Underwater on a Luxury Car!

My friend is underwater on their BMW. They always seem to be servicing it and can't afford to maintain it anymore. But it's valued at 43 K and his loan is 58. What do you think about when deciding how to handle an underwater car loan? Yeah, well, OK, so here's the first thing I want to say. I have I have a little bit of compassion here because I think a lot of folks, especially if you did not, if you if you were not like raised in a household that talked about money or you never learned like the right way to go about buying an automobile. I feel like so many people, especially early on in their financial journeys, find themselves in a place where they are underwater on a vehicle. Brian, I think I've told you I've got a dear friend. I didn't know any better. Financed a car for five years, gotten a car wreck was not his fault. Insurance company told of the car when he got the insurance check. It was it was less than what he owed on the car. He was underwater on it and had no idea. I said, well, I didn't know this was a thing. How'd this happen? But I don't know if that's the Joe's friend. I don't know if it is in that situation because he's driving a luxury car. First, everyone should know when you step onto a dealership lot, anyone can buy a luxury car, but only people with actual resources can afford to service a luxury car. Is this this is a tale as old as they come when it comes to these luxury cars. I've already told you guys, when you buy a luxury car, it's not just the purchase price. It's the fact that the tires on the front are different than the tires on the back. So that means that you don't get to rotate them. You burn through in a year. They're also probably super soft. There go. So they go burn down even faster. You're going to have to put premium fuel in this. You're only going to be able to buy parts from the premium, meaning the manufacturer of the luxury good itself. So all these things, I've covered it because I've fallen into this trap myself. And that's why I tell you this is a tale that is so old, but it's a problem that somehow the average American still falls into. It's because one in five vehicle trade ins have negative equity. The meaning of $10,000, I'm rolling in. They're borrowing more than what they're buying the car for. This is a perfect example of BMW and based upon that market value versus the value, that's, that's like probably like a, an X seven or, or some other thing, you know, big SUV that probably cost close to a hundred thousand dollars when they bought it. And, and, and, you know, it also makes me just chaps. Me is become so popular is close to 20% of loans out there on cars right now are being financed for 84 months. Most people don't drive cars for that long. And when you show up on the dealership, they'll gladly with a smile on their face, give you the keys so that you can drive your financial life over the cliff. And that's why we want to tell you there's a better way to do money. And that's why, look, I have a lot of grace in my heart because I know when I started out my financial journey, I couldn't afford to buy a new car. I didn't have cash in the bank to, to even finance it, but I needed a good, reliable piece of transportation to get me to my first wealth building tool, which was my job. So I remember I had to go finance and I have a no hypocrite policy. I'm like, whatever worked for me in bow, we need to be able to share. So you guys know we walk this walk with you. We eat our own cooking. And so that's why we came up with 23, eight. If you guys can not afford to put down 20% on your vehicle, don't finance it longer than three years. Why is that three years so important? It's exactly what Bo talked about. You don't want to be underwater. And it also will keep your eyes in check with your, your, your wallet and your purse. Because when you finance it for three months of three years versus the 84 months, three years versus the seven years that the, it seems like too many people are doing these days, you'll get a big wake up call that maybe you can't afford that car anymore. And then we want to keep it just in case those two first checks don't do it for you. We also have the guardrail of saying it can't exceed 8% of your gross income. So if you will follow that, this will allow you to buy reliable transportation and without a doubt before all the haters jump in, we love paying cash for cars. Matter of fact, our own research shows most of our millionaire clients did have to finance their first car. But when you look at their current purchase, well over 60% of them are paying cash. We're paying cash for our cars these days, but it's just one of those things that we want to give you a tool so you don't fall in the traps. But don't just because somebody on the dealership tells you that sexy car that you think people are going to care about. They don't, by the way. Um, just because they can say you can afford it doesn't mean you really can. So let's give Joe some advice. I mean, unfortunately, difficult financial positions require difficult financial decisions. And your friend has gotten them in this place where they have an incredibly expensive car that's incredibly expensive to maintain. So if they try to just keep driving that car, keep operating that car, odds are they're going to keep spending money on repair and the maintenance is going to be high and the oil changes are going to be high. So one of the things I think that may be conceivable is, okay, is there some way that I can go get into a much more affordable, much more reliable car? Think a Honda Accord, Toyota Camry, something like that realistic that will work until I can write this ship. Now, if you do that, odds are you're going to be rolling in negative equity cause it doesn't sound like you have capital to be able to buy that affordable car. But at least what you're going to do then is then you can get your maintenance costs down, get your ongoing wear and tear down, and you have to devote everything you can to getting this debt paid off so that you can start building future financial independence. If I don't have the numbers in front of me, was it, it's a Oh 58 and it's worth. 43 40. Yep. That's exactly right. Okay. Look, the water's taking on the boats, taking on water rapidly. You've got a $15,000 mistake right now to just clear the slate. You have 15,000. I think if you keep driving it, unfortunately the maintenance is going to eat you alive cause probably the sets of tires are several thousand dollars a year. Um, all the other maintenance and everything else. So I would, I would try to unload this thing. Think Corolla, um, not land cruiser, you know, on how you get yourself out. And then you have to, you have to make those hard decisions. Bo's talking about, you gotta quit taking on water when it comes to these bad financial decisions. So humble yourself, get into a car that you can actually afford and then let's get that $15,000 extinguished as fast as possible. The last little piece, somebody just commented a Toyota Camry is 35 to $45,000 these days. Yeah. If you go buy a new one, don't, don't miss here. We're saying don't go buy the new Camry, the new Corolla, get one that's a couple years old. It's gently useless. Someone else pay for that depreciation. It's not about being in a nice car when you're in this kind of situation. It's about getting out of a very deep and very bad hole. Yeah. Yeah. I think you can, you can get reliable transportation for under $17,000.