Hey parents, join the LA Kings on Saturday, November 25th for an unforgettable kids day presented by Pear Deck. Family fun, giveaways, and exciting Kings hockey awaits. Get your tickets now at lakings.com/promotions and create lasting memories with your little ones. The business proposition of radical personal finance is very simple.

Works like this. I create great media that gives you ideas and inspiration on various ways that you can save a bunch of money and pile it up and become wealthy in every area of life. I do that first in advance and then you voluntarily just send me some of the money that you've saved because of the ideas and the tips and the tools and the tactics in this show.

Simple. For details go to radicalpersonalfinance.com/patron. Today on the show let's dig into one of the most hotly debated topics of personal finance. Should I buy a used car or a new car? Welcome to the Radical Personal Finance Podcast. My name is Joshua Sheets and I'm your host and this is the show where we dig into all of the most hotly debated topics.

We just don't do it every single day. And today let's talk about those car things. People have very strong opinions and are very entrenched on both sides of this issue. I'm going to try to unpack it a little bit and give you a very simple framework for how to consider it so that you can make a wise decision for yourself.

If this is your first introduction to the show, one of the things that you need to know about this show is that I don't tell you what to do. I give you ways for thinking about what you should do and then you decide what to do. That fits in line with my values and the way I like to approach life and so that's why I do it.

So today is going to be no different. I'm not going to tell you buy a used car or buy a new car and here's why. Rather I'm going to discuss the decision, talk about the things that I think you need to be aware of and then from there it's up to you.

But let's start with this. Let's start with instead of talking about it from the perspective of a car, let's pretend it's something else. Now it can be just about anything else that we want to talk about. It can be a piece of clothing that you're buying. It can be a tractor that you're buying.

That's actually the example I'm going to use because it's kind of a fun one because very few of you go out and look for tractors. But my point is that the car is not this somehow special decision. The reason it gets so much attention and so much press and so much publicity as a big important personal finance decision is because it's usually a big decision as far as dollar amounts involved.

Anytime there's a big decision, there's a potential for big mistakes and also big – what's the opposite of mistakes? Good big benefits. We'll go with that. Big dollar items matter is the point. So for most people, the number one thing that we spend money on is taxes and that takes up more of our budget than anything else.

That's why I spend so much time on taxes. Number two is usually housing. For most of us, we spend a lot of money on housing. That's why there's so much written about when to buy houses and how to buy houses and when not to buy houses. Third thing is transportation.

Now it doesn't necessarily have to be that way. You don't necessarily have to spend a ton of money on transportation. But generally, at least in the US-American culture, we do. The US-American culture is the culture of the automobile. So if any of you non-US-American listeners are wondering like why do American finance people spend so much time on this, it's because the United States of America, we have a culture that's built around the car.

Our country is very spread out. We have a culture that comes from driving. Driving is a rite of passage for young people where you transition from childhood to adulthood and you have your freedom. We in many ways as a culture worship the automobile. So that's – it's not the same throughout the world but in this culture, it is.

That's why there's so much content. But what I have to share with you is applicable no matter where you live. But let's talk about not buying a car because there's simply too much emotion associated with buying a car. Let's talk about buying a tractor. Now, for a tiny percentage of you, by my best estimate, three of you, there is actually a lot of emotion associated with the idea of your buying a tractor.

But for the vast majority of you, it's not something that you've considered. But let me paint this picture for you and let's talk about how you would approach buying a tractor. Now, for all but the three of you who are committed to the myth and mythology of the beautiful bright red tractor, the beautiful bright green with yellow trim tractor, beautiful yellow tractor, whichever brand you prefer or blue, those are the four major ones that come to mind that I see out in the fields when I travel through farm country.

But for those of you, you might have some baggage associated. Most of us don't have any baggage that's associated with a tractor. So pretend I come to you as a farmer and I'm saying I think I need a tractor. And I start listing off what I need in a tractor.

How would you advise me in that scenario? What would you tell me that I needed? So let me play just some fun little examples here to hopefully make you think. Let's assume that I am operating a small half-acre garden plot. I have an urban farm. It's a good example.

I have an urban farm. And I come to you and I say, "Listen, I was down at the John Deere dealership this weekend and I saw just the most beautiful John Deere tractor. This thing was awesome. It had 800 horsepower. It has a total of eight tires. The tires are 68 inches in diameter and there's eight of them total so I don't get stuck in the field.

And this thing can haul three implements all at the same time and I can put across a 30-foot..." I'm not good enough making these examples up. So those of you who actually know are making fun of me right now, but let me keep trying. "I can put in place a 60-bottom plow.

It's 120-feet wide plow. I can get this tractor and I can plow my entire half-acre urban farm plot in about three minutes." And I got to tell you about this thing. After all, this thing, it's got air conditioning, it's got leather seats, it's got an air suspension in the seat, it's got a GPS built in so I can just simply click the buttons in the GPS and allow it to...

