If you are purchasing a car with a payment over $1,000, but can fit it into the 20/3/8 rule, is that still a bad decision?

Cars have gone up significantly in price over the last few years. How can you buy a car without breaking the bank, and what type of car should you be looking at? Get the answers to all of your car questions in our ultimate car-buying show!

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If you didn’t follow our 20/3/8 car-buying rule and now are underwater on your vehicle, what should you do? Does it make sense to sell it and take the hit to get into a cheaper vehicle?

Once you have reached step seven of the financial order of operations, saving 25% of your gross income, and are in the hyper-accumulation phase, you have the freedom to spend your hobby money on a car payment if you wish, as long as you have checked all the other boxes, but skipping essential steps is not advisable for long-term wealth building.

Check out our 20/3/8 hub, and check out our car affordability calculator to help you make your next car purchase!

The value of a car depreciates rapidly as soon as it’s driven off the lot. With that in mind, paying cash for a car is great choice, but we realize not everyone has that option.

If you need to purchase a reliable vehicle to get you to work and take care of your family, we have a Money Guy 20/3/8 rule of thumb that allows you to take on a car loan in a wise and financially responsible way.

The 20/3/8 rule stands for:

• 20% down
• Finance no longer than 3 years
• Total car payment is no more than 8% of gross income

Also, make sure your car payment doesn’t exceed your monthly investments. We want to make sure your army of dollar bills is still working for you!

The only exception to this rule applies to buying luxury vehicles. For these types of cars, pay cash or pay it off in one year.

Check out our free car-buying checklist!

And, before you start shopping, calculate how much car you can afford with our free 20/3/8 car affordability calculator

For a more in-depth look at car purchases, check out the following episodes of The Money Guy Show.

Video: How to Buy a Car the RIGHT Way!

Video: Why You Should NOT Pay Cash For a Car!

Owning a new car sounds great… but is it actually keeping you poor? Buying a car can be a treacherous process, threatening to knock your financial life off course. This episode will walk you through everything you need to know! You’ll be able to walk off the lot knowing you made an informed decision and got a good deal!

In this episode, you’ll learn:

• The hard truth about buying a car
• Car purchase ground rules that keep your financial life from ruin
• The best and worst car brands for your financial life
• How to decide on a new vs. used car
• The 3 factors that create a great deal
• How to make the buying process easier

Research and resources from this episode:

• Vehicle Depreciation Rates (Direct Express Auto Transport)
• Car Depreciation: How Much Value Will a New Car Lose? (Carfax)
• What Car Brands Depreciate The Fastest? (The Mix)
• Top 10 Cars That Hold Their Value Best (iSeeCars)
• Depreciation Rankings – Popular Brands and Vehicles with the Best Resale Value after 5 Years (Car Edge)
• Dealer Cost Calculator – Find out what the dealer really paid. (Car Buying Strategies)
• When Is the Best Time to Buy a Car? (Edmunds)

Enjoy the Show?

• Sign up for the Financial Order of Operation (FOO) Online Course!
• Get FREE downloads full of financial advice from our Resource Page!
• Subscribe on YouTube or wherever you listen to podcasts.
• Send us your questions or share your story.

If you have any questions (or just want to say hi!), join the conversation on Facebook, Twitter, or Instagram!

Chances are, you’ll be purchasing a car multiple times throughout your life. While cars are necessities for a lot of us, they can easily become one of your biggest financial mistakes. In this episode, we’ll teach you our best tips and tricks for buying a car – the smart way!

In this episode, you’ll learn:

• The biggest car mistakes the average American makes
• How to calculate how much car you can afford
• How to research the best deals and negotiate like a pro
• Why financing might (surprisingly) be your best payment option

Research and resources from this show:

• How to Negotiate with Car Dealers (Money Guy Blog)
• A $45,000 Loan for a $27,000 Ride: More Borrowers Are Going Underwater on Car Loans (WSJ)
• The Average New Car Price Is Unbelievably High (Financial Samurai)
• What Is the Average Income in the U.S. in 2019? (TheStreet)
• Compare the Costs: Buying a New Car vs. Used (Nerd Wallet)
• More Americans go without health insurance for the first time in a decade (USA Today)
• State of Automotive Finance Market (Experian)

Enjoy the Show?

• Get FREE downloads full of financial advice from our Resource Page!
• Subscribe on YouTube or wherever you listen to podcasts.
• Leave us a review on Apple Podcasts.
• Send us your questions or share your story.

If you have any questions (or just want to say hi!), join the conversation on Facebook, Twitter, or Instagram!