I read this book along time ago, I cannot rememeber the name but It was written by Benjamin Franklin. IN the book he spoke about, how sometimes you buy things that end up costing you a lot more money than the inicial purchase price. When I heard that, it clicked for me.

Here a quick example, lets you say you want to buy an iphone, and it cost about $1000 brand new, Is that the only cost. The answer is no. You have the cell phone service, Icloud, apple music and a bunch of subcriptions; Before you know it, that one ppurchase cost you the same $1000 every year. And lets not even mention the time we spend on phones.

But for this video, we are talking about cars, so lets stick to the subject at hand. How does having a car make you broke.

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First of All we have to elimate the idea that cars are investments

They are not investments and we know they go down in value

But everything you buy, doesn’t have to be an investments

And buying a new car is not an investment either

What you have to do is, to try to get the best buy you can



Here is the problem and this might be you:

A lot of folks buy a car and they finance it for about 5 years or so

After 5 years they own the car

Some folks trade it in, sell it temselves and some folks keep it





This look normal and it is normal ( but normal sucks ) and here whats hiding between this one decision

First Problem

If you have to finance a car, then you cant afford it

Its not affording payments, its about affording the item you are buying

And if your response, I have the cash I just don’t want to spend it all in one place, that doesn’t mean you can afford it

It means look in to another car that you can buy and still keep money in your wallet

I can afford a Corolla for 10k but I cant afford to buy a fancy Mercedes for 80k



Second problem

Terrible buy, when you buy new, as the first buyer you take on all the risk and reality of deprecation

After your 5 years loan you have about half the car value

But whne you buy a used car, lets say 35 years old, the bulk of the losses have already bbeen taking, so the depression slows down

You still lose money but not at the same rate and you also buy for a discount



Third problem

You missed a massive opportunity to invest.

5 years ppaying nearly 500 dollars is a lot of money

If you had invested that at 10%, you would have nearly 40k



Forth problem

Lack of peace of mind having to worry about a car payment every month

I’ve bought in the past where the first few weeks are great but then it’s a headache because of those payments

The payments make it so you cant really enjoy it



Does that mean its never a Good idea to buy a new car ( how to buy a car the right way )

Simple rule is don’t spent more than half your annual income on a car or 10% of your networth

Pay in cash

That’s it



Now does that mean you should never buy new

The asnwer is no, you can buy new

Just make sure you can afford it

and by afford it, I mean you can afford to see the value go down by half and not be so worried about it

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