Are you thinking about buying a brand new car? From a financial planning perspective, this is a big decision. Cars are a huge expense and rapidly drop in value. They are a great way to destroy wealth.

3 things to consider before you buy a new car

1. Do you need to change your car – or is it just a want? Are you justifying emotional decisions with flawed logic?
2. If you do need to change your car, do you really need to buy a new one – or will a good quality second hand one do the job?
3. If you need to borrow money to buy a car, then think twice. This is putting good money after bad. If you think leasing a car is smart because you get tax deductions – then you are wrong. If your accountant tells you it’s a good idea – they are wrong!

Borrowing money to buy a depreciating item like a car is a mistake. I’ve done the maths, it doesn’t work. Leasing and salary packaging is not a good way to buy a car. If you can’t afford to buy it with cash- then buy something that you can afford with cash and save the payment you would have put towards borrowing or leasing. In time you’ll have enough to buy the car with cash.

Ask why you want to buy the car

If you don’t like what I’m saying here then ask yourself why. Test your thinking. Why do you want to buy a car that you can’t afford with cash? Are you trying to impress people, is it a status symbol for you – part of your significance?

Will Smith put it this way… we spend money that we don’t have, on things that we don’t need, trying to impress people we don’t like. Is this you? I’ve certainly been guilty of it in the past!

If you still don’t think I’m right then listen to what research shows.

According to bestselling book The Millionaire Next Door, which is an excellent book based on a 20 years of study. This book studied the habits of self-made millionaires in the United States. This study found that most millionaires don’t buy new cars, and they don’t lease cars either. They typically buy good quality second hand cars that are two to three years old.

I’m a big believer in modelling successful people. Jesus and Paul both tell us in the bible to model after them in how we live our lives.

So if I want to be Godly, then I model Godly people. If I want to be skinny and I do what skinning people do – then I’ll end up getting the same results. If I want to be a wealthy, then I need to model wealthy people.

Please don’t misunderstand me… I really like cars. I’m a car kinda guy. But they can destroy wealth and often cause a whole world of stress for family finances.

So if you are thinking of buying or leasing a new car I hope I’ve changed your mind… or I hope you are a millionaire already.

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