Some people are in denial with their vehicles. They buy new cars because they think they need something reliable, but in reality they’re making ridiculous car payments upwards of $500 when their income just cannot support that. Dave Ramsey offers a great rule of thumb that everyone should follow. If your vehicles are worth more than half of your annual income, your cars are too expensive.
If you’re 1% or 2% over, it’s no big deal, but there are people that have $30,000 worth of cars and make that same amount each year, and that’s ridiculous! Cars are a liability, they go down in value. New cars are the worst offenders; they can easily decrease in price by 20% each year for the first few years. This depends on the make and model, but vehicles generally take the largest beating in value when they are new. This is why I recommend that one should never buy a vehicle that’s newer than two-years old.