car in 5 to 6 years. Last time, I bought savings bonds and cashed them in at the time of purchase, but I was dissatisfied with that strategy because of all the taxes I had to pay when I cashed in the bonds which really cut into the interest I earned over the years.
I am trying to put away about $200 a month toward the next car but I would like advice on a good investment strategy for the medium term that will limit my tax bill when I purchase the car.
Any ideas?

[Listener2307]

Originally Posted by kanhawk

I bought my last car for cash 2 years ago and am now saving to buy another new car in 5 to 6 years. Last time, I bought savings bonds and cashed them in at the time of purchase, but I was dissatisfied with that strategy because of all the taxes I had to pay when I cashed in the bonds which really cut into the interest I earned over the years.
I am trying to put away about $200 a month toward the next car but I would like advice on a good investment strategy for the medium term that will limit my tax bill when I purchase the car.
Any ideas?

You have taxation rigor mortis. You are focused on the taxes paid instead of money made.

No. I do not know of a good way to make money without paying taxes on it.

[jlawrence01]

Originally Posted by kanhawk

I bought my last car for cash 2 years ago and am now saving to buy another new car in 5 to 6 years. Last time, I bought savings bonds and cashed them in at the time of purchase, but I was dissatisfied with that strategy because of all the taxes I had to pay when I cashed in the bonds which really cut into the interest I earned over the years.
I am trying to put away about $200 a month toward the next car but I would like advice on a good investment strategy for the medium term that will limit my tax bill when I purchase the car.
Any ideas?

If you keep the car for 15 years, you will not need to cash in the bonds AND you will avoid the sales tax on the new car.

I agree with the prior poster. Most of my friends who have "car buying" funds are investing in balanced or growth and income funds.