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Wednesday, November 5, 2014

117. Do you believe that car payments are a way of life?



Do you believe that car payments are a way of life?

We have been free of car payments since 2011. We bought a 2003 Toyota Sienna last year (2013). Paid $8k for it cash. We were very happy to let someone else pay for the depreciation on our family van. We hope it last till 200k to 250k miles! Still, we are saving a little each month towards the purchase of a new vehicle.

Here's what Dave says about car payments... in Total Money Makeover chapter 3:

“Myth: Car payments are a way of life; you’ll always have one.

Truth: Staying away from car payments by driving reliable used cars is what the average millionaire does; that is how he or she became a millionaire.

Taking on a car payment is one of the dumbest things people do to destroy their chances of building wealth. The car payment is most folks’ largest payment except for their home mortgage, so it steals more money from the {family} income than virtually anything else.

A new $28,000 car will lose about $17,000 of value in the first 4 years you own it. That is almost $100 per week in lost value. To understand what I'm talking about open your window on your way to work once a week and throw out a $100 bill. The average millionaire drives a 2 year old car with no payments. He or she simply bought it.”


From my book review of The Millionaire Next Door:

3. They believe that financial independence is more important that displaying high social status. The authors point out on multiple occasions that millionaires don’t have fancy cars. Millionaires drive the same vehicle for years.

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“There is an inverse relationship between the time spent purchasing luxury items such as cars and clothes and the time spent planning one’s financial future”

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Of interest…

*Over 80% of millionaires purchase their vehicle while the rest lease.

*Only 23.5% of millionaires interviewed own a brand new car.
*A typical millionaire only spends on average $24,800 for his or her most recent car purchase. *About half of the millionaires surveyed never spent more than $29,00 for a single vehicle. 

*Most American millionaires like to buy American-made vehicles such as Fords, Chryslers, Chevrolets, and Cadillac’s.



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