How to Buy a Car the RIGHT Way! (20/3/8 Rule) 

Nice

*wobble-wobble-wobble*

Im rocking a 2006 matrix with 220k miles

Great underrated comment.

Many people don't care. They just see what everyone else is driving and decide they deserve the same or better.

@@absolutelynonameslef yep marketing and keeping up with the Jones

So true! Broke without knowing it. I’ve been there.

That’s literally me

Same dude, my 2010 only has 107k, hoping to get another 150k

If you change the oil every 6k miles or every 6 months it will run for another 200k+ easy haha

Camry with 177k here. Change the oil myself every 4-5k miles and top off all fluids. Hoping for another 130k with minor maintenance. My registration and insurance are such a breath of fresh air compared to my brand new Honda 2 years ago.

Have fun with just a newer Corolla cause that's all you'll be able to afford with this 20/3/8 rule (unless you be making well over 70k despite still driving an old beater)

​@@StandAloneState if only it was that simple lol most cars will need significant repairs and parts replaced after that 200k mile milestone, if they haven't been having them done regularly already. My 2010 Ford Escape Hybrid was perfectly fine with basic maintenance up until the last few thousand miles. I'm at 216k and almost all at once everything that isn't included in standard maintenance started creaking, squeaking, and just straight up wearing out. I've been told the car I have can make it up to 300k, but I have never met a single person with any car made after 2005 that has anywhere near that much that didn't buy it second hand after a total maintenance overhaul.

i LOVE my car. ive got an itch for a new car too, but my current one is awesome. i just hate paying for gas so my new car will be a hybrid. but yeah, my current car is a 2017.5 nissan rogue (they made a mid year update, lol) it gets like 28 mpg city and 33 mpg highway. I literally just got back from running errands with 35 mpg. but my next car will be the rav4 hybrid with 40 mpg city and highway. the only reason i got my current car was due to it being an SUV with sedan like fuel economy. highway mpgs in the 30s! sadly I just had to get the brand spanking new one. man, i was dumb. but I still love her. 80,000 ish miles right now and lots of memories.

I can attest to that since I worked in auto ins. One caller was really chill and he was excited to move to a new place. My eyes almost popped out of my head from the $60 it would to add to his monthly amt. We were both shocked since it was a relatively safe area. We still made the adjustment, but holy ish

The Car Edge channel is also a pretty good car purchasing resource. They focus more on how to interact with dealers to get the best value.

Car Complaints is a great website for learning about the best/worst vehicles and best/worst model years.

Agreed. Wonder why they do that

It would make cars MUCH less affordable that way, using the 8% part of 20/3/8, you'd need to be making SO much more than they mentioned if you use net to ever get any car not from a family member, basically

@@uzimakiuchiha that is the whole point of This rule. It’s to prevent the overspending of your monthly budget on a depreciation asset like a car. If they use gross that is making it seem like you can afford more care than you actually can as most people gross pay is significantly more than net pay.

Your net income is also impacted by Roth IRAs & Roth 401ks

What’s the present of your income is it and what are you saving?

@@kckuc310 my current income is $96k and I’m saving about $500 a week (our house is fully paid off). We are currently looking for a bigger house to move into.

How much oil was it burning? My Lexus burns about a quart every 1800 miles. Its an 07 with 186k

No but I did the math including paying extra interest the first year you wait for the tax credit. It haaaardly squeaks by at almost the same exact impact as 800/mo for a gas car

Just the monthly payment on the loan! If you are worried about high outside costs eating into your budget, you can always keep it below 8% though.

costs will continue to drop on batttery replacments if/when they need to be replaced. 10 yr old tesla batteries have been shown to still be in good shape.

Or driving in the rain. Even under warranty. You might be pay 20k.

​@kreem82 they have also been known to fail and cost $24k to replace... That's a huge role of the dice. I would expect obscene depreciation on used electric cars out if warranty once people come to understand the risk unless cheap aftermarket batteries become available.

@@getinthespace7715 it’s a 8 yr /120k mile warranty on batteries. Most people don’t even keep their cars to 100k

The battery pack generally needs a replacement after 10 years, which is around the time most people would be looking to replace their car, electric or not. A "financial mutant" would have been saving for either the battery replacement or the car replacement by then.

They are underrated IMO. I went from $600 a month in gas for my 08 sequoia to $40 a month charging my new model 3. Insurance on the Tesla was cheaper than the sequoia, maintenance is just constantly filling the washer fluid. The autopilot on a long commute or stop and go traffic so is another form of luxury. Range anxiety only exists on gas cars when I think about how much gas is in the car before I leave the house and wonder if I have to account for a stop to the gas station or not. I never worry about that on an electric vehicle because it’s always full when I leave the house.

