We are casually shopping for new-to-us cars, about 2-3 years old. We are not at all in the market for new cars. Why, you might ask? Because on average a new car loses 42% of its value in the first three years.1 That’s literally turning $30,000 into $17,000 in three short years. I don’t want that much money tied up in something going the wrong way in value. And no, YOUR vehicle is no exception. They ALL go down in value, some faster than others.

And most people will finance their new car for as long as eight years adding interest on top of it all. Whoa! The average auto loan now is almost six years.2 That’s just nuts!

One of the biggest myths we’ve been led to believe is that “you’ll always have a car payment”. Like it’s a fact of life. No thank you! You might be thinking, “well I can afford $500 a month for a car, so I might as well drive something nice”.  That kind of thinking will keep you paying car payments, and keep you broke, your entire life. By spending that $500 a month on a car payment, you lose the opportunity to spend that $500 anywhere else. You have pledged that payment for the term of the loan and, if you don’t change your behavior, you’ll roll it into another new car and keep the cycle going. If you instead invested that $500 in a mutual fund returning an average rate of 8% from age 25 to age 65, you’d have $1.5 million dollars. From just that one move! As Dave Ramsey says, “1.5 million dollars! I HOPE YOU LIKE THE CAR!!”

So how do you not have a car payment? The first thing you have to do is decide. You have to decide to break the cycle of always buying new cars. And then, pay off your current car, or get rid of it. What?? Did he just say to sell my car?? Shocking! Why would I do that??

Well you might do that if you have too much car. If the value of all your cars, trucks, RVs, motorcycles, boats, and jet skis equal more than half your household income, you have too much money tied up in things with motors. Especially if you’re making payments. If you earn $50,000 and you’re making payments on a $40,000 truck, you have too much of your income pledged and promised to a depreciating asset. Sell it, and get something cheaper paid for in cash. I know, the $40,000 truck is now only worth $30,000, but if you sell it for $30,000 and get a beater for $5000 then you throw $25,000 at the $40,000 debt and now you only owe the difference which is $15,000, and your beater car is paid for. It’s much better to owe $15K than it is to owe $40K.

The next step is to pay off the $15K, and all other consumer debt, as fast as you can. Side note: if the value of your vehicles is less than half your household income, then don’t sell anything unless you just don’t like it. But do get about the business of paying it all off, as quickly as possible.

Now you have no consumer debt and a paid-for $5000 car. Start saving the $500 a month you had as your car payment, and put it in a simple savings account. In 10 months you can trade the $5000 car and the cash for a $10,000 used car. It will be quite an upgrade from what you’re currently driving! Then…do it again. $500 a month for 10 months, trade it all for a $15,000 car. In less than two years you’ll have a car valued at $15,000 with NO payments, and you’ll be proud to drive it for years.

Now…if you read that last paragraph and thought, “Yes but I can’t save $500 a month…” think about why. The reason you can’t save money is because all your income is promised and pledged to some combination of lifestyle and payments. Credit card payments, car payments, student loan payments. If you have consumer debt, pay it off. All of it. Everything but your mortgage. If you spend everything you make and don’t know where your money goes, get on a budget and tighten up a bit. THEN you can save and invest.

Want to see how to take that savings model and drive-used-retire-rich to the next level? Check out this video to learn how to Drive Free Cars For Life. You can plug in your own numbers, but if you will get over the mindset and the myth of “I have to have a new car”, the concept and process absolutely works.