No one was a bigger idiot when it came to car ownership than I was a few years ago.
Until I was 35 years old, I never had a car payment. Pretty cool, right? But I bought my first car 5 years ago and things went south really fast.
Here are the cars I have owned in the last 5 years:
- Honda Fit – My first new car. Financed at 6% with a total cost of $17k. I owned it along with a Honda Accord (totally paid for) with 130,000 miles on it. The Fit payment was app. $200/month.
- Audi A4 – I was commuting to work 50 miles each way and the Fit was killing my back. So I traded it in after 1 year of ownership (losing tons of equity on top of a crap load of depreciation) and bought the used A4 for $22k. The Audi payment was app. $400/month.
- Honda CRV – I took on a CRV Lease at $250/month. Still driving the Accord with 150k miles at this point.
- Porsche Cayman S – This is where I lost my mind. I traded the Audi A4 for it when the economy tanked. I got the Porsche for $30k with 7,000 miles on it. I loved the car dearly, but I have a wife and 2 kids…the car was a two seater. By the way, I lost $6k on the Audi and now had three cars. The Porsche payment was $700/month.
- Audi Q7 – One year later I traded in the Porsche for the Q7. Sure, I got over the bug of having an incredible sports car, but I bought a luxury wagon instead. Payment = $800/month. Add the CRV lease and I was paying $1k/month in car payments. Can you say “freaking lunatic”?
- Honda Odyssey and Honda Accord – I came to my senses (actually I freaked out and wasn’t sleeping because I was broke) and sold the Q7 (at a $5k loss) and traded in the CRV (with a penalty of $2k) for these two Hondas. The Odyssey is totally paid off and I have $5k left on the Accord. I have been paying $1k/month on the Accord, so after it is paid off in 5 months I will continue to put the payments in a savings account. The Hondas should last me another two years (only 50k miles on each) at least. By that time I will have banked $24k and will buy another couple of used beaters for way less than that.
7 cars in 5 years. Isn’t that insane??
Between payments and lost equity I imagine that I lost upwards of $50,000 on automobiles. Dave Ramsey calls this “stupid tax”. I call it:
- My kids’ college tuition
- $300k-$500k in retirement savings if I continued my stupid ways
- Paying off my mortgage 10 years early
- Financial Independence in general
As soon as my Accord is paid off, I vow to never have a car payment again. Cars are wealth killers; there are no two ways about it. Sure, my scenario is extreme…but even if you have a car payment between $300-$500, you are throwing away your money on a material item to keep up with the Joneses.
Learn from my mistakes. Don’t buy a car that you don’t need with money that you don’t have to impress people you don’t even like.
Instead, buy a used car for cash only and put your “car payment” into a savings account for later. Do that for a while and you can even buy the Porsche for cash. Funny enough, by the time you save $30k in a bank account I guarantee you won’t want to blow it on a car!
Feel free to share some creative car buying stories in the comments below!
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