Suze Orman TwitterSuze Orman FacebookSuze Orman YouTubeSuze Orman LinkedIn
View Blog & News List

The Two Biggest Mistakes You Can Make When Buying a Car

April 16, 2015 at 12:00 PM

If you lack the cash to buy a car free and clear, you really need to hear me out on the two worst financing moves you can make. What I am about to tell you can save you hundreds, if not thousands of dollars. And trust me, this is exactly what car dealers and financing companies don’t want you to know:

A car loan longer than 36 months is a waste of money. I know, I know, there are all those great looking ads showing how “affordable” a payment will be with a 60 month or 72 month car loan. Don’t fall for it. For starters, we need to get on the same page: A car is the worst investment. Why? Because from the moment you drive it off the lot it loses value. You will never recoup what you paid for the car when you eventually sell it. Got it? Good.

So if you’re going to lose money on this deal, why would you agree to pay more interest on the loan? That’s exactly what you end up doing when you choose a longer repayment term.

The reason the car industry hawks five year (and longer) loans is because they want to entice you to buy a more expensive car. The longer the term, the lower your monthly payments. But what they don’t point out to you-and I do-is that because the payments go on for a longer time, you end up spending more over the life of the loan….for a crappy investment.

My advice: Shop for cars that you can pay off with a three-year loan. No more.

Leasing is the Worst Way to Build Financial Security. A shiny new car every three years seems so enticing. But have you every stopped to consider the cost? If you are leasing and trading in, and then leasing again, you never own the car free and clear. You will be making monthly payments forever. That is a colossal waste of money. If you instead follow my advice and take out a 3-year loan, you will own the car free and clear after 36 months. Given the dependability of cars these days, that could mean you could keep driving the car for five, seven or even more years (depends on your mileage ) without having a loan payment. That gives you years when you can be saving more for other important goals—such as retirement-rather than continuing to throw money at your depreciating car.

