The advice given for this post was the following:
"I know this seems like an extreme stance, but borrowing money to buy a very expensive thing that plummets in value is an extreme strategy for burning money. So an extreme response is called for! Ok, but what if you NEED a car and you don’t have any MONEY? What do you do? The average US new car payment is $716/month. Let’s say you’re broke and can only afford half that, or a $350/month payment. Here’s what you do: • First four months: Don’t have a car. Bus, bike, borrow, barter, and beg your way to where you need to go. I know it sucks. But it’s only four months of your entire life and it means you get to be a millionaire later. Humans were around for 6 million years without cars. You can do four months. Put your $350/month in a savings account. • Month five: Take the $1,400 you saved and find a deal on a clunker that runs. Boom. You have a car, and zero debt. Keep saving $350/month. • Year one: Sell your $1,400 clunker for about $1,400. Combine it with the $2,800 now in your savings account and buy a perfectly decent $4,200 car. (I drove a $3,000 car for six years). Keep saving your $350/month. • Year three: Sell your $4,200 car for $3,000. Take your $11,400 and buy a really darn nice used car. You can get a 3-4 year old car that looks and drives like new. Drive it for five years. Keep saving your $350 • Five years later: Take the $21,000 you have saved, plus the $7K or so from your last car and buy yourself a $28,000 car you want. When you repeat that last step, you’ll end up with EXTRA money and you’ll be able to invest the rest and become a millionaire. See, now wasn’t riding the bus for four months all those years ago worth it? You can tell your kids about all the character you built and all the nice bus people you met. As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.
- Jeremy"
I am maybe a bit of a hypocrite since I just bought a new car (I kinda need it for my job now to the extent my company paid for at least part of it), but I got by without one for close to 20 years. Incidentally, BYD Dolphin, it has been the best car I’ve ever driven.
I agree that the first thing is decide how much you need that car. I honestly don’t think most people in a city need one. Even if you are in an area without public transportation, walking and/or biking can be totally reasonable options. When I first moved out of the city, living within walking distance of a market was a requirement for me for specifically this reason. My partner still doesn’t want to ever drive and we get along just fine.
I would argue that buying a clunker can be a bad longterm value proposition though. If it’s an old car in reasonable condition, great! But you could definitely end up in a situation where you are spending more on maintenance than you spent on the car, especially if you aren’t particularly knowledgeable about maintenance.
Also at least in my country, there are other costs associated with car ownership too, especially for used cars. You need to show proof you own/rent a parking space, which can be extremely expensive. Used cars must get an inspection every two years that is around $1000-2000 USD plus the costs of any repairs required. New cars can go longer before they are required to get an inspection. About 500 USD tax/yr for car ownership. Additional taxes if the car is over 13 years old. There’s a reason you see very few people in Japan driving old used cars, it just makes no sense to spend more than the cost of the car in annual fees.
All that means that even if I buy a used car and resell it for the exact same price I bought it at, I am out a lot of money.