“I have a buying decision question for you, when you have a sec.” -Text I received from a friend last Friday
“Yo. I’d like to buy my friend’s car. The dealership is offering her $2,000, but it’s really worth more than that. I’d like to buy it, and then sell my car. Play devil’s advocate.”
Done. Believe it or not, there’s a lot here. But first you need some more background. My friend owes about $6,000 on his car. He’s quite confident that he can get $10,000 for it if he were to sell it. I don’t have a reason to doubt this. His monthly payment is $300. He currently is fighting through some credit card debt.
Assuming that he’s okay with driving his friend’s car and it’s of reasonable quality, he should do this. Here’s the rationale. Our cars are often anchors. The payments that come with financing a car are a part of your life for years. The sooner that you can get past the payment phase, the better. Your goal always should be to payoff a car as soon as humanly possible. A car, in most cases, is a depreciating asset. You don’t want depreciating assets to drag you down.
I hate car payments. I think you should too. In this instance, my friend has the ability to “exchange” cars and eliminate a car payment. He should do it. And you should do it too, if you ever get the chance.
Peter Dunn a.k.a. Pete the Planner® is an award-winning financial mind and a former comedian. He’s a USA TODAY columnist, author of ten books, and is the host of the popular radio show and podcast, The Pete the Planner Show. Pete is considered one of the foremost experts on financial wellness in the world, but he’s just as likely to talk your ear off about bass fishing.