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Ask Dave

What is the Best Way To Buy a Car?

Linda wants to know the best way to buy a car. Only one way, according to Dave.

QUESTION: Linda has 3 options to buy a car. She can pay cash, do a car lease or finance it. She is 61 and is on disability. She has a paid-for house and $1 million in assets. She tries to spend no more than 4% of her principal each year so she doesn’t dip into it. Dave thinks she’s got the right attitude about wealth building, but the wrong one about car buying.

ANSWER: There’s not a chance I’ll tell you to lease or finance a car. You have a peaceful and calm financial life and you don’t want to mess that up with leasing a car. You’re being ripped off with the new car lease. Consumer Reports and my calculator say it’s the most expensive way to operate a vehicle. I’m all right with you buying a new car. Pay cash or don’t buy it. Don’t go for auto dealer leasing. The dealership makes more money on the lease than they do on the sale of the car. If you’re not willing to pay cash, then you don’t need to drive that car. You are more than able to buy a car every 3 years, and since you have the money that’s all right. But don’t go into debt for it.