Orman explains that if you don’t have the cash to purchase a car outright, financing is a fair second choice, so long as the payments don’t continue for longer than three years. If you need to finance for longer than that, then “you can’t afford the car that you’re going to buy.”

Orman also suggests buying a used car, because unlike a home, a car will never increase in value. “The second you drive that car off the lot, it depreciates, 10 percent, 20 percent… Let somebody else get that depreciation and be smart with your money.”

For more videos, visit our trending category.

Subscribe to our free daily newsletters!
Please enter your email address to subscribe to ETF Trends' newsletters featuring latest news and educational events.