This piece is part of my 2016–2026 archive migration. Some original formatting, content, and external links may be missing, changed, or not be optimized.
If you’re starting to sweat while signing the papers, walk away
1. Never buy a car that exceeds your net worth
My first car exceeded my net worth, and when I first saw it, it felt like “love at first sight.” Not the best excuse, but I have no regrets. However, I will never make the mistake again.
You never want to go into the red when you purchase a vehicle. If the car’s value exceeds your net worth, it is not the right purchase (for now).
It is impractical to purchase a depreciating liability that costs more than your entire net worth. Though many people do this, it doesn’t mean you must do it.
Buy a car worth less than your net worth so you will still have a positive net worth after the purchase.
2. Never buy a car that compromises your financial goals
Some people are fortunate and have meager car payments. Many people have unaffordable and high car payments.
If you’re not purchasing the vehicle with cash, determine what kind of car payment is most sensible for your budget and financial goals.
Will you still be able to invest/save the amount necessary to reach your financial goals?
If not, you have two options:
Delay the car purchase
Find a cheaper car
3. Never buy a car that you couldn’t afford to pay with cash
This is an uncommon piece of advice, but I stand by it. If you can’t afford to purchase your car with cash, you can’t afford it.
If you have $20,000 across your accounts, your new car shouldn’t cost $20,000. If anything, your car shouldn’t exceed about $2,000. That’s right, 10% or less of your net worth should be allocated to a car purchase, so if you want a higher-priced car, increase your net worth.
4. Never buy a car that causes financial strain
If you feel your cortisol levels rise, if you know the car will put you in hot water, and if you’re starting to sweat as you review and sign the paperwork, walk away, buddy.
Spare yourself the stress. The timing isn’t right quite yet.
5. Never buy a car that forces creativity
Recall a time you tried to get creative to purchase something you really wanted. Most of us have been here at some point or another.
“If I just move this around, cut that, stop that, add that, skip that, etc.”
STOP.
You can’t afford the car right now, and that’s okay. Never force a purchase; this is a recipe for financial strain.
6. Never buy a car if you don’t have to
You might live somewhere that doesn’t require a vehicle. You’re in luck because that sets you up to save potentially thousands. Around 85% of people manage a car note, but I bet some didn’t need the cars they bought.
Does your household need more than one or two vehicles? Maybe not.
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This content is for informational purposes only — not professional advice. Consult a qualified professional before making any major decisions.