FAQs
Self-made millionaire and author David Bach once said that buying a new car is “the single worst financial decision”—and the habits of several billionaires show they agree.
Is buying a new car the single worst financial decision? ›
“Nothing you will do in your lifetime, realistically, will waste more money than buying a new car,” said self-made millionaire and bestselling author David Bach to CNBC Make It. “It's the single worst financial decision millennials will ever make.”
What does Dave Ramsey say about buying new car? ›
"Cars drop in value like a bag of rocks, losing 60% of their value in the first five years! This isn't a smart investment. You really should only consider buying new if you have plenty of money to burn." With this in mind, Ramsey urges potential car buyers to understand what dollar amount they are capable of spending.
Why buying a new car is a waste of money? ›
The depreciation and costs of buying a new car
That means if you spent $50,000 on a new vehicle today, by next year it would be worth about $35,000. And the depreciation never ends. After the first year, your car will lose about 15-18% of its value annually, for a total depreciation of about 60% after five years.
Why is buying a new car a money mistake? ›
"If you buy a brand-new $28,000 car, it's going to be worth $8,400 in four years," he says. He's not wrong -- it's rough out there. "That means you're losing $408 every month in depreciation."
Is buying a new car a financial triple threat? ›
Should You Buy a Brand New Car?
- Buying a new car can be expensive, and may not be the best option for everybody. ...
- Brand new cars are a “financial triple-threat” because (1) You borrow money at interest to buy an asset that you (2) have to pay to maintain while it (3) drastically depreciates in value.
Do millionaires buy used cars? ›
But this is not quite the same as saying the majority are driving around in used (as in pre-owned) vehicles. The book reports that “nearly 37 percent” of millionaires bought their cars used.
What does Suze Orman say about buying a car? ›
According to Carfax, cars lose 20% of their value in the first year of ownership and retain just 40% of their original value after five years. “Your goal should be to buy the least expensive car. Period,” said Orman. “That should steer you to a used car rather than a new car.”
How much does Dave Ramsey say you should pay for a car? ›
According to a Ramsey Solutions article, if you wonder what type of car you can afford, the answer is simple: “The car you can afford is the car you can pay for in cash.” “And as a general rule, the total value of all your vehicles combined shouldn't be more than half your annual income,” according to the article.
Do most millionaires buy new cars? ›
Stanley and William D. Danko, “nearly 37 percent” of millionaires bought used cars. The book also noted that only 23.5 percent of millionaires drive the current year's model. A survey done by the book's authors found that only 11.3 percent [about 1 in 9] leased their most recently acquired vehicle.
What can I do about car buyer's remorse? Car buyer's remorse entails feeling anxious, uncomfortable, or regretful about a new vehicle purchase, and it's common. The federal Cooling-Off Rule doesn't apply to most motor vehicle sales, and very few dealerships offer return policies.
Do millionaires buy or lease cars? ›
But what about the acquisition methods employed by America's millionaires? According to my national survey database of millionaires, overall only 11.3% [about 1 in 9] leased their most recently acquired vehicle. Also, only 13.8% of millionaires indicated that they leased a Mercedes-Benz [Toyota 8.0%].
How new cars keep you poor? ›
Depreciation. Any new car loses a significant amount of value the moment it's driven off the lot. According to Edmunds, creator of the Edmunds Trade-In Value tool, new cars generally lose 23.5% of their manufacturer's suggested retail price (MSRP) in the first year. In five years, they may lose around 60% of their MSRP ...
Is it financially better to buy a new or used car? ›
If you're planning to finance your car, you'll be more likely to get a lower interest rate on a new car than a used one. New cars have a higher resale value and are less likely to have mechanical issues. That means the lender is less likely to lose their investment if you can't make your payments.
What is one big mistake most people make when buying a new or used car at a dealership? ›
“The biggest mistake people make is if they go in and say 'I can afford $600 a month. '” Rather than laying out how much money you're open to spending on your car payment, you should instead determine what the dealership is willing to sell you the car for. “That's the first thing,” he said.
What are two disadvantages with buying a new car? ›
Buying a new car comes with many disadvantages that might not weigh in favor of your bank account. From depreciation and insurance costs to taxes and fees, it's clear that buying a new car is not always the best move. Used cars save you money and are often reliable and can give you many years of service.
Is it easier to finance a new or old car? ›
It's usually easier to secure a loan for a new car than a used car because lenders can more easily determine the value of a new car. Lenders are also more likely to assume a new car is in good condition when you drive it off the lot.
Is financing a car a good financial decision? ›
Key takeaways
An auto loan can benefit you because it spreads out the expense of the car, leads to ownership and can help you improve your credit score. Some drawbacks to watch out for include being stuck with the same car for longer, possibly expensive monthly payments and the risk of damaging your finances.
What is a drawback of buying a new car? ›
New cars depreciate the fastest in the first few years, especially in the first year. This means that a new car will lose a significant portion of its value quickly, which can be a disadvantage if you plan to sell or trade in the car within a few years of buying it.
Why should you not finance a car for more than 4 years? ›
Lenders usually charge higher interest rates for long-term auto loans. Because there's more time for a borrower to default on the loan, lenders consider longer-term loans to be a higher risk. To compensate for that risk, they often charge a higher interest rate when you stretch out the loan term.