A reader's husband wants a new car. She wants a used car. Who should win this argument?
August 5, 2015 | Howard Dvorkin, CPA
Question: We need a new car. Our 1999 Camry finally perished in the parking lot at the grocery store. My husband wants to buy a new car from a dealer in town because he says he got a great deal on a loan. I want to buy a used car and not add to our debt, which is more than $5,000 on our credit cards — and that doesn’t include our mortgage.
What can I tell my husband to convince him to stay away from shiny new objects?
— Pat in Rhode Island
Howard Dvorkin CPA answers…
You want me to persuade a guy to not like hot new cars? To paraphrase from Star Trek, I’m a CPA, not a miracle worker.
However, I can give you concrete proof that a car loan is seldom as sweet as the car dealer tells you it is. Obviously, the dealer is thinking about himself more than he’s thinking of you. As I wrote in my second book, Power Up…
If a loan sounds too good to be true, then it probably is. Understand one thing, though: The purchase price the salesperson gives you will not be the total price you pay in the end. The annual percentage rate (APR) and other fees will balloon the price over the period that you have decided to take the loan.
Even a four-year loan can add thousands of dollars in interest to the original sticker price of the vehicle.
Now, if you have excellent credit and a steady income, there’s no reason you can’t negotiate a low APR on a modest loan and enjoy that new-car smell. However, many personal finance experts drive cars they paid for in cash. That’s why, when we offered some car-buying advice earlier this year, our first tip was to “buy used.”
Even Stacy Johnson, the founder of Money Talks News and a partner with Debt.com, has written an articled called Why I Don’t Buy New Cars. Even though he owns a boat, he’s never bought a new car in his life. Why? As he says, “Paying interest to finance a depreciating asset is not how you get rich.”
If that’s not enough evidence to sway your husband, Pat, sit down with him and review those credit card bills. Until you pay those off, adding new debt isn’t healthy. Check out our section called Get Out Of Debt Safely And Effectively. If your husband still has doubts, you can both call our certified credit counselors at 1-800-810-0989 for a free debt analysis. While an auto dealer can put you in a new car today, we can put you on the path of financial freedom forever.
Have a debt question?
Email your question to firstname.lastname@example.org and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of Debt.com, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.