Ramit tells Matthew not to trade in his car after one year. Keep cars around seven years instead, and calculate the real monthly cost including taxes, insurance, and maintenance, not just the payment.
Overland Park, Kansas.
Seven years.
$350 per month.
Today, a question from Matthew from Overland Park, Kansas. He asks, I have a car that I've been making payments on for a little over a year and I want to get something else. Is it a good idea to trade it in when making another purchase? Are you shitting me? One year and you want to trade it in? What the. This is what's wrong with America right here, this question. Matthew from Overland park, you are destroying America. What is wrong with you people? One year and you want to trade in a car the average amount? You should be keeping a car seven years the average amount. Americans keep it far less than that. I like to buy a great car because I'm Indian. I only have two choices. Honda Accord, Toyota Camry, and drive that shit into the ground. Here you are, one year after you bought it, still making payments and wanting to trade it in. I honestly do not even know what the hell to say. Literally every time someone says something like this, an angel dies and an Ogilvy executive lights a marshmallow in hell. I don't even know what else to say to you. Couple of points tactically that I can recommend to you. Number one, don't do this. Because people who do this tend to continue making poor financial decisions like this. I'm almost willing to bet that Matthew is not financially straight. I guarantee you that he's either in debt, credit card debt, he certainly has, student loan debt, and I bet you that he has not maxed out his Roth IRA. His 401k match is not completed. He's not automated. I almost guarantee you that. And I hate coming down on people. I rarely tell people what not to do. But this is an incipient disaster just about to happen. You could just tell from the kind of question, so don't do this. I would recommend you keep the car, drive it as much as you can, because each year you're actually amortizing the cost and you're really saving a lot, especially after you complete those payments. Seriously, number two, if you decide to do this, I'm going to kill you. But if you decide to do this, then at least ask yourself, am I in a financially stable enough position that I can do this? So if I trade this car in, if I sell it and then go and buy the next car, is it going to adversely affect me? Now, if you're making $250,000 a year and you bought a Subaru, I don't think this is going to be a problem. However, from your question, I seriously doubt that. Third, and I want to tell you this Very important point you have to consider tco total cost of ownership. When I bought a car, I wasn't kidding. I actually did buy a four door Honda Accord in my early 20s. And what did I do with that car? So I could have paid off a lot of it, but I actually chose to make payments just for security's sake, right? And what I did was my payment was $350 a month. Okay, fine. Well, I lived in San Francisco and guess how much the total costs were. When you factor in taxes, insurance, gas, parking tickets, all those things, guess how much it was per month. $350 payment over $1,000,000 per month. Phantom costs. That's the answer. Most people don't even think about this. They don't calculate that registration fee that they have to pay every year in January. They don't calculate maintenance, especially for a used car. They don't factor in all kinds of these criteria which really drive up your costs. They are your phantom invisible costs. So three points I wanted you to consider. I really urge you not to do this because the fact that you're asking this question probably means you're going to do it again and again. So I'd encourage you not to do it. You know what a car, it's going to just after a while the sexiness wears off and it's just a car. And there's other things to use your money on. They could be investing and saving it could be actually spending it on other things you love. So if you're financially secure, go ahead and make that decision. But my guess is just from the question, you're probably in a better situation to keep that car and drive it into the ground. Alright, that's my answer for you. I hope I didn't come off too harsh, but I always want to be honest with the people who are reading my stuff. Thanks a lot.