Tag Cloud

social workHDHP'sFree Debt EliminatorSuze Orman spouse Kathy Travislong term carepreexisting condition not coveredEmergency Savingsfocus on new truth paid in fullquick closingcommitnot enough life insurancehome related tax break bonus escrowverify retirement plan with HR or plan sponsorGracePay Off Debt Before Retirement2015 financial roadmapStudent Debtlive below your meansEric Dodge debtcouple financessame-sex marriageget health insuranceprotect your familyAccuQuote.comdon't extend mortgage doctor no longer in networkgraduation3% debt transferred successgrandparent IRA contribution get over life insurance phobiacost of capitalization calculatorget credit cardhome ownershipreferrals COLAlet them have 50% controlFinancial AwarenessNew York Lifehigh deductible health care planno interestLong Term Care shoppingincrease retirement savingsCNBClong-term care Adequate Auto and Home Insurancepay more than minimumback-to-school budgetBeautySandy Hook Elementary Schoolretain separate credit cardsstudent loan repaymentspeak new goalborrow each year, capitalization is going to pile up SpendingSuze is my biggest mentorstretch out haircut appointmentsreduce withholdingSchool of Social Worksavingsuniversal college accesscalculate dependents annual income needsgrandchild summer job IRA contributionsecure creditbest loan deal Money-SavingFRAchildren under 18multiple lendersinterest on student loansno life insurance financially irresponsiblebuy home you can affordsetup automatic savings withdrawgift grandchild IRA contributionprescription tierget the most out of social security pay 100% cashFICO at least 720stay positiveretirment savingsreal estate marketfocus on needstax ID theftdangerous money seasonthree year car loanpercentage of women widowed 75-84allowance taskbad decisionsAlarm Clockhome budget after tax costcredit reportcredit managementbetter loan ratesno negativityonly offered while employed better loan dealspay credit debt ASAPstandard deduction term life insurancenear historic lowsfinancial argumentscollege graduatewomen long term carepay down car loanone credit cardRetirement SavingsConventional loan PMI8 month safety netclosing costs 2% of loan50 over 50low credit scorelow-cost index mutual fundAmy LacyetCollege of Veterinary Medicineswitch to spouse coverageLTC shoppingreal estate mistakesGay Rightslower overall drug costTeachpay high rate off firstMortgage Credit Availability Indexdon't ignore open enrollmenttaxesInvest for savings growthfinancing car verify wellness screening and programsraise insurance deductiblesame sex marriage band end Floridarent vs buyHDHP's are not badteensautomatic paymentrequired disclosurecostly insurance mistakemortgage interest tax deductionno sneaking in feesprotect dependent Warner Bros Television Groupteach your child good money habitsterm insuranceNewtownLifestylestandard rateproperty taxno private loancontribution save moneyrepay student loansfraudulent returndeath benefit needs for familyBankruptcybad retirement planningbe kind to yourselfstore credit cardsbe true to yourselfmobile appmarriage inequalityhousing marketfinancial concernRoth 401(k)high premiumscut monthly cable billdental discount planwrite new goalGifts15-year refinance dealgift up to 14,000public service loan forgiveness programInfluential Celebritymortgage disclosureteens and moneypositiveadvice for college graduatesFinancial Gift Cliffhigh FICO scoreinsurance yearly reviewUniversity of Illinoisdon't derail retirement savingsemotional stakesSuze Ormandepreciating asset don't charge a pennydo not pay allowance for good behaviorMoney Marketresponsible with moneylowest cost fund optionpay down student loan debtannual cost of living adjustmentmanage student loansHoliday Season401(k) Contributionsretirement planStock Investmentsultimate compounding giftrefundworst financial mistakeexercise reguarlycan you afford itThe Suze Orman Showdebt freeHolidayderailed planunsubsidized Stafford loaninterest capitalizationroth iraGoodbyeface your financial fearhome insurancecomparison shoppingHDHP/HSAphysical healthCommunication Skills Gay CouplesForeclosureavoid burn outEasy Life Insurance Post-DivorceOverspendingborrowing plan One Wallet At A TimeNew american Dream be good exampleHoliday Shoppinglower mortgage interestTelepictureslong term goalLTCzero rate transfer dealsopen enrollment review Financial Power of Attorneyinsurance mistakeritual schedule2016 adjust estimated taxschool age appropriate chore2017 TaxesBankbecome member InfluentialsAARP Social security calculatordebit carddon't do five year car loanForbescharges on credit cardfull retirement ageis it true? do you need life insurancealways use all paid time offkid borrow firstpresident Obamasecured cardbest interest ratesMoneylousy investmentbreakdown projected monthly housing costbill paying prioritiespowerfulpaying for collegeshort term goal shop online guaranteed level term policybuying car 2016mortgagePBS Specialemergency fund savingssavings pleasureFederal Funds Rateinitial tax break anticipated salarynegotiate points with bank or sellerloan is giftFinancial Solutions For Youreduce interest rateteach importance of helping othersemployer offered life insurancemax benefit coveredincrease emergency savingsfour steps to retirement savings Changing LivesCredit Card Interest Rateconsider roth 401(k)marriage financial responsibility20% down