Are $5000 Cars As Good As New Cars? NO, Some Are Better!
Ok, I know cars are hot button issues and I’m coming at you with the very best of intentions. Listen, I’m a car guy myself and have always been! Here is my main point. New cars can create a terrible cycle of debt entrapment that robs you of your wealth over the course of a lifetime. There are better options. Options that leave you with something COOL to drive AND money in your pocket!
Corvettes I’ve had, from left to right: 1998, 1985, 1976
I recorded this podcast last fall as schools were starting back. I wanted to help some new teachers avoid that new car cycle as they started with their first jobs out of college. If you never get caught up in the new car hamster wheel, then you will be SO much better off financially in the long run.
Get Your FREE Car Guide
As a lifetime car enthusiast, I’ve had dozens of cars and trucks, both new (sad but true) and used. To help you get started I’ve put together a 3 page guide to buying some of the very best $5000 cars available. The FREE 2018 Used Car Guide will point you in right direction whether your looking for a car, truck or even family van!
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Message for New Teachers
On this episode of the TEAMM podcast, I talk about new teachers and new cars. In short, don’t do it, just don’t do it. Ten years from now you will thank me if you do not purchase that new car and get in that new car cycle that so many new teachers get into with that first teaching job. The first thing you will say is “Why not a new car? Don’t I deserve a new car?” I’ll discuss that question and give you some alternatives plus give you a FREE used car guide that you can download “here”.
Most Americans can’t afford a new car, study finds
Cars (dot) com
Most Americans Can’t Afford Average New Car
Money (dot) CNN (dot) com
Americans are going deeper into debt to buy cars
Good day fellow teachers and welcome to the team, teaching educators about Money podcast. Today I want to talk about new teachers and new cars. In short don’t do it, just don’t do it guys. Ten years from now you will thank me. If you do not purchase that new car and get in that new car cycle that so many new teachers and so many people in general get into. First thing you say is Why not a new car? Don’t I deserve a new car? What you deserve to be guys; you deserve to be free. And when you buy a new car and you get in that new car cycle, that new car hamster wheel you’re not free, you are enslaved because the borrower is slave to the lender and you have sold yourself into slavery. I’m all for living life while you can enjoy yourself but reward yourself with experiences, not things. Because when you reward yourself with things those things will disappoint. If you reward yourself with an experience you pay cash for it. You can’t go wrong with that. So the next thing you say is a new car will make me happy. My answer is yes, for a short period of time it will make you happy. Here’s the big picture though. You’ll finance a new car for 72 months and by this Christmas. If you bought a new car or you’ll go outside its got the windshield cracked, it’s been keyed. It’s got paint chips on it and you’ve split something in the seat and you only have 68 more payments to go. The new has worn off.
[00:01:29] It will not continue to provide that happiness that you think it will. So do not sell yourself into slavery. I want you to be free and you can only be truly free if you don’t sell yourself into slavery by taking on this huge amount of debt right out of college and as you take this first teaching job may just give you a why what if what if you get an opportunity to go overseas and teach next year. Those opportunities are available unless you have sold yourself into debt slavery. You have a big car payment maybe you’ve even bought a house. Your options are limited. If you have not done that you are truly free. You can say hey I’ll take this opportunity I’ll go to Saudi Arabia or wherever it is, I’ll take a year or two years make some really good money get a head start on my life. But if you have sold yourself into debt slavery that option is off the table. The other thing, what if teaching is not what you want to do. So there’s a big disconnect gap between what you learn in college about teaching and when you actually get that first classroom. There are some things that you just cannot learn in college that you can only learn once you get in that class and get that experience. And I’ve seen this happen before. So what if teaching is not your thing if you don’t have a lot of debt you’ve not sold yourself into debt slavery then you have some options then you can actually say I need to step away from this. My contract runs out. I need to go a different direction.
