Dave Says

Thursday, October 18, 2007 at 1:35am

Dear Dave,

We’ve leased our last couple of vehicles, and to me it seems like we’re just throwing our money away. At the end of the term we have nothing. What is your take on buying new cars or leasing? What is the best way financially to go about getting a vehicle?

— Anna

Dear Anna,

To start with I’ve got to tell you that I’m a boy, and I love cars. But when you run the numbers you find that automobiles represent the largest purchases Americans make that goes down in value.

Kiplinger’s Personal Finance magazine says that a new car will lose 60 percent of its value in the first four years. Turning $30,000 into $11,000 is not a good plan! So financially speaking — and common sense agrees — that if you pay cash and buy a two-year-old car with very low miles in great condition, someone else has already taken the bulk of the loss in value.

This is what the typical millionaire does. Very few millionaires lease cars — or as we call it, “fleecing” a car — because it’s the worst deal on the car lot. Consumer Reports, Consumer Federation of America and Smart Money Magazine have all done articles on the “fleece” and the fact that it’s a rip-off. The only one who comes out to the good in an auto lease is the dealership. Have you noticed, too, how they never mention those high interest rates you’re getting roped into?

Buy a two- or three-year-old or older vehicle, and pay cash for it. You’ll never be able to build wealth when you’re throwing your money away on car payments!

— Dave

Dear Dave,

I bring home about $30,000 a year, we’re debt-free and my wife is a full-time, stay-at-home mom. We live in a 2,000-square-foot apartment in a small town with a toddler and another baby on the way. We’re due in April, and we’re trying to decide whether to move now using a no down payment loan, or wait until six months after the baby’s born. We’re worried about being cramped, plus we’ve always wanted our own place.

— Knox

Dear Knox,

You’ve got 2,000 square feet and only three — soon to be four — people under the roof? You’re not cramped, that’s plenty of space. Especially when two of them are tiny!

I want you to own your own home someday. It’s a great feeling to have a place you can honestly call your own. But you’ve got to make sure you’re ready financially for that kind of commitment. The best way to start the ball rolling is by saving for a big down payment.

With no debt, you should be able to save up for a 20 percent down payment — or more — in no time. If you do this you’ll reduce the amount of your mortgage, plus you’ll avoid having to pay Private Mortgage Insurance. Also, make sure that your monthly house payment will be no more than 25 percent of your take-home pay. In your case, that would be about $750 a month.

— Dave

Dear Dave,

My wife and I each had our own houses before we got married. We’ve tried unsuccessfully for five years to sell hers, but the market there is really bad right now. We owe $43,000 on it, and it’s been appraised at $62,000 so that’s what we’re asking. Any ideas on how we can get rid of it?

— Mark

Dear Mark,

Five years is a very long time for a house to be on the market. From what you’re telling me, this home is located in a very distressed market.

Basically, market value on a house is what a willing buyer will give a willing seller without duress. It looks to me like values have dropped but your price hasn’t.

I hate to say it, Mark, but it sounds like you’ve got two choices. You either become a landlord, or you slash the price on the place. If you rent it you’ll still have the problem of an extra house on your hands, but at least you can see some income in the deal.

But considering the housing situation you’ve described, you may have to let it go for the amount of the loan. Sometimes there are no tricks to selling a house in a depressed market – except pulling the trigger on the price!

— Dave

For Dave’s free “How to Get Out of Debt CD” and other special offers, please visit www.davesays.org or call 1-888-22-PEACE.

Filed under: City Business
By: jwk6179 on 12/31/69 at 6:00

It sounds like Dave Ramsey and his staff are STILL MAKING UP LETTERS and presenting them as facts. "Knox" in his letter says he is bringing home $30,000 and year and living in a 2,000 Square Foot Apartment. I have never seen an apartment that LARGE outside of a major city and the ones I have seen are going for $1500 to $2000 a month. And he will never get a house that size for $750 a month and probably not one half that size at that cost. There are just TOO MANY HOLES in that letter for it not to be made up by a member of his staff, or maybe even Dave himself.