If you are thinking about buying new car don’t do it, says self-made millionaire and bestselling author David Bach.
In a recent CNBC Make It segment, Bach said buying a brand new car is the single worst financial decision Millennials will ever make.
“When you buy a brand new car it smells good, but drive it off the lot and it drops in value by 30%,” Bach said. “Most people borrow money to buy that car – why would you borrow money to buy an asset that immediately goes down in value by 30%. Don’t do it!”
Instead, Bach said if you really want that new smelling car, buy a car that’s coming off of a lease that’s two to three years old.
“You know why? That car is almost brand new and you can buy it at that 30% discount and lease it,” he said. “Now you can buy it or lease, so let me explain the difference. When you buy a car you’re gonna own it at the end. When you lease the car, you’re gonna give it back. Who should lease the car? Someone who’s in business and can write the lease off. If you can’t write off the lease, don’t lease, instead buy that car almost new like new, but three years old. You’ll save a fortune and you can take that savings and put in your retirement account where you don’t need the money.”
Bach said one critical thing to know when you lease a car – that’s how many miles per year they give you.
“Is it ten thousand miles per year?” he said. “If you’re leasing your car, make sure you don’t go over that allotted amount because there’s a huge penalty – read your lease documents and know them before you sign.”
Watch David Bach’s full segment on CNBC Make It:
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