A jeep with money exploding out of it.

Become a Millionaire with a Few Small Decisions About Cars

Posted On August 19, 2023 By Peter In

Recently, I did a message on how the small habits of our lives can have a dramatic impact on our future. I explained that the small financial decisions we make when we are young can have a dramatic impact as we get older. Thus, I ripped off an old Dave Ramsey (the financial guru), and made a short video. And ever since, I get an endless number of questions about it! So, below, I took the script of the video and expanded it into a blog – with much greater detail to help you execute the strategy.

If you want to see the original video, see the message “Finding Peace” Part 3 – August 20th, 2023. But here’s the idea:

“Someone recently asked me: “What was the BEST financial tip anyone has ever given to you?” I.e., What ONE change had the biggest positive impact on your finances? And immediately my mind went back to an old Dave Ramsey book about cars. He made the case that ONE simple decision about cars can make you a multi-millionaire – regardless of your income.

And I realize that, it sounds too good to be true. But, here I am 27 yrs later… and it’s happening for me. And what I’m about to tell you is actually not about cars… but it’s about stewardship and priorities! After all, you could actually apply this same principle to any number of financial issues! But, to do this…I’m gonna borrow a little lesson from ramseysolutions.com that will totally rock you.

So, to start: Allow me to give you a little math!

Now, Cars today have gotten more & more expensive! Am I right? Currently, the average new car costs $41,378![1] And the average car payment is $577 (for new cars)[2] and $413 (for used).

Now, its common for a new car to lose over 25% of its value the second you drive it off the lot, which means, a brand new car burns around 10k right off the bat! But even a used car (that’s in the first five years of its life) loses a crazy amount of its value: Over 60%. That means, the average car loses 25 grand! And if a person gets a car-loan on top of this, it’s even worse because:

If you get a new car ($41,378) with a typical six year loan (at 6% interest), the total loan over six years will cost you $49,374. But, remember, cars are always depreciating (unless of course, it’s a classic car, that you never drive). But if you deduct typical depreciation, in just five years, that car is now worth $16,552.  That’s a loss of $32,822 in just five years!  I.e., The average person pays[3] close to 50 grand for a car that’s now worth, maybe 16 grand (all because, we wanted a car in its 1st five years of life). This would be like tossing a $20 bill out of your car window, every day… for 5 years straight.

And even worse, after 5 years, the average American will repeat this entire process again because they’re sick of their car.

However, what if we decided that enough was enough!? What if we decided to hang on to our money and instead of sending all of it to the bank (and the dealership) in forms of payments,  what if we got really radical and devised a plan to make our money work for us instead of letting it work for the bank? Remember, priority determines capacity!

Now, in our example, the average car payment was $577 a month, right?  So, let’s think differently for a minute. Let’s say, you want to buy a brand-new-sports car that would normally cost you $577 a month and the car you’re driving currently is a junker – worth about $1500. It’s not pretty, and it yes, it has a lot of problems, but, it gets the job done.

My 1st Car – This was ugly even back then!

The average old car costs about $800 a year to maintain (oil, tires, etc.) and, if it’s old, it usually has about $1200/year in repairs (about $2000 a year total). Now, $2000 isn’t cheap; but, new cars need $800/year maintenance too! So, your $1500 car will generally only cost you about $1200 more a year to keep it moving (compared to a newer car). But $1200 dollars is a steal compared to that $577/month payment, which is almost six times more![4]

So, what if, instead of paying that $577 to the bank (or dealership), you paid yourself. I.e., You’d put it into the bank. Guess what? In just ten months, you’d have $5770.

People tell me all the time, “I need a reliable car!” (And reliable usually means, “Let me be dumb and just get what I want.”) So, I tell them, in just ten months, you can sell your junker for parts ($1500), and add it to your $5770 (that you paid yourself). You now have $7270 to get a major upgrade in car – without ever owing the bank a dime!

My 2nd Car! Those hub caps flew off every month.

But let’s keep going:  If you saved at that rate, you would have another $5770 in the next 10 months! Chances are, you could probably sell that $7270 car for close to what you just paid for it, which means that: you could step up again with cash into an excellent used $13,000 car in just twenty months from today! Not bad! I’m just trying to hook a brother up with a “reliable” car.