[00:03:01] But if you’ve sold yourself into debt slavery you have this big car payment maybe you have this big house payment already. Your options are limited because your creditors they expect to be paid on the first of each month without fail. I want to tell you in this episode number one I want to get your mind wrapped around total debt not monthly payments. I don’t want to be thinking monthly payments on what you think about overall debt. I want explain to you how the new car cycle and traps you in and I’ll end with some other good options for you when it comes to used cars. First let’s talk about these new car prices because this is this is ridiculous. Michelle Krebs She’s a senior analyst for Auto Trader. She said in the past 35 years the cost of a new car has gone up 35 percent and a used car has gone up 25 percent. But at the same time the median household income in this you take years has went up only Dum-Dum dome 3 percent. That’s right. A survey from bank right. Dotcom came out just this past June. They said the new average car price This includes They included local sales tax. The new average now of a new car is thirty five thousand three hundred sixty eight dollars. That’s just the average the average payment in June was five hundred and seventeen dollars a month. That’s the highest it’s ever been. So now you say, Wait, Bruce, I can make a $500 dollar payment on this new teaching job. I don’t want you thinking about monthly payments.
[00:04:33] I want you to wrap your mind around total debt and this is a perfect example because that new average price of $35000 and that new average monthly payment of five hundred and seventeen dollars when you put those together. That means it will take about six years to pay that car off at five hundred and seventeen dollars a month because that’s how the math works out for $35000 average to $575 a month payment works out to about six years and that’s how they are still selling these new cars many in record numbers. Because although like I said new car prices have gone up 35 percent. Used car prices went up 25 percent. They stretch out the loan terms longer and longer and longer and that way they can get the monthly payment down. But when you do that a whole lot of bad things happen that debt slavery just continues on and on. Also in June, they come out with the average time period that a new car is financed and it was sixty-nine point three miles. So just short of that six-year mark. That’s the new average. Long term loans are the new thing now plans stretch from 72 months or more just eight years ago. Barely one in 10 car loans was 72 months. Less than 10 percent of them are 72 months. Now a third of them are 72 months or more. Class Balle from Bankrate dot com. She said she has seen longer loan terms of 72 84 or even 96 months becoming popular. That’s crazy. What do these numbers mean Bruce? Am I really not just concerned about how much I can pay. Right.
[00:06:13] Here’s what my check is. Here’s what I can pay per month. That’s what I can afford right. No no that’s not right. That’s right. If you want to sign up to be enslaved to debt because the borrower is slave to the lender never forget that. So here’s what I want you to do. Here’s how I want explain how this new car cycle entraps you and it just keeps getting worse and worse. I’m going to use round numbers to give you an example to make things simple but here’s how it works. You’ve got this new job coming up this fall. You get that first big paycheck. You deserve a new car right. A new car will make you happy. So you go out and you buy a conservative new car let’s say $20000. And it does make you happy for how long. Well about to Christmas of this year two years let’s say two years pass a new car makes you happy that’s no longer a new car so guess what. You’re no longer happy. You have to have another new car. So you go to this car the car is now worth half of what you give for it but you’ve only paid down a fourth of it so how do we make up the difference. You owe more than the car is worth while the new car dealer and the finance companies are also eager to work with you and help you. They’ll sell you the new car. They’ll take the difference that you owe and add it to the total cost of the new car.
[00:07:32] So now two years later you’ve traded cars you’ve got another new car but you owe 25000 now instead of 20000. Two more years go by. You’re not happy. Because happiness is a new car. You no longer have a new car. I have to have a new car to keep up my happiness maintain my image whatever it it may be. So you trade again. Guess what car is again worth half of what you give for it. But now you owe 10000 more than it’s worth. Car dealer adds that on the price of the new car. And so what has happened in about five years you look up and you owe $40000 on a Toyota Camry for example. And so that is how the new car slavery works. That’s how you get entrapped with new cars new car cycle. I have some suggestions for you. Number one you’re coming out of college and his new job. Keep driving what you’ve been driving you’ve had something it’s not. It’s probably not the best but it’s got you through school. Keep driving it because again I want you look at total debt and the fact that a new car will not make you happy. You start putting that money back and all of a sudden next summer guess what. You can easily afford a great experience. You can rent a new car and drive to the Gulf Coast or drive to California and pay for it all in cash why you cannot insulate yourself to this debt by having a new car. It gives you an opportunity to build some wealth get you an emergency fund put in place.