The tractor will drive itself. It's got a TV screen there. I can sit there and I can watch satellite TV. And yeah, I need to be in the cab, but I can watch satellite TV while I'm cruising down my half-acre garden strip in comfort. It's an utterly ridiculous scenario, isn't it?

But do you see the parallels to what we do with cars? You would look at me if I were all hot and bothered about the fact that I had this big, giant John Deere tractor and you would say, "Come on, man. What's wrong with you?" But if I were coming to you and I'm all hot and bothered about this brand-new car that I'm going to buy and somehow it's going to enhance my self-image, you would look at me and say, "Well, that's normal.

After all, driving a nice car is important, right?" Now, let's flip my scenario. Let's say that I come to you and I'm running a 15,000-acre corn farm in Iowa. I come to you and I say, "I'm running this 15,000-acre corn farm. We're running a little bit short on our ability to get the corn out in time because the fields are muddy." So what I've done is I pulled out my local classified ad and I was able to find a used lawn tractor from a guy down in Des Moines.

So I'm going to drive a few hours into Des Moines with my little pickup truck and I'm going to put this little lawn tractor – you know what I'm talking about, right? Little ride-on lawn mower that people mow their yards with. I'm going to drive down there and I'm going to pick this thing up.

It's about nine years old. It's really – but it's in pretty good shape for it being nine years old. I picked it up. I only given the guy $280. So that's going to solve my problem. A little bit silly, right? But yet, haven't you noticed that some people, when they're trying to run a massive operation or it's massively financially profitable, they're trying to nickel and dime and save every last bit and buying a rusty old nine-year-old lawn tractor when they need a $180,000 brand-new John Deere?

In reality, that's actually what they need. My point is simply to try to reframe this conversation because cars in our culture are a very funny thing. People have such strong opinions and they state them so strongly about this is the right thing to do and here's why. Again, people are so strongly stuck in either side of the camp, in either side of the buy used or buy new camp.

We're very prone to confirmation bias in this scenario. As an example, I personally, me, Joshua, I've never purchased a new car or at least I haven't yet. Maybe someday I will, but I never have. I've had pretty good experience with all of the used cars that I've had. I've got some data that backs that up, but what happens is I'm very prone because of my good experience, I'm very prone to indulge in a little bit of confirmation bias and say, "Well, here, I've made these good decisions.

This is right for me, so therefore it should be right for you." I'm very prone to that. Now, on the flip side, I know people who always buy new cars. Then there was that one time where they bought a two-year-old car and it broke on them. They're very prone to confirmation bias of their decision as well.

But yet we've got to look through it a little bit more. We've got to actually understand the situation just a little bit deeper. If it helps you, set aside the idea of buying cars and think about buying something else. Think about buying a tractor if you like that example.

Think about buying a chariot if you like that example. One of my favorite personal finance books is a book called The Richest Man in Babylon. If you haven't read it, read it. You can find it online for free. You can get it in your library. You can buy it online, a paperback.

Go to Amazon, use the book. I'm sure you can find it for about 10 cents. It's a well-written book. It's really fun. I like it. One of the things that I like most about it is the author. I think it was George Clayson is the author. He wrote it from a modern perspective but in a past time period.

In our modern perspective, we have so much baggage associated with all of our decisions, so much baggage associated with the cars that we drive and the houses and the right way to live and the clothes and things like that. He goes back and he takes all of these things that we associate today and he puts them in a historical context.

For example, he talks about somebody looking jealously and enviously at the brand new chariot to be pulled around town in or somebody buying the brand new tunic and robe and paying triple the cost to have the most perfect shade of tunic to wear or the new sandals. It makes you laugh because at least for me, not having been in that type of culture, I don't care at all about what color my tunic is or how fancy my sandals are but I do care what type of clothing I wear today and I do care what brand my shoes are.

Interesting. Sometimes it's valuable to look at things from a different perspective. Now, when we look at cars, basically this comes down to a financial calculation. What is going to be in my best financial interest given my personal situation and giving all of the decision input and criteria that I have in my situation?

That's what it comes down to. Now, I would encourage you, try to think of yourself like a business owner. Pretend you're the farmer or whatever business owner or other business owner that you want to figure out and think about your car not as an extension of you but just think about it as something that is useful to you in your business, the business of your life.

Ask yourself, as the CEO of this corporation, Joshua Sheets, Incorporated, what advice would I give Joshua Sheets? Well, if you were doing that, you would probably sit down and you would write a careful list of your needs, what you actually need. You would also make a list of what you actually want and those needs would be different depending on the scenario and the situation that you're in.