But let’s just go crazy with this: Just for fun, let’s carry out our new plan (where we’re paying ourselves for a full six years) by continuing to pay that $577 /month car payment to yourself into, let’s say, a good investment fund for the next 72 months.[5]

Let’s just see what happens!

My 1st car with dignity: My VW Passat when I turned 29

Now, you’re 6 years into the future: your $13,000 (paid-for) car has pretty much run its course! Yeah, it’s been great, but, it’s time to upgrade your car! But hey, that’s no problem! You have a mutual fund specifically earmarked as a car replacement fund!

And do you want to know how much is sitting in that fund right now? At the stock market average of 12% you’d have about $37,316 in that mutual fund!

And, here’s where things get crazy: Let’s say, you bought another $13,000 used car one more time. I.e., You’ve upgraded all of your car’s features by 6 years. You got a new style and color. You got the better [fill-in-the-blank]. Yet, you leave the remaining $24,316 sit in that mutual fund. Even if you never added a single extra dollar to that car fund, you’d be able to buy $18,000-19,000 cars every five years just off the interest of that fund alone! That’s free cars the rest of your life! And you’d never have to make a car-payment again!

The process above, that I just described to you, only took a total of 7 years and 8 months![6]

If you started this at 21 years old, you’d be car-payment free by 29 (which is exactly what happened for me)! Now, did it take some sacrifice to get there? Yeah, Carolyn and I had to work our butts off and sacrifice like crazy. But it was worth it!

In fact, if you continued putting this “typical car payment” into the fund for the next ten years, by 39 years old, you’d have $132,657.61. And if you kept this up, by the time you retired, you’d have: 3.7 million dollars![7]The interest alone would be close to $400,000 a year!

I still buy used cars. But they kick butt! Me & Ruby – a 2019 Wrangler!

And all it took was one simple decision:  Buy cars in cash. And take that money and invest it in yourself instead!

But, you could apply these principles of compounding interest to almost anything when you’re young:

For example, I had a mentor encourage me to get $14,000 into mutual funds by the time I turned 25. Now, this was rather difficult for me (as my salary was right around poverty level). But, even at minimum wage, $3500/year was only 7% of my income.[8] And sure enough, we did it.

So, do the math: Even if you never added another dollar, this would mature into 2.5 million by the time you retired! Not bad, right? And this is assuming you kept that minimum wage job and never added another dollar!

Most 25 year-old couples in America could do even better than this:  Say, 25k by 25 years old: You’d have close to 30 freaking million by your mid-70’s – assuming you never added any more money and you had a mediocre paying job!

But even if you’re 50 years old, and you’re way behind: There are still ways to benefit from the principles of stewardship! I believe that God can bless good stewardship no matter when you start! Indeed, the Bible is filled with stories of where his people got windfall gains.

But one thing is for sure: He’s not going to bless us with resources that will simultaneously destroy us. So, at the end of the day, we never ask God for money; rather, we ask him for the stewardship that could responsibly handle more money!

Besides, His blessings aren’t merely for us. We are to pass them onto the world around us.

So Father, help us to live in such a way that makes sense in the light of eternity!

For More of my Financial Blogs:



[1] https://www.jdpower.com/business/press-releases/jd-power-and-lmc-automotive-us-automotive-forecast-august-2021

[2] This assumes a typical 6 year car loan.

[3] An average 6 yr loan at 6% would be $49,374 Total Cost of Loan (I.e., You’d pay around $7996 in interest). Yet after five years of depreciation (60% = $24,826), the car would be worth roughly $16,552. Thus, you lost $32,822  ($127/wk – roughly, $18/day) in just five years.

[4] $6924 roughly 5.7x’s more than $1200.

[5] In August of 2023, it’s reasonable to get between 12-13.7% return on investment: Eg., https://www.nerdwallet.com/article/investing/best-performing-mutual-funds

[6] Remember, you flipped two low-end cars over the course of 20 months. Then, you bought a nice used one, and kept the “former car payments” (of $577) flowing into this mutual fund for 6 more years which took a total of 7 years and 8 months.

[7] So, if you initially invested $24,316, added $577 each month for 10 years, and then left the accumulated amount untouched for an additional 30 years at a 12% annual return with annual compounding, the approximate total amount in the fund would be $3,744,329.28 at 69 years old.

[8] A married couple who’s working (at minimum wage) would be $24k (x2) = 48k. Thus, $3500 = 7%

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