Did you buy any upgrades and do you have a supercharger at home? ​@@joshuavoss1387

Less to maintain than toyotas of the same year

how many miles you put on it?

My opinion, most of the price increases were due to demand fuelled by cheap debt. Debt isn’t as cheap. So after tax wages need to rise in comparison to interest rates. OR, 10 year car loans will become a thing. $60k at 8.5% is 25% cheaper per month over 10 years compared to 7 years. Pay more of course, but most ppl driving demand are only looking at monthly payments unfortunately

Single year. So if you make 100k. Don't go over 8k per year.

Your income is well above average but you cant afford 400/mo car payment + rest of cost of ownership? You must have to do some budget rearranging

Should have sold it and bought a $25k car.

When isn't he. He's taking a dump. He's like to his wife, I'm so excited. It doesn't smell this time.

How much is a new crate motor? Uh huh. About 10k right? Love my Tesla. Troglodytes are afraid of progress. 🎉😂❤

@@mattmcfly2165 Engines last longer then batteries.

@@mattmcfly2165 not hating what so ever. ive been looking at tesla for myself but i cant pull the trigger yet bc finances are not in line. But you have to look at that as a potential maintenance/repairs. If for whatever reason the battery or whatever component fails how much will it cost. You cannot take it to any shop to repair but tesla and they charge an arm and leg for some repairs/replacements.

Car manufacturers are starting to cheap out, offering what should be standard features on higher trims

When you buy used sometimes you are stuck with the model available.

If you live close enough to work, you may not need anything. I was able to keep up using just a normal outlet. However, if you work more than 15 miles from home, you may not be able to do that. I agree that is a great point to think about though.

It's your money regardless. Importantly, you should have a conversation with your personal tax /cpa to see where the benefit and most efficient way of doing it so you write down depreciation and interest payments against business expenses If you have the cash, loan the business the money to buy it Get it right at the start.

Thank you for this very thoughtful response 👍

@@colinschubert4018 Business also gets to write off depreciation and interest And just remember, buying a new truck for a work truck means you're massively losing in the first 2/3 years. Buying something used that's already taken the biggest hit is also really worthwhile. Remember the game at the end of the year is to take out as much money from your company, after taxes, and pay yourself the profits. Driving a smarter car and thinking you're saving money because you're getting a small tax break is stupid.

Understood I have an appointment with my cpa coming up, but what do you mean by a smarter car? And thank you I appreciate any advice

@@colinschubert4018 smarter... Fancier, more expensive than it needs to be

He encourages it if possible

They're not saying that. The whole video is about the 20-3-8 rule

❤ I'm a happy camper basically

Do you think Teslas not have brake pads?

I think their argument is that it's a lot of opportunity cost on that $40k if that's a significant percentage of your net worth.

You still have to change brakes.

​@saulgoodman2018 yes, but way less bc of the way they regen when slowing down.

What if electric prices increased slightly (25-50%) but gasoline costs aligned with Europe. As for the current grid, I have an electric car and lawn mower and snow blower. My solar panels produce more than I use in electricity. Granted solar is a large expense too. Also, keep in mind, the amount of electricity used at night is way less than used during the day. So the capacity is not as constrained as it seems.

