I just read an article that struck me as important (it highlights many of the economic disadvantages hard-working folks living under the poverty line might face), but the article goes against what Jeremy and Dave Ramsey have counseled. I’d love to know PFC’s thoughts on this idea:
“You gotta be rich to own a cheap car,” source: https://www.thetruthaboutcars.com/2015/02/no-fixed-abode-gotta-rich-cheap-car/
I don’t think that article made a very strong argument. There wasn’t really any data there, and he basically said a $300-$400 car payment is predictable whereas your radiator blowing is not. Sure. But a $400 car payment ($550 is actually national average) adds up to $4,800/year. Fixing a radiator is $500ish. So I would never suggest to someone they should burn that car payment just for the predictability of it. Rather, it’s more wise to pay as little as possible for the car and save the extra in cash… enough to cover the unpredictable maintenance needs as well as saving to upgrade the car. Do that for a few years and you’ll be able to buy nice cars in cash for the rest of your life and build a massive amount of wealth. I’m still on team buy-used-cars-in-cash.
Thank you for the response! I agree. Cash for a reliable older model strikes me as the wiser route. I’m currently trapped in one of those national-average car payments. I was foolish.
Me too, I’ve just got out of ours this month that I had for the wife and kiddies. That car payment will be going straight into the emergency fund and then eventually into the investments. This was the first and last lease deal we’ve been involved in and I couldn’t wait to stop that monthly going out. I feel so free and this will be the first month of not paying it haha.
At least we’ve learnt this lesson now and don’t waste future monies going forward.
Tom
The author makes good arguments. Working two jobs with a wife and two children living in a NYC apartment with a broken down car couldn’t be much fun. Taking the time to drop the transmission pan to maintain the fluid and filter may be too much to do on your back in a gravel parking lot with a car parked closely on both sides. It is so much easier to go to the Ford Store and put $2,000 down on a 2 year old Fusion and make payments.
I had radiator hoses blow off my car a couple times. I learned the hard way that if you maintain your car, those things happen rarely. My Oldsmobile 88 has 252,000 miles. I have a maintenance log that has tons of entries. I also have a spare car to drive when my main car is down for service. I did have my primary and secondary car both break down at the same time once. I blew a brake line dodging a deer in one car, then I blew my tire and busted the wheel in my other car the next day when I hit something on the highway!
All I can say is that saving money isn’t for everyone. I couldn’t count how many times I jacked up mine or a friends car, ripped the pads and rotors off and replaced them.
This is a good point.
More and more I’m leaning toward selling my Jeep and finding a gently used, older, well-maintained compact car. My first car was a Toyota that my parents bought from an older woman who had kept it very well-maintained. She was surrendering her license and going to a nursing home. But I wrecked that car and I was making just enough money to be dangerous, so I bought a new Jeep Wrangler Rubicon and have been making $500/mo. payments on it since 2014. It was one of the most foolish things I’ve ever done but I guess I’ve learned my lesson. It has had just as many, if not more problems than any traditionally reliable Japanese used car (Toyota, Honda, Nissan, Subaru). My next one will be a Corolla and I’ll pay cash for it.
Not as dumb as me… I leased a 2013 Lexus GS 350 F-Sport for $698/month for 36 months. I now own a 2016 Toyota Prius (my ave. mpg is 50.4). They say leasing is bad but I got a great deal from Toyota as I was about to lease a Lexus Hybrid for $299/month.
My Prius was $251/month (1st month free, no down payment). After 36 months, I bought it out for $15k. I love Toyota’s, barely any maintenance for now. Maybe a new Hybrid battery later on.