Do you think financial advisors like Dave Ramsey..etc give people good or bad car buying advice on car buying? (2010, van)
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A few years back I heard Dave Ramsey say to never buy a brand new car but instead buy something a couple years old for half as much because you still have 75% of it's life left. That makes sense to me, as long as you go with a better make of car. If he's now saying to buy something for $4000 then I would disagree. Even the best makes of car will need work done like flushing fluids (that the previous owner probably put off), exhaust system can rust, etc. You also have to count in PTO lost or even unpaid time off work for a car that always needs work.
As for buying things in cash... that's great if you can. On cars I put over $5k down on something I'm buying for $12k and then my monthly payment is only $150 a month. The big problem is low income people putting zero down and being stuck with a $400 a month payment plus high car insurance.
A car that's a couple years old is NOT half the price of the new car. That's nonsense. Yet I keep seeing people post that. It's like they've never bought a car.
To buy a car that's half the price of a new equivalent, you get a car with maybe half the life left. But that's also the half where you spend more on maintenance because things are breaking.
My Volvo has 70k miles and cost me $8500 which is 1/4 the price it was new. But it's also EQUIVALENT to a $25k Golf Sportwagon or Subaru wagon. A new Volvo costs the $38k but is also a far better car.
It's already costing money just to do standard maintenance jobs. It will probably be $1000/yr which comes out to about $80 per month. That's enough to almost have bought the Golf Sportwagon once you factor in different interest rates.
Last edited by thejackalope; 12-15-2015 at 03:06 PM..
A few years back I heard Dave Ramsey say to never buy a brand new car but instead buy something a couple years old for half as much because you still have 75% of it's life left. That makes sense to me, as long as you go with a better make of car. If he's now saying to buy something for $4000 then I would disagree. Even the best makes of car will need work done like flushing fluids (that the previous owner probably put off), exhaust system can rust, etc. You also have to count in PTO lost or even unpaid time off work for a car that always needs work.
You're crossing wires here. Ramsey's advice, and it's been consistent for many years, is not to buy more car than you can afford. For someone who only has $4000 to spend, then, yes, that's a $4000 car. I've never heard him tell anyone to buy the cheapest car he or she can find without regard to the amount of money they can afford to spend.
But as far as that goes, there's nothing wrong with buying a $4000 car. I've been driving sub-$1000 cars for years and not one of them has spent any more time in the shop than my friends' late-model vehicles with the big payments.
Leasing is still paying for the depreciation and the financing.
You pay cash for something that depreciates because...
It limits you to lower priced options so you spend less
If your financing something its usually for a large amount, in other words you can't afford it but you can afford the payments. Financing such a large amount is financial suicide unless its something that you would reasonably believe will appreciate or generate income. Example...you finance stuff for a business, your education, an investment property....all things you expect will increase your income and/or net worth in the long run.
Depreciation is fairly even across all typical models and brands. Very few cars break this trend.
Yes you will lose the depreciated value of a new car regardless if you finance or pay cash. However paying cash has the benefits I mentioned above.
Agree. Paying cash for an automobile doesn't avoid depreciation, but it does avoid the situation where you still owe money on the car than it's worth - for example, you get your car totaled in a collision, and you still owe the bank or finance company money on a vehicle you no longer possess or use.
The cheap car for cash thing works better for those of us in non-rusting areas, with a decent garage, and some mechanical knowledge and tools. I have several old, fully depreciated cars as daily drivers. Specifically, a 92 Subie Legacy, an 87 Camry, and an 82 Scirocco. If one is in my shop, I drive another. The odds of all 3 cars being unavailable is, I would guess, not worse than the odds that a new Camry would not start.
For people in the opposite condition, living in the Rust Belt and parking on the street - your car will always be a money pit, sorry about that, it sucks to be you.
He shills insurance companies, he should understand risk.
Putting around in a family of five in a 1982 Honda Civic in a day of constant distractions on the road in the name of saving a few bucks isn't sound advice.
My kids are carted around in a very non-sexy 2015 Sienna. Why? Because it is one of the safest cars on the road (lots of safety features, low center of gravity, lots of mass.
The $300 or so a month it costs me (I got it for a song after factoring in the sales price of my 7 year old car) is one less vacation I can go I each year, but it affects little else and keeps my family safe.
That's good that you like your car, but you have misunderstood him. He does not suggest you cart your family around in a 30 year old car. No where has he ever said that. He says a good used car can be found for a reasonable price if you look hard enough. He's right. I have done that for years. This year is only the second time I ever bought a new car.
I don't think he overlooks them, but more ignores those things because one should have enough common sense to know that those things apply.You can really get into the weeds nickel and diming every small cost that pops up. You have to set a goal to work towards. The emergency fund will catch a lot of those unexpected things. When you are drowning in debt, you NEED to work, work, work to get caught back up. Just part of it.
Many females are absolutely clueless on car upkeep and maintenance.
90% of females I know with cars approaching 90 or have 100K miles and I ask them, when is the last time they have changed their transmission fluid, coolant, timing belt (if applicable), serpentine belt, or even got a tune up, ALL say the same exact thing...whats that, I just drive the car and I do my oil changes. So that probably explains why some overheated and destroyed their engine, had transmission failure due to burnt fluid, blown engine on broken timing belts and more.
Ramsey and other financial advisors needs to specifically warm people about expensive upkeep if they are going to buy $2-3000 cars if he is going to give any car advise.
Again, the issue with Dave Ramsey is that he makes sweeping blanket statements that don't apply to everyone, but people interpret it as some sort of gospel that applies to everyone.
I have a few buddies who listen to Dave. I listened to him a few times through free podcasts. It's pretty repetitive. His advice is really geared to people in huge debt.
People with no debt and financial savvy don't gain much from him. His choice is to buy cash. Ok well when you got a few million in the bank buying cash takes on a whole different meaning than to him than the guy making 50k a year.
Most people even when completely "debt free" will never see millions in their account. They will have a better less stressful life which is good.
Leasing is still paying for the depreciation and the financing.
You pay cash for something that depreciates because...
It limits you to lower priced options so you spend less
If your financing something its usually for a large amount, in other words you can't afford it but you can afford the payments. Financing such a large amount is financial suicide unless its something that you would reasonably believe will appreciate or generate income. Example...you finance stuff for a business, your education, an investment property....all things you expect will increase your income and/or net worth in the long run.
Depreciation is fairly even across all typical models and brands. Very few cars break this trend.
Yes you will lose the depreciated value of a new car regardless if you finance or pay cash. However paying cash has the benefits I mentioned above.
Depreciation isn't even close with Japanese cars compared to American.
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