When Is a Low Interest Rate Worth It for Buying a New Car?

We're going to move on to Ron's question. He says, "When is a lower interest rate worth paying the premium for a new car versus an old one? My wife and I are needing a new car, and interest rates for used are like seven to eight percent, where some deals for new cars have three percent." So, this one, I'm trying to think about how to answer this. Well, Ron, the answer, I mean, it's gonna be mathematics, right? You gotta weigh the value of a used car versus the cost of a used car with the interest rate factored in, versus the value of a new car versus the cost of a new car with a lower interest rate factored in. Cars are hard decisions because they kind of suck, right? They're expensive and they require maintenance, and they become less valuable over time. But sometimes buying a new car is justifiable. I know when my wife and I started having children, we said, "Hey, you know what? There are some pretty cool safety features out there. There's some stuff that'll keep you inside the lane. There's some stuff that'll let you know if you're getting too close to the car in front of you. There's some stuff that'll let you see 360 degrees around the car." So those kinds of things are valuable. So, if you buy a four or five or six-year-old car, you might not have that technology. So, maybe it is justifiable to get the new one. But I think, you know, is there an interest rate differential that exists where it makes sense to go new ones that have used? There's a lot more math that factors into it. Well, here's what Bo is saying, and I'll just put it in some cold hard numbers to put some reality on this. If you're paying six percent for a used car that costs fifteen thousand dollars, but it's going to be reliable transportation to get you there, and you're just starting out in your career, I'd rather you pay six percent for a fifteen thousand dollar reliable used car. Then I'd rather you pay zero percent or one percent on a fifty thousand dollar brand new car because you got excited that zero to one percent on this new fifty thousand dollar car. That is a disaster. Yes, the interest rate was lower, the interest you will pay is going to be so much lower on that new car. But what have you done to your financial life? You have put yourself way behind, and you focused on the wrong thing. Just like we tell people, "Don't let the tax tell wag the dog." You know, and the fact that people will do some crazy things just so they can save some taxes from the government. Don't do crazy things with financing cars for long periods of time or buying way too much car more than you can afford at your stage of life just because the interest rate was a teaser rate. There's a reason, by the way, the dealerships do this. They know that psychologically, you're like, "I'm getting a deal. I'm getting a steal." So, it pushes you further out to go just a little bit further on how much you're willing to finance, how much you're willing to pay, and they can get you into the quasi-luxury car. But it is totally going to leverage your future. You want to get as much money into your savings and investments as young as possible so you can take advantage of compounding growth for you and your wealth building instead of loading up the auto manufacturers who are out there trying to create this illusion that the nicer car you drive, the more you'll impress your friends, family, and everyone else. It's false. What will impress your friends and family is when you can actually live your best financial life, where you are making these sacrifices while you're in your 20s and 30s so that in your 40s, when you're going to Africa like I just did for 11 days, people go, "How did Brian take off 11 days? How did he get to fly that way? How did he get to stay in that place?" It's because my 20 and 30-year-old self was making sacrifices. Don't skip the steps so you can feel better about yourself in your 20s and 30s and try to impress your friends. That's a false illusion. Let them think you're a cheapskate. Who cares? Because you're saving for the future. Bedazzle your basic life. I love it, and I agree with everything he said. However, okay, however, I'm going to throw one "however" out there. I get so frustrated that I see people sending good money after bad. I watch people who'll go buy a used car that has 80,000 miles on it and is five thousand dollars less expensive than going to buy a newer car. That's not a good question. Mutants understand value and don't get so caught up in this "I have to buy used, I have to buy used, I have to pay." I agree with everything you said, and I love it. But don't go out and say, "Because I want the BMW, I'm going to go buy a used BMW instead of a new Honda Accord." I get so frustrated because I've got buddies who do that, and it drives me absolutely insane. I want to go back to 22-year-old Brian graduating from college. Um, I could have gone and bought a new Honda for 18,000 or so. Sounds amazing right now. But I actually ended up buying a ten thousand dollar, four-year-old Mazda. And I'm telling you, that's a fifty percent loss difference, but it was so much more valuable. And I don't want people to buy the brand new Honda Odyssey for your family. You are buying the five-year-old Dodge Caravan that cost a third to a half of what the brand new Honda Odyssey cost. I agree with everything you said, and I love it. But don't get caught up in this mentality of bedazzling your basic life. Be a financial builder, not a financial consumer. That's what's going to make the difference in turning you into a financial mutant.