When you buy a new car, you have that great new car smell. Unfortunately, it doesn’t last anywhere near the length of the car payments. Many of you decide within four years to get a new car. This is the current trend among car buyers. A few years back, people kept their cars for seven years. By 2021, it is expected that it might drop to just three years. Guess what, with the price of new cars and their prices increasing every year, many of you will not have paid-off the car before you decide to get a new car. You’ll just roll the outstanding loan amount into the loan for the new car.
Let me tell you that this is ridiculous! You are making a huge mistake. This is financially stupid! You’re going to owe more on the loan than what your new car is worth. Remember, that a new car smell is not worth the cost you’ll incur in interest. Don’t whine and say, “But I need a car.” Yes, you need a car, but not a new one every three or four years. Drive your current car until you can afford to pay cash for another car. If you need to finance a car, don’t finance it for more than three years. If you need to finance it for longer, guess what, you cannot afford this car. Walk out of the dealership.
Save for a car. Buy a used car for which you can pay cash. Continue saving money for another car. Then, trade-in the old car or sell it. Take the money you saved plus the money or trade-in amount from your old car and pay cash for your next car. Sure it’s used, but a new car is a lousy investment. It only loses value. This should open your eyes. You should feel compelled to want to spend the least amount of money possible to buy the car. The best way to spend less is to drive your current car as long as it is safe and reliable.
Another caution is avoid leasing a car. This is even worse than buying a new car. Leasing is fleecing. Be a wise steward.