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

paying for collegeStudent Debt CrisisCollege of Veterinary Medicinehome buying budgetmoney-aware childopen enrollment review no retirement funds for down payment50 over 50Must Have Documentsdangerous money seasonschool affordable premiumunsubsidized Stafford loaninsuranceAuto Savings raise your deductibleLong Term Care shoppingage appropriate choreproperty taxPhyllis Shelton expert long-term careroth iraInvest for savings growthcharges on credit cardcontribute household expenses gift up to 14,000confidentbecome member require chore in exchange for allowanceCommunication Skills healthy retirement blood pressureprescription tierconsider roth 401(k)don't spend retirementpermanent life insurancedon't ignore open enrollmentrolloverbill paying prioritiesbetter loan ratesmeet monthly create new truthSelectQuote.comgift grandchild IRA contributionMost Influential Celebrities Listlong term goalloved ones dependent on incomefinancial goal phrasecnbc alarm clockis it true? same sex marriage band end Floridacostly legal One Wallet At A Timehome buying seasonNew american Dream raise deductibleslive below your meansuniversal college accessnew carat worst still pay 75% benefitForeclosureno late fee budgetcommunity bankBeautydental insurance death benefit 20 to 25 times annual incomePrime Rate IncreaseFinancial Awarenesshealthy aging loan necessitySuze Orman spouse Kathy TravisEasy Life Insurance Gay Rightscredit reportterm life insuranceCPI-WWall Streetpay high rate off firstdoctor no longer in networkFinancial Power of AttorneyLifestyleFixed Rate Mortgageexercise reguarlyphysical healthwomen long term careSandy Hook Promisepeace of mindavoid burn outemployer offered life insurancehome loan credit score below 740 valentines dayreal estate marketFederal PLUS loandebit cardnot gender specific no private loansmoney vowsworkaholicSelfish15-year refinance dealForbesGay Couplescar buying mistakestraditional vs roth 401(k)Money Market740 credit scoreverify retirement plan with HR or plan sponsormonthly dental insurance premiumpublic service loan forgiveness programTelepicturesstaycationbuy down Pay Off Debt Before Retirementretirement plan20% down paymenthome related tax break bonus 6 month waiting period3 savings buckets sidelineddear suzerepay student loansdeath benefit needs for familyno life insurance financially irresponsibleFRAmarriage financial responsibilityemployer funding HSAFICO ScoreSpendingRetirement IncomeFinancial Advicewomen outlive menFree Debt EliminatorFinancial Educatorspecial saving accountinitial tax break lower overall drug costdon't charge a pennyverify wellness screening and programsbad decisionsrising home pricesUniversity of Illinoishigher monthly paymentplanConventional loan PMIlower premiumback-to-school budgetFiscal Responsibilityletter to suzeshop online guaranteed level term policyborrowing plan MoneypowerfulAmy LacyetHigh Credit ScoreWillpaid vacationlife insurancemax employee matchdon't defer interest paymentseight month living expense be good example8 month safety netovercome financial fears20 to 25 times annual incomeemergency fund max employer matched 401(k) contributiondental discount plancar loanhome insurancewould you decline a bonusSchool of Social Workemotional stakesnegotiate points with bank or sellerprotect your familyfinancing car push yourself to save more for retirementBankruptcylowest cost fund optionbig results Revocable Trustlearn good financial choicesChanging LivesSuze Orman Scholarshipalways use all paid time offno negativity3% debt transferred Washingtonstudenthousing marketRoth 401(k)healthy retirement weightbuy homecut monthly cellular billPBS Specialtitle insurance15 year mortgagebe true to yourselfcredit cardmax benefit coveredFinancial Solutions For Youmanage student loansget credit cardenjoy saving mortgage interest tax deductionyours, mine & ourshigher insurance deductiblehome buying mistakesSuze is my biggest mentorfinancial aidreplace permanent life insurance with termdo not pay allowance for good behaviorbest interest ratesone annual feeresponsible with moneypresident Obamalow down paymentfile taxes quicklydo you need life insurancejuggle multiple financial goalssavings pleasureSave Us Moneydon't use allowance as bribederailed planmortgage disclosuremortgageNew York Lifecompare monthly expensesRichStock Investmentsapproved medical 100% tax-freeface your financial fearheartachefull retirement ageno tax on withdrawlsstudent loan repayment estimatorsocial securityknow before you owesuccesssmall changes get the most out of social security 8 month emergency fundhighest possible benefitHoliday Shoppingcompare provider pricingbe kind to yourselffinancial independencefraudulent returnFederal Stafford loan20% down payment avoid feesJose Rodriguezcollege graduateMoney-Savingaffordabilityautomate student loan paymentsdangerous retirement plansetup automatic savings withdraw30 year mortgage ultimate compounding giftdon't buy wantsstretch out haircut appointmentsGiftclosing costs 2% of loanteach importance of helping othersHDHP IRA contribution gifted moneyunexpected expenseFinal Goodbyelousy investmentdon't derail retirement savingsis it necessarycollege studentage appropriate goalsinsurance yearly reviewdream schoolSuze approvedHDHP/HSAincrease emergency savingsFundsreal estate mistakeshigh FICO scorebad retirement planning10 year repayment plan advice for college graduatesjanuary billsHolidaylow mileage discountARM Cautionstandard deduction under 18 financial gift401KCredit Card Interest RateFICO credit score credit card mortgagereferrals protect and provide for minor child 2016 adjust estimated