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Other than your home, your car may be the biggest "investment" you make. How and why you buy your car and how you pay for it may be one of the biggest prosperity opportunities you have. This is extremly important information for your financial future. Many people could significantally increase the quality of their retirement by wisely purchasing their car.
| Invest in assets first then buy your new car. | Let's be clear about one thing a car is not an appreciating asset. To have abundance you must contol your expenses and build your assets. In the book Rich Dad, Poor Dad Robert Kiyosaki makes exactly that point. He talks about how he bought his new car only after he had accumulated enough assets that the profits from those assets paid for his car. |
The Prosperity Consultant suggests that you read chapter 4 in the book The Millionaire Next Door. It is titled "You Aren't What You Drive" and it makes clear that most American millionaires do not drive new cars. Why? Becuase they know that a new car significantly depreciates in value immediatedly after purchashing it. They know that paying a high price for something that immediately loses value is not a smart financial move. They know that new cars lose up to 50% of their value in the first three years and they cost more to insure. In addition they know that if they have to finance the car they will incure additional financial losses.
| Most American millionaires do not drive new cars. | The key is here is not to look and see if you can afford the monthly payment. Do the math and figure out what the entire purchase price of a new car is once all the payments are made. Look at what the true cost of the car is and what the value of the car is if you try to sell it next week. When you do you will see a dramatic difference between what you pay and what you get in return. |
By driving a car that you can afford to purchase outright you put yourself in a strong financial position. First of all you could save and invest all the money you would be paying on your monthly payments. You could also save any extra insurance costs that are requied by the lender over and above what your needs are. If your ego is telling you that you must have have a new car the ask yourself if you're retirement account is fully funded. By this I do not mean did you put $2,000 in your IRA this year. I mean will the money you currently have support you the rest of your life. If not tell your ego to be quiet and listen to your common sense. Drive a car that is with you current means without pledging future income.
If you can comfortably purchase a new car and want to do so that's great. By all means do so and enjoy it. Just be sure and look at all the figures before you make your decision.
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