How to pay for your next car.

In conversation with a friend recently, he mentioned that he is starting to check out the new cars because he is going to be buying a car in three years. He has owned his current vehicle for seven years. His goal is to keep it for ten years. NOTE: This is how you win financially. Buying depreciating assets sparingly. Do not buy a new car every single year.

Anyway, I asked him if he was planning on paying cash for it. The answer was an uncertain, “No.” It was almost quizzical. It was like, “Who pays cash for a new car?” or maybe “How would I pay cash for a new car?”


Take the expected purchase price of the vehicle in three years. Let’s say that it will be a $20,000 vehicle. You have 36 months until you will be purchasing the vehicle. Divide the $20,000 by 36. You need to save $555.56/month in order to have $20,000 in cash three years from now.


You may be saying, “Joe, there is NO WAY I can save $555.56/month for each of the next 36 months!” My answer? THEN YOU CANNOT AFFORD A $20,000 CAR IN 36 MONTHS!!! I bet you will get a raise between now and then. I bet you will get a tax refund between now and then. I sincerely hope that you will be paying off your consumer debt between now and then.

Listen – If you really want the $20,000 car in 36 months, save $555.56/month. We don’t do debt around here.



  1. papa_ridgeback on July 13, 2006 at 3:00 am

    Awesome. Questions drawn from your post ought to be included in the written section of every new driver’s license exam (Seems like there’s an old saying … “You don’t see millionaires driving new cars”).

  2. Joseph Sangl on July 17, 2006 at 7:47 pm

    Wish I could make this happen. Maybe I should run for Congress.

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