taxanticipated salarycouple financesVeterinary Schoolworst financial mistakeearn allowanceretirment savingsalternative FICO scoreget over life insurance phobiapay down student loan debtcontribution is it kind?buying car 2016AccuQuote.comno waiting periodcomparison shoppingLTCburn outStaffords this year have a fixed 6.8% interest ratesave costly insurance mistakeInfluential Celebrity19 years cash flow problemorigination feesSuze changed my life8 Rulessame-sex marriage2015 record year car salessocial security not going brokehome budget after tax costraise insurance deductibleHoliday Seasonhome ownershipGiftslow-cost index mutual fundtax refund fraudhigh down paymentHow To Build CreditStudent DebtHDHP's are good for youcredit utilization rateUS Tax Codeone credit cardDurable Power of Attorney for Health CareCory Bookerpay credit debt ASAPpremiumfocus on needsdebtEmployer Matched Contributionfinancial argumentsgraduationshorter payback perioddental savings planspeak new goalclosing disclosuremake saving a pleasurekid borrow firsttaxesvalue moneyis it necessary?ETF'srefinancereduce withholdingMortgage Credit Availability Indexterm insurancegay marriage ban end Florida cost of capitalization calculatorCredit scoreignore 6 month grace period insurance mistake401(k) ContributionsOverspendingwives should be involved in retirementLong Term Care Insurance summer job match income women longer life spanresponsibleno splurge cut monthly cable billsocial workHeartMotherbest loan deal automatic withdraw to savings ritual scheduleinterest on student loanspublic service career student loan repayment rent vs buyLong Term Care premiumscalculate dependents annual income needslow credit scoremortgage brokerdebt freeget health insurancekeep a scheduleadd teenHSA tax savingstake actionstudent loan repayment plannon conventional routeloan big picture grandchild summer job IRA contributionmobile appcommitHDHP's are not badFinancialoverspend on giftspay 100% cashlower mortgage interestteach your child good money habitsteensgrandparent IRA contribution Financial Systemfinancial fearsHDHP'sStudent Loan10% donate to charityhigh deductible health care planno intereststrained relationshipfederal student loan deferment long term careloan no longer than 36monthsmaintain standard of livingstudent loan debtlet them have 50% controlfocus on new truth Financial Gift Cliffprotect loved ones 2016 adjust withholdingdon't extend mortgage required disclosurebuying a carsocial security never insolvent4 Must Have Documents SatisfyingCredit Card Rate IncreaseBaby Boomerspositiveincrease retirement contribution rateLegal Guardianleave a legacymarriage inequality3 step financial road mapGracelower interest rateCNBCborrow each year, capitalization is going to pile up provider of financial supportno apologypay off debtswitch to roth 401(k)depreciating asset Revocable Living Trustteens and moneySuze Ormanhealthy youconfident of solutionAdequate Auto and Home Insurancenear historic lowsidentity theftPost-DivorceRetirement Savingskids schedule paymentszero rate transfer dealscredit unionSuze Orman's Money Warsreduce monthly paymentbreakdown projected monthly housing costInfluentialsno fee transferprotect dependent long-term care premiumsFinancial Clifffour steps to retirement savings don't cover cosmetic dentistrylife insurance name trust as beneficiaryautomatic paymentwrite new goalCiti Simplicity Card !00% tuition paidwaive home inspection bidLoveUniversity of Floridapercentage of women widowed 75-84credit managementdoctors in networkloan is gift20 year level term High FICO Score = Better Rateincreased auto insurance premiumrefund20% equitytoo expensive schoolholiday spendingpoint cost offset by savingscar leasingcan you afford itLTCi ASAPYoung Adult allowancepay more than minimumstudent loan repaymentlong-term care escrowInterestpaid in fullAlarm ClockWarner Bros Television GroupThe Suze Orman ShowSandy Hook Elementary SchoolCivil Rightsdon't do five year car loanpreexisting condition not coveredallowance taskannual cost of living adjustmentFinancial Awareness Video Festivalswitch to spouse coverageretirement accounts40% toward financial goalmental healthchildren's bookARMsecured cardoverspend on dining outGoodbye2015 financial roadmaponly refinance if it paysno sneaking in feesnot enough life insuranceExhibitionCommencementhigh premiumsincentives for health care wellness screeningForbes Top 10Urbana-Champaigntelevision hostback door Roth IRAclosing feesAmericans don't use all paid vacation timebetter termsFICO at least 720retain separate credit cardsFHA loan feesfinancial concernstandard rateCOLAidentity fraud2017 TaxesEric Dodge Marlo ThomasNewtown3 bucket approachstay positivethree year car loanAARPfamily save at least $100 monthlysecure creditBill and PennyBankfile asapVital Documentsadult childrenEmergency SavingsPrime Rate Rise 2015lower ratewomen live longerchildren under 18tax ID theftpercentage men widowed 75-84Personal FinanceMass Mutualquick closingAshley Springerstore credit cardsspring summer monthly benefit better loan dealsiffy incomeFederal Funds Rateonly offered while employed save moneyincrease retirement savingsTeachbuy home you can affordco-sign LTC shoppinginterest capitalizationpay down car loanshort term goal high credit score discountgift not loansavingspurely financial standpointitemized deductionpay interest while in schoolcommunity collegeemergency fund savingsmultiple lendersadjust allocations no private loandon't blow tax refundreduce interest rateoverspend on nights outbalance transfer AARP Social security calculatorMinor Children schedule vacation


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