payment avoid feesholiday spendingswitch to roth 401(k)require chore in exchange for allowanceFinancial System6 month waiting periodcut monthly cellular billdangerous retirement planFinancial Educatorwaive home inspection bid19 years cash flow problemfamily save at least $100 monthlyno splurge 401KRetirement IncomeCredit scoreconfidentoverspend on nights outadjust allocations social security never insolventreplace permanent life insurance with termdon't buy wants20% down payment2015 record year car salesAshley Springer8 Rulescontribute household expenses maintain standard of livingSuze approvedMost Influential Celebrities Listloved ones dependent on incomebuying a caremployer funding HSA3 savings buckets home buying mistakesallowancelower rateautomatic withdraw to savings rising home pricesstudent loan repayment estimatorpurely financial standpointFinancial Adviceadult childrendon't spend save increase retirement contribution ratejuggle multiple financial goalssmall changes max employee matchenjoy saving gay marriage ban end Florida under 18 financial gift20% equityFICO Scoresocial security not going brokerolloverloan no longer than 36monthsno late fee valentines dayis it necessary?don't use allowance as bribeincentives for health care wellness screeningdental savings planFHA loan feesInterestcreate new truthBill and PennyLong Term Care Insurance big results life insuranceStudent Debt Crisisletter to suzealternative FICO scorekids schedule paymentsbuy homedon't defer interest paymentspublic service career student loan repayment dental insurance push yourself to save more for retirementat worst still pay 75% benefitapproved medical 100% tax-freeJose Rodriguezmax employer matched 401(k) contribution4 Must Have Documents Forbes Top 10age appropriate goalsmortgage brokerMotherearn allowancepercentage men widowed 75-84unexpected expensestudentSave Us Moneycollege studenthighest possible benefittax refund fraud10 year repayment plan 10% donate to charityMarlo Thomasmake saving a pleasureLong Term Care premiumsLoveitemized deductionYoung Adult Personal FinanceLTCi ASAPclosing feestake actionretirementHSA tax savingsGiftEmployer Matched Contributiondear suzeadd teenovercome financial fearsAmericans don't use all paid vacation timeSelectQuote.comFICO credit score credit card mortgagetraditional vs roth 401(k)Student Loancredit cardoverspend on dining outiffy incomebudgetCredit Card Rate Increasemonthly dental insurance premiumhealthy aging don't blow tax refundcommunity collegeSuze Orman Scholarshipconfident of solutionwould you decline a bonuslong-term care premiumsIRA contribution gifted moneyinsuranceno waiting periodpay interest while in schoolgift not loandeath benefit 20 to 25 times annual incomeSandy Hook Promisemeet monthly healthy retirement blood pressureis it necessaryfinancial fearsFinancialRevocable Living Trustplanfinancial independencedoctors in networkspecial saving accountPrime Rate Increaseonly refinance if it paysprotect loved ones co-sign emergency fund federal student loan deferment Exhibitionmental healthUniversity of Floridaleave a legacyPhyllis Shelton expert long-term caredon't cover cosmetic dentistryStaffords this year have a fixed 6.8% interest ratebetter termsMass Mutualfile taxes quicklyVeterinary SchoolRichCiti Simplicity Card identity theftpermanent life insurance8 month emergency fundfile asapback door Roth IRAHDHP protect and provide for minor child Durable Power of Attorney for Health CareCommencementpremiumlearn good financial choicesHow To Build Creditvalue moneylife insurance name trust as beneficiaryignore 6 month grace period 3 bucket approachFiscal ResponsibilityCivil Rightsidentity fraudFinancial CliffUrbana-Champaignclosing disclosureretirement accountssummer job match income wives should be involved in retirementHeartSuze Orman's Money WarsAARPloan big picture heartache!00% tuition paidfinancial goal phraseyours, mine & ourslow down paymentcar buying mistakesSatisfyingorigination feesjanuary billsmoney vowshigher insurance deductiblecompare monthly expenses3 step financial road mappay off debtmoney-aware childsocial securitymonthly benefit lower premiumloan necessityno tax on withdrawlsraise deductibles20 year level term buy down point cost offset by savingscnbc alarm clockone annual feeFinal GoodbyeSuze changed my lifeHDHP's are good for youcar loanETF'sdream schoolis it kind?2016 adjust withholdingnew carknow before you owechildren's bookcommunity bankprovider of financial support40% toward financial goalstudent loan debtpaid vacationwomen longer life spanCory Bookerno retirement funds for down paymentoverspend on giftsbalance transfer student loan repayment planwomen outlive menCPI-Wkeep a scheduleresponsibleBaby BoomersUS Tax Codewomen live longernot gender specific automate student loan paymentsrefinancetitle insuranceAuto Savings no fee transferhome loan credit score below 740 home buying budgetWall Streetcar leasingFinancial Awareness Video Festivalcredit unionFundshealthy retirement weighttelevision hostPrime Rate Rise 2015Washingtonreduce monthly paymentsidelined

View Blog & News List
People First. Then Money. Then Things.
Connect with me on Facebook Connect with me on YouTube Connect with me on Twitter
© 2017 Suze Orman Media Inc. All rights reserved.
 |  Search  |  Sitemap  |  Privacy  |  Terms
Sign Up For E-mail Offers
Open Panel
Close Panel