[00:09:03] Start paying off that college debt which we’ll talk about next time. So number one suggestion is keep what you have. Number two Buy yourself a beater What’s a beater a beater is a cheap car. You give a thousand you get fifteen hundred dollars for it. It’s basic transportation from your apartment to school and home. You can pay for it in a couple of months you’ve got enough money put back that you can pay for all of the best things I did a few years ago I bought a 96 Geo Metro little three cylinder car I give twelve hundred dollars for it. I drove it 35 miles round trip every day to school and back it would get at most it would get 50 miles per gallon even had air conditioning. Nothing wrong with a little car. Basic cheap transportation and wouldn’t cost me anything. I turned around I give it to my nephew who took a job in a town about 30 miles away so he’s got about 60 70 mile commute each day. I gave it to him. So now he can reap the benefits of it as well. So all this money you’re wasting you enslaved yourself on a new car. You can actually be putting back accumulating wealth doing other things with that money that will make you much happier in the long run than buying a new car. Number three Buy yourself a good used car for around 5000. Can you get a good used car for around 5000. You certainly can. Let me say this.
[00:10:24] Say you want to spend 5000 on a new car and you say I can spend five I can forward to $500 a month payment if you finance. If you finance a used car a $5000 car for 12 months that’s exactly what you make a 500 dollar payment would make $6000 in a year you would have that car paid off it would last you for several several years. And so then you have basic good basic transportation for several years to come. And again we’re back to building wealth. We’re back to paying off student debt. We’re back to having experiences funding these experiences in life which are which are the good stuff. But you say wait a minute you can’t get a good used car for fat. Well let’s just talk about used cars for 5000 to start with a quick search on autotrader.com for used cars 5000 under comes up with sixty four thousand five hundred and twenty five matches and you say Well Bruce those cars are probably have high miles OK. Some of them certainly do. So I search on autotrader.com for used cars $5000 and last and last than a hundred thousand miles results eight thousand two hundred and seventy nine cars available for $5000 less than a hundred thousand miles. So nice. Hi Bruce some of them could be Dodge’s. Well hey that’s that’s fair enough. No I’m just kidding. Dodge fans just joking. But you can with some time and some knowledge get a good used transportation for $5000 and be able to start living out of starting your career enslaved to debt. What I’m going to do I’m going to give you some good options. You know this will be my opinion on for used cars. I’m going to have free resource available for yet.
[00:12:07] Bruce McGrew dot com forward slash cars sign up and I’ll send you the free resource for a used car guide in e-mail what I will do. I will list some good used cars. Good reliable used cars for around that $5000 Mark and again these are my opinion. Take that for what it’s worth. I’ll I’ll also give you some other information some things to look for and some things to make sure you do when buying a used car to make sure you get a good one and you don’t get a lemon and it will show you how to accurately value either your car or the car you’re trying to buy by using Kelley Blue Book. Make sure you’re using the right search settings. You’re picking the right options and so you can get an accurate appraisal of what your car is worth or what the car you’re trying to buy is worth. So again go to Bruce McGrew dot com forward slash cars download that free resource and that will help you a lot if you have any questions. Be sure and let me know I’ll do what I can to answer them. I do appreciate your time and attention. I hope I’ll give you a few things to think about again. Think about total debt not monthly payment. Think about it live in life with experiences and not with stuff cause stuff disappoints new stuff only makes you happy for a little while the new wears off. And it’s disappointing. Until next time. Have a good day and go out and teach him kids.