Financing a depreciating asset is poor stewardship at best or worse, a very poor investment, especially a vehicle of any kind be it a car, boat or RV. My father-in-law who sold cars for 42 years and averaged a car a day, new and used, taught me how to buy and sell cars.
Starting out in life you may have to finance your first 2-3 cars so you can get to work. After that, you should be paying cash. We haven’t financed a car in 30-35 years. Here was his wisdom:
• Never buy new. Buy something 2-3 years old with low miles and some warranty left.
• Drive it for at least 150-200K miles.
• Do the necessary repairs until you pay it off.
• Drive it at least 2-3 years after it’s paid off and put money equal to the payment in a “don’t touch” savings account.
• When it’s time to purchase a new car sell your present car yourself. Never trade it in. Take the proceeds from the sale and the cash you’ve saved and search for a new one.
• Once you’ve settled on “new” car, offer the seller 20% below the lowest book wholesale price. Whoever puts the first price on the table starts the negotiation. Decide before hand, pay no more than 10% above the highest book wholesale. Walk away and keep looking. Never fall in love with a hunk of metal and plastic.
* Once you do this 2-3 times you should be able to pay cash the rest of your life.
David Robinson is a Board Member of Wealth Codes Coach and an expert in Leadership & Business Consulting. He specializes in For Profit & Non Profit Business Consulting to help other achieve leadership and financial success. He holds a PhD from Logos University.