Millennial Millionaire: Don't Buy A New Car

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Why buying a new car is 'one of the worst decisions you can make in your life.'

Grant Sabatier, founder of Millennial Money and author of "Financial Freedom: A Proven Path to All the Money You Will Ever Need," knows how to maximize his savings. By the age of 30, he had earned over $1 million.

To get there, Sabatier, now 34, increased his income by negotiating his salary and working up to 13 side hustles at a time. He also focused on saving as much as he could by cutting back on his three biggest expenses: food, housing and transportation.

To get around, Sabatier recommends cost-saving measures like carpooling or using public transportation. But if it's necessary to own a car, "buy the nicest kind of used car that will get you from point A to point B," he tells CNBC Make It.

That's because, he says, buying a new car is "one of the worst financial decisions that you can make in your life."

Not only is a new car often quite expensive, but it's not an investment that will gain value over time.

"Realize that you're trading two things when you buy a new car," Sabatier says. "The first: You're trading all of your life that you spent making the money to buy it." And second, "you've lost the opportunity for that money to grow over time."

Buying a $40,000 car, for instance, he says, would require a year's worth of work if you're earning $20 per hour after taxes and working 200 hours annually. If you had invested that money instead, it would be worth more than $240,000 after 30 years with a 6 percent rate of return, or more than $440,000 with an 8 percent rate of return.

Financial experts Suze Orman and David Bach agree that buying a new car isn't worth it.

Orman recommends buying used cars because, unlike a home, a car won't increase in value. "The second you drive that car off the lot, it depreciates, 10 percent, 20 percent," she tells CNBC Make It. "Let somebody else get that depreciation."

Bach agrees: "Why would you borrow money to buy an asset that immediately goes down in value by 30 percent?"

Bach also points out how much owning will cost in the long term. "If you're spending $500 a month for that car, well, that's $6,000 a year, not including the car insurance or the gas. That could be two months or three months of your income," he says.

"Run the numbers and then ask yourself: Do you really need a car that nice or could you buy a car that's less expensive — maybe a little older — but still looks good and still runs?"

At the end of the day, "it's up to you" whether or not you want to invest in a new car, Sabatier says. But if you decide put your money into a vehicle instead of another investment, "you've missed that growth opportunity."

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Millennial who saved $1 million: Buying a new car is 'one of the worst financial decisions you can make in your life' | CNBC Make It.
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If you are making $20 an hour and buying a 40k car ... Something is wrong.

tightpantsJONAS
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Agreed. Worst decision I made was buying a brand new car after college. Put that money towards something else like student loans, savings, etc. If you HAVE to have one to get around, buy a used one.

queen_bey
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I make $125k, and I'm single living in LA. When it came time to buy a new car last year, I chose a used $7k Nissan Sentra, when I could have easily afforded the payments on a $20k Honda Accord. My rationale was to stay as liquid as possible and just buy something that could get me where I needed to go.

celica
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So true! Don't bother trying to impress people!

InvestingBookSummaries
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Cash is king, I saved my money to buy my cars/trucks with cash. I always buy used.

CBkid
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Actually, Being alive is a massive financial mistake...








EDIT : I'm a content creator as well.

DyslexicMitochondria
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Cars depreciate as soon as you drive it off the lot so I would definitely never buy new 🚘

YoungProfessionals
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It depends whete you live. Now with ridesharing apps, bikes, scootet companies, etc its became easy to not have a car if your in a big city.

HostDotPromo
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Bought a 10K Honda Accord ten years ago. Best car I’ve ever owned. Never going to sell it.

josesbox
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what if i save money and invest that money, then use the investement profit on a car?

xondeez
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40.000$ and win 300.000$ after 30 years? That's not the way. What do i do? I miss the chance of having a great time driving a car for 30 years? I don't buy it

cristchaesarehg
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lol ...i get it with being frugal when ur salary is less than 50k per year ... but comeon ... no rich person became rich cos he saves on his car.... thats reality. so u may have 300k saving 40k in 30 years... but a person can enjoy his life before that not when hes before his death bed.

xmyvibex
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But what about the time value of money? What present value those 300k will have?

ellhnasellhnas
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im 37 and owned beaters my whole life ive never had ac ive never had heated anything never had bluetooth done winters with only defrost working and no carp payments are amazing

microtechmachineshop
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Ive inherated a '68 f100 and a '52chevy pickup that is in need of slight repair, think i'll just fix those and call it good

IloveHamberger
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I would love to do what he said, but in my city, public transit is expensive and I would have to allocate more time for work commute, plus Uber doesn’t exist in my city. Just don’t buy a needlessly expensive car, and do note the savings electric cars can offer.

sng
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why would you buy a new car? MILLENIALS DONT EVEN MAKE ENOUGH TO PAY CASH FOR A NEW CAR.

askformoreinfowhichyouwont
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In the end, you can't take either a new car or a million dollars in the bank with you. So do what makes you happy while you're still here.

tomazp
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I see people driving expensive vehicles and I feel so rich in my 1998 chevy 😂 had it for almost a decade only paid 1500. learning basic mechanics will save you thousands as well

nickedwards
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If people don't buy new cars then where will used cars come from? 🤔

justrandomthings