I like the straw man. Unfortunately I have a lot of experience in this area. All electricity has to be used pretty much as it's created. You can store the extra during the day in batteries if you have them, but the majority of people will dump that excess power back into the grid. The grid then has to find a use for that power. Most states have laws that require the electric grid to buy or accept that power. So I'm sure in your world, yes you generate more power than you need from solar panels. From the statement above the power generated by the electrical grid is used pretty much as it's generated, within minutes. So the peak demand times are when factories and offices open in the morning and when people arrive from home in the afternoon until bed. Many times that morning demand starts before the sun rises. As the demand changes throughout the day, the utility grid operator will tell different power generators (solar, wind, geothermal, hydroelectric, coal, nuclear, natural gas, and any other method I can't think of) how much power they need generated. When the sun is out, solar can produce a base load (as noted it can be more than a household would use) during the day, but that needs to be offset by using other sources at night. Wind energy is basically always available, but the quantity of that energy is variable and the majority of wind energy is generated a long way from where most people live and there's the moral concern with how many birds they kill. Geothermal is great, but again the locations that we have access to that energy to generate electricity is limited. Hydro has the moral concern of how the dams disrupt fish and ecosystems plus their best times to generate electricity are in the spring after winter melts. Coal and nuclear operate best when they can be set to a base load and operated continuously, but with states forcing the grid to take all electricity generated by home owners, many of these facilities are used more to cover the peak loads and that is less efficient and requires more fuel to operate. Natural gas generation is used exclusively for covering peak loads. The generators start quickly and can produce a lot of power in a short amount of time on demand. All power generation needs to work together at all times to have electricity when you need it. This helps explain why charger rates change so much throughout the day as it's cheaper to give away electricity than to start and stop the power generation method. All of that is to say, in order to support 3x the electrical demand, we'd need significantly more electric generation than is currently available. That will require more facilities that utility companies will pay for with higher electrical rates. The other thing that hasn't been discussed is taxes. A component of the cost of gasoline and diesel is the taxes that are paid for each gallon used. I expect once the ICE demand drops, governments will get to work increasing the tax on BEV's to make up for the loss tax revenue. My final point is that many things in the US are cheaper than other places around the world because subsidies are given to those industries making it very difficult to track the "true cost" for a given product. I wish those subsidies would be removed and taxes lowered so that the debate could be done easier. Ultimately if BEV sees wider adoption and ICE drops off, the cost of using a charger will go up. At home with some sort of renewable attached to the house, you might get away from those costs, but I suspect that the government will get its tax dollars somehow. (Side note: battery technology has come a long ways, but still is not where I would trust it for large scale peaking so I didn't talk about it. )

@@chrisgreen359 These are valid concerns (it was quite long so I didn't read ALL of them), but not a reason to not try. With more electric cars, you would just need to keep the (non-solar) electric generation last longer. We still use a LOT less electricity in the middle of the night. Obviously charging only at night isn't a perfect solution (not necessarily possible). While I'm not saying my comment wasn't straw-mannish, it was a direct reference to the same phrase from the post I was responding to (using gas price doubling like the electric rate doubling). I agree with you that they seemed to just stipulate the costs they used and may not be accurate.

The basics of my question and my point overall. Who ran the analysis and what were their assumptions in the model? From my previous experience, typical assumptions is that the cost of electricity will remain the same or similar and the degrade in performance for the life will be negligible. Overall, I'm completely down with pursuing all options for a sustainable future. There's a lot of new and exciting things that are being pursued. Also there are many variables that go into a decision on a vehicle for your family. Each person's experience is going to make that decision a little different.

They did mention maintenance in the video briefly and addressed this. I'd still go proceed with the 20/3/8 due to insurance most likely increasing as well with Tesla parts.

😂

It's crazy how many people's monthly car payment could fully pay for a nice electric bike. And the savings you get on gas, insurance, depreciation, maintenance, registration, and even your health are huge. I hope I never have to buy a car in my lifetime

I'm getting an ebike, but using my regular bike in the meantime for local errands on safe roads. I agree with you, but in a lot of places in the US it would be dangerous to ride a bike. A rider I knew died from a car not paying attention and hitting him. He was in California, so even blue states have this problem.

Even a bicycle here has a "tag". May not be true where you live. Granted I haven't actually paid for my bicycle (license or registration which ever it is here).

@@gmenu8032Agreed 100% - 75% do not NEED a car. 75% currently use a car. If your commute is

Hard to do when you have to pick up kids from school.

Until winter when your range and charge rate drop to 0

Lol range drops 10% if that in winter

It’s dangerous. Read your contract, many of these zero interest loans have a hidden, retroactive rate if you default on a single payment. And with 7 years… you have 84 opportunities to screw up the deal.

just pay down the principle balance 20% and pay it off in 36 months or less!

They would still like you to pay it down in the 3-year timeframe, personally I would invest or put the excess in a high-yield savings account.

@@BiggMo Stop with that as an excuse.

@@saulgoodman2018 that was a warning, not an excuse

What sources do you look in the private sector? Craigslist, other sites?

@@melissastroud I usually get a monthly subscription to a site called Galves. It's dealer auction prices. It's ultimately hard to pay the prices you see, but at least helps you get a sense of what a "fair" deal is. KBB and other free online is all biased information owned by Cox Automotive, who ultimately owns most car websites adn pricing sources. Point being, they have reason to show high values vs real values.

Most people don't keep cars that long. However, if you are a person that keeps a car for 200k or more miles, you're probably right.

For now, you will make more in the future, be patient

No more than 8% of monthly income with at least 20% downpayment and do not finance for longer than 3 years (36 months) & most importantly your monthly investments should be greater than your monthly car payment 👍

@@MoneyGuyShow does this count insurance? How do you calculate the total cost of a car that can be afforded?