Save $2 million by driving used cars

New cars no value even with a 'good' dealSister-site Aol Autos offers a list of the Best New Car Deals of the Month, pitched on the welcome screen as "Editor Reveals Best Cars to Finance."

Talking about the "best cars to finance" strikes me as a bit like talking about the best prescription drugs to freebase.

Among the winners: a Mazda3, available with 0% financing for 60 months, with $500 cash back. Other cars on the list included the Chevy Cobalt, the Kia Forte, and the Honda Pilot.

Now let me give you the personal finance take on these "deals". There's nothing really wrong with financing a car, but anyone who does borrow money to buy a car should know this: You are very, very unlikely to ever become rich if you borrow money to buy new cars.

Sorry to say it, but it's true. And what about those 0% financing deals? In his book The Total Money Makeover, Dave Ramsey sums it up well:

Myth: You can get a good deal on a new car at 0% interest.
Truth: A new car loses 60% of its value in the first four year; that isn't 0%.

If, instead of having a relatively modest car payment of $300/month for your entire life, you simply scrape together cash and buy used cars, how much money would you accumulate between ages 20 and 65? If you invested it in the stock market and earned an average return of 9% per year, you'd end up with $2,063,469.67. Use the savings to scrape together the down payment for a house or rental property, and the results could be even better, once you take into account the benefit of leverage and tax savings.

The reason that people have such a hard time accumulating net worth in America has nothing to do with President Obama, rising health care costs, or taxes: the problem is that people have car payments. If people drove clunkers paid for with cash, they'd be rich. And then, once they were rich, they could buy those new cars . With cash.
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