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Only one person did it right
Most people finance their cars – even people with money – but a few people do it differently.
I’ve recently engaged with multiple people who have bought cars over 100k, and I find it interesting how each person bought them.
It is not recommended to buy a $140,000 car – unless you have money to blow, you’re on track with your savings/investment goals, your net worth will remain positive after the purchase, you have multiple income streams, you can buy the car with cash if you wanted, and you won’t feel the purchase (if you feel it, you’re likely not ready for it).
Person A: Financed Car
Their income finally climbed above six figures, but not your average six figures. This person was earning nearly half a million – except all their money seemed to disappear; to prove this, they had very little savings.
How do you only have $70,000 in savings when you earn that in a month?
$40,000 was required as a downpayment since their credit was ruined, and the rest was financed.
So, not only did they throw away $40,000 in cash, and they only had $70,000 in savings. But their savings were only in one type of investment, and it was a super risky investment. They could literally lose it all at any point if the markets got moody.
Furthermore, they didn’t have an emergency fund and only had one primary income stream, which was an unstable one.
Diversify people.
So not only did they land themself in further debt with their car purchase – a big no-no – they slammed themselves every month with close to a $2,000 car bill, which they could afford, but they were mismanaging their money, so in reality, they couldn’t afford it.
They were also paying for an overpriced home that they were renting out.
After the car purchase, their deck of cards looked like this:
No emergency fund.
Still had bad credit.
$100,000 worth of car debt.
A consistently depreciating liability.
Person B: Paid Car With Cash
I only followed up with how the person paid for their car because they told me they don’t collect debt.
But people who say this usually still have a mortgage or car debt; they verified they do mortgage debt, not car debt.
So the six-figure car they bought was in cold cash, and they could afford it.
It wasn’t a reckless buy based on their overall financials.
After the car purchase, their deck of cards looked like this:
No car debt.
Multiple income streams.
Multiple real estate properties.
Who did it right?
This content is for informational purposes only — not professional advice. Consult a qualified professional before making any major decisions.
This content is for informational purposes only — not professional advice. Consult a qualified professional before making any major decisions.