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Ask Dave

Brand-New Car With Cash?

Dave outlines his only exception for when he considers it acceptable to buy a brand new car with cash.

QUESTION: A listener asks if Dave would be against buying a brand-new car with cash.

ANSWER: I would not be against paying cash for a brand-new car under one condition: you must be able to afford the loss that depreciation is going to cost you.  If you can afford for the value of your car to go down by thousands of dollars the day you buy it, then you can buy a brand-new car.  The only people who can afford to do this are millionaires. 

Also, remember that your purchases of transportation (i.e., cars, boats, motorcycles, a Seadoo, etc.) should never total more than half your annual income because they are going down in value.  Decide to live without the new car smell and buy slightly used cars.