22 Mar Myths vs. Truths – The Truth About Car Payments
– Exposing the false beliefs of the financial world
Myth: Car payments are just a way of life. You’ll always have a car payment.
Truth: Car payments are NOT a way of life. In fact, they’re a really, really bad idea.
The truth is car payments are not a fact of life. The average millionaire drives a used, paid for vehicle.? Don’t think they bought it new or paid cash for it because they have millions of dollars. They have millions of dollars because they pay cash for cars and avoid payments like the plague.
Why? I’ll say it again. Because car payments are a bad idea. Loans in general are not smart, but they’re an especially bad idea on something that drops in value so quickly. A new car loses 50% of its value in the first four years. So we rationalize our bad ideas with statements like, I bought a good vehicle that holds its value, or, I need a dependable car so I have to have a new one. Even if a car doesn’t depreciate as fast as other cars, it is still depreciating and losing value!
So, buying a brand new car doesn’t make a lot of sense, and it makes even less sense to make payments on a new car that’s dropping in value like a rock. If you need a dependable car you can easily find one that’s only few years old. A three- to four-year old car has already taken the big hit on depreciation and is still pretty reliable. Paying cash for a slightly used vehicle makes so much more sense. It’s not a status symbol.? It’s a transportation tool.
Remember our millionaire friend who drives a paid for car? They figured this out early in life, and didn’t worry about keeping up with the neighbors. In fact, the average millionaire lives next door to you and you don’t even know it! They’re likely the neighbor that everyone else laughs at because they aren’t driving the newest car or borrowing money to impress everyone else. If you want to be a millionaire, do what real millionaires do – pay cash for your cars and only buy used.Matt Wegner is a personal finance, small business and leadership coach focused on teaching his clients the tools for L.I.F.E. (Living In Financial Excellence). Learn how to avoid car payments by requesting a free planning session today or visit financialexcellence.net.