Tag: Dave Ramsey quotes

Buying a car can be a stressful process with so much to think about.  Are you getting the best deal?  How much car can I afford?  Does it come with a rear view camera?  For the first time ever, I am looking to buy a car from a dealership and I am not in a position to buy the car outright.  I have never had a car note before and the idea of an additional monthly expense gives me anxiety.    So how does one make such a large purchase with confidence?  The answer is going into it well informed so that you don’t get hustled by the vision of you riding off into the sunset with sexy new wheels or hustled by a salesperson trying to make their quota.  Over the next few weeks, I will break down everything need to consider before buying a car.  Today, we will focus on two of my favorite starting points- New vs. Used and Down Payments.  So buckle up and join me on this car-buying excursion.

The New New

There is this character in the 2006 movie ATL whose nickname was “New New”.  New New got her name because she was known to have the latest and greatest of everything.  If she were looking for a car in the year 2017, she would be considering a 2018 because the 17 model just wasn’t new enough for her.  Even though New New is a character in a movie, many people out there share the same mindset.  The thing is she places her money in items that depreciate in value at an accelerated rate.  In fact, just by driving your new car for the first time as a new owner decreases its value by 11%.  The $30,000 car you just drove off the lot is now worth $26,700 by the time you get to the highway.  Instead, consider a used car that is between two and three years old.  They are often still under warranty, they offer many of the same features, and comes with a lower price point.

Cash Is Queen

I understand that most people cannot afford to pay cash for a car.  I did it by dealing directly with private sellers on Craigslist, buying older models, and going into the process with a set amount to spend.  It worked for me and I did it at a time when the cars on Craigslist were good deals for both buyers and private sellers.  I am a regular person who found a way to make the money work for me.  Financial guru, Dave Ramsey, reflects on people who give him push back that regular people cannot afford to pay cash for a car in his book Complete Guide to Money (a must read, click the here for a FREE download with the app).  According to Ramsey, “people don’t buy with cash because they are rich; they’re rich because they buy cars with cash”.  I must agree with his statement.  I am in a better financial position today because I decided I couldn’t afford to have a monthly car note.

Assuming you can’t buy the entire car with cash, consider how much you can pay for up front to keep the overall price of the car as low as possible.  Whenever you finance a car, you are paying interest on that auto loan.  Instead of financing the entire amount, you should aim to have 20% or more as a down payment to avoid wasting thousands of your hard-earned money on interest.  Additionally, taxes and extra fees should not be considered when calculating your 20% down payment because you should NEVER finance taxes and fees.  Before you even set foot in a car dealership you need to ask yourself, can you actually afford the car you have been researching?  Rich people ask “how much?”  Broke people ask “how much down and how much per month?”  A salesperson will tell you the lowest down payment to get you to sign on the dotted line but going into negotiations well equipped with the knowledge of best down payment to make, you know you can do better…and if you can’t, that means you cannot afford that car. Ramsey explains, “When a rich person says she can afford it, she means she can actually afford the car.  When a broke person says she can afford it, she means she can probably make the monthly payments as long as there are no emergencies and she doesn’t lose her job”.    Think about it, could you afford your monthly car payment if you were out of work for a month?  How about 3 months?  These are all things to think about before you buy a car.  Stay tuned next week for Part II as we discuss  Every Thing You Need to Know About Leasing and Financing a Car!