I hate new cars – at least for people who can’t afford then, and think that you shouldn’t spend more than 20% of your income on a new car. The reason I say these things is because I want you to be rich and the easiest way to stay broke is to continue to purchasing cars with car payments. This is how most rich people buy cars.
Let me tell you about a rich reader who recently sent me his family’s story. First, a little background. The couple is in their late 30’s/early 40’s and they don’t have kids. They are both professionals in their field and have done a great job of handling their money. Their combined income is $300k+ and he recently purchased a new car.
What kind of car would you guess they purchased? Mercedes? BMW? Ferrari? If you said Mercedes, you were right. However, there’s a catch. When I say he purchased a new car, what I really mean is he purchased a car that was new to his family – his “new” car is 7 years old.
He searched around for many months as he compared prices of different models between dealers and private sales. He even test drove some new cars but he couldn’t bring himself to spending so much on a new one when he could get a great used one for so much cheaper. Why should he take a $15,000 hit by driving a new car off the lot when he could buy it from someone else who already did??
In the end, he purchased a 2006 Mercedes with just over 50,000 miles on it for $16,000 from an older couple who completed regular maintenance on it and had the receipts to prove it. I’m not the kind of guy who could tell you every make and model of Mercedes, but when I saw a picture of it, it sure looked new to me!
So how did his purchase compare to the 20% rule for buying cars? He only spent around 5% of his annual income on his new car and he bought it for cash. That’s how rich people buy cars. Most of the time, the people driving around in new BMW’s and Mercedes only look rich, but in reality they’re saddled with high payments. Don’t be fooled!
Do you agree that this is how rich people buy cars?