Whether you’re kicking the tires on car ownership for the first time or you’ve been navigating the highway of that particular responsibility for a while, you probably think of it as a race to spend money. There’s the monthly car payment, of course, plus other fees associated with upkeep. Eventually, you’ll want to trade it in for a newer model, starting another lap around the seemingly neverending track of vehicle-related expenses.
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Suze Orman wants you to pump the brakes on this line of thinking. The famed financial expert and author says car owners don’t have to keep rolling over the same financial potholes. According to Orman, approaching car ownership strategically will help you save money — and getting the green light on these savings is easier than you might think.
Don’t Rev Up Your Spending When You Don’t Have To
In one of her “Money Monday” newsletters, Orman acknowledged that for many people, purchasing a car means taking out a loan. Is that better than buying a car outright, in cash? Of course not. But a car loan doesn’t have to derail your finances if you follow a simple principle.
“Your goal should be to buy the least expensive car possible, finance it for the shortest time possible, and then drive it for as long as possible,” she wrote.
It’s a straightforward approach with long-term value. If you keep driving the car long after it’s paid off, you’ll enjoy years without a monthly car payment. The beauty of this, Orman explained, is that it frees up more money for your other financial goals — money you can use to build your emergency fund, invest for retirement, or grow your wealth.
Trading in Your Car Too Early Puts Your Money in the Slow Lane
Despite this advice, many car buyers take a different route. Writing in that same newsletter, Orman cited data from the car-buying data firm Edmunds, which found that one in four people who bought a car in the fourth quarter of 2024 still owed money on the car they were trading in.
“So not only did they have to pay for the new car, but they also had to pay off the remaining balance on their old car,” she wrote. “And it typically isn’t a small sum. Edmunds says the average remaining balance is more than $6,800. And one in four trade-ins still owe more than $10,000.”
That’s a significant amount of money essentially being wasted, especially considering the average age of a traded-in car was just three years old. Orman marveled — and not in a good way — at buyers who traded in a three-year-old car and rolled their debt into a new car loan instead of keeping their perfectly functional vehicle.
“Are you kidding me? That is just spending on a want, not a need,” she said.
That new, higher car payment is essentially taking money away from your other life goals, all for a flashier model.
Take the Superhighway to Your Financial Goals
A three-year-old car still has plenty of life left in it, so there’s really no justification for taking on extra debt just so some random stranger will compliment your spiffy new wheels. Even the most high-tech infotainment system and heated seats aren’t worth the extra money you could invest elsewhere.
“The average new car payment is now more than $700 a month and the average used car loan is more than $500 a month,” Orman said. “Another way to think about this is that if you get your loan paid off and keep driving the car, you could have $6,000 to more than $8,000 a year that could be used for other goals. Including saving up so you don’t have to borrow so much for your next car, or so you can finance it for fewer months.”
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By saving this kind of money, you make it much easier to pay off credit cards, save for a down payment on a home, prepare for retirement, or even invest — strategies that can accelerate your financial growth in the long run.
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This article originally appeared on GOBankingRates.com: Suze Orman’s Blunt Advice on Car Ownership — and How It Can Make You Richer
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