Buying a car, whether it’s a first-time purchase or not, can seem like a daunting task. I’m here today to give you a completely new perspective when it comes to purchasing a vehicle.
First off, always remember this, if you want to be rich you need to be vigilant about two things.
- Live beneath your means
- Never get into debt
If you remain vigilant with these two principles you will be well ahead of the game.
1. Let’s breakdown the most fundamental part of purchasing a car.
The reason you purchase a car is for transportation and suitability for your current situation (kids, dog, equipment, etc). In short you purchase a car to get from point A to point B while transporting materials or family members. That’s it.
Over the years I have developed a simple formula to illustrate how the majority of people vastly over pay for cars. Here it is
Cost of Vehicle
Hours in Vehicle a Week * 260 weeks (which equates to 5 years)
Car Buying Cement Rules
- Always pay cash
- Must be a reliable car (Heat, A/C, etc)
- Used Car
I don’t care how much money you make. Follow these rules!
2. So what am I suppose to drive a Ford PINTO?!?!?
Not at all, here are a couple of results from an Auto Trader search with the following parameters:
- Maximum Price = $7000
- Maximum Mileage = 60,000
2008 Hyundai Accent GS Hatchback — $7000 — 48,921 miles
2008 Toyota Corolla — $6,995 — 7,327 miles
2008 Chevy Impala — $6,900 — 48,000 miles
Purchasing brand new vehicles
2012 Honda Civic — $21,928 — 0 miles
2012 Nissan Maxima — $27,118 — 0 miles
2012 BMW 328i — $36,500 – 0 miles
3. Who makes out the most when you purchase a car?
Remember above all else that a car is a depreciating asset. You will NEVER be able to get the original purchase price back for that vehicle. Everyday you drive that vehicle it decreases in price.
Take a look at the illustration below
Everyone makes money in this deal EXCEPT the buyer.
If you want to become rich, the first step is to NEVER borrow a penny. As soon as you understand interest, you will only want to be a lender. You will never be a borrower. Tell yourself, “I’m not going to borrow a penny.” Once you do that, everything in life becomes a lot more simple. Why would you borrow $20,000 to $30,000 to buy a new car when you can get a car that performs the same function for 20-25% of the price of a new car? It makes no sense!
Stop throwing your money away and start making it work for you!
Here’s to our wealth!