Now, I am going to give you some details on all the different aspects of the costs so that – and give you some tools which – through which no matter what decision you make, you can mitigate the cost and lower the cost. But just think about this. Think of the farmer.

If I've got a half-acre farm, I probably don't even need the lawn tractor but if I need a tractor, I need a small basic lawn tractor. It's probably not that big a deal if the lawn tractor breaks down one day a year. Now, flip it around. If I've got a 10,000-acre farm, a lawn tractor doesn't serve my needs.

I need that big John Deere and I probably need to make sure that thing is in top shape. But I also have a difference of scale, right? Think about my profit potential on 10,000 acres versus my profit potential on that little tiny plot that I'm managing. There's probably a little bit of a difference as far as what percentage of my profit, the actual cost of that equipment is going to be.

So when we're making needs and wants and we're making lists of those things, recognize what it is that you need and that you want. Recognize the scale of the decision. Let me give you an example from my life. So far in my life, I have owned and operated three vehicles.

The first vehicle that I owned and operated, I bought while I was in college and I bought it from my brother. It was a 1993 Honda Accord. I bought it with 193,000 miles on it. I paid $2,000 for it. I drove that car for many years. I don't remember the exact number.

I sold it with 315,000 miles on it and a total of $1,200. I experienced a total of $800 of depreciation. I think it was over about five years, something somewhere in that range, and a lot of miles on it and relatively trouble-free. I only had one or two major repairs in the range of a couple hundred dollars.

Other than that, it was all just normal scheduled maintenance, most expensive of which was swapping out the timing belt, but it was a good car to me. At that stage of my life, that was a good decision because I didn't need much car. I needed basic transportation and I'm still in the wealth-building stage of my life.

I sold that car when I finally decided that, A, it was having a little bit of problems with some oil leaks and I decided I would go ahead and sell it rather than fixing it because I wanted to upgrade a little bit. I needed a car that was a little bit more appropriate for my occupation as a financial advisor.

I was able to find a 2006 Ford Expedition. I've told the story in the recent show with Tom Stanley. What I found with what I needed, my goals for what I needed at that time is I needed a vehicle that was, A, big enough and comfortable for me. It's a real challenge for me with cars.

I'm 6'6" and over 300 pounds and I wear a size 16 shoes. As much as I love driving small sports cars with manual transmissions, I simply can't do it because to drive them, I have to be barefoot. My feet can't work the pedals. My shoes are too physically large to actually press the accelerator without also pressing the brake, just the normal shoes that I wear.

So I can't buy a small, cheap, manual transmission sports car. I can't get into many of the cars, even with the seats all the way back. I remember one of the more disappointing experiences of my life. When I was a kid, I always wanted to have a Dodge Viper.

That was my dream sports car. Then one day I was at the Dodge dealership, killing time. I had some time, I was waiting and I decided to go look at cars. I've always enjoyed looking at cars at dealerships and they had a Viper on the showroom floor and I tried to get in it.

I literally could not get in it. My head was too tight. My shoulders were too big. I couldn't shut the door and my dream was dashed. I knew that I would never be able to have a Viper because I couldn't physically fit. Same things happen to me with Corvettes.

Every time I've driven a Corvette, I've always thought that would be the best car for me as far as that it's a supercar that is very low priced. But man, I can't drive them comfortably. I have to take my shoes off and I can hardly see through the windshield because the top of the windshield is staring right at my face.

So my dreams of owning and having supercars, I've basically decided that's never going to work for me. But a big SUV works well for me. Now, it has high expensive gas mileage. It's not cheap to drive as far as the fuel. But on that one, I got a good deal.

It was four years old when I bought it and I bought it for less than a third of the new price. So you figure out the depreciation, but in four years, it was less than a third of the purchase price. Bought it with almost 100,000 miles. I think sold it later with $150,000, 150,000 miles.

Replaced it with a 2007 Hyundai Entourage that I bought for $5,000, the minivan. Bought it for $5,000 and something like 160,000 miles. Now, it's at almost 200,000. It's been a great car. It's done a good job. Did have one expensive repair, but that was not endemic to the car.

That was probably due to mechanical error and just kind of a freak set of circumstances. But these vehicles have been good to me. But I have been at this stage of my life, I've been very focused on how can I buy for the least possible money that meets my needs.

So the needs that I've tried to fulfill at various times, the car needs to be big enough for me. It needs to be comfortable enough for me. It needs to be new enough and fancy enough to not be – when I was a personal financial advisor, to not be a negative mark on my image and my reputation.

But I also didn't want it to be a negative mark from being too fancy. So I was trying to find the gray man vehicle. So I won't go more into that. But also I live in a city where it's very easy driving. I have good local networks. I have little problems if I have a used car.

Because it's a personal vehicle for me, then if the car breaks down, well, all right. I'm out in a little bit of inconvenience for a few days. But that's really not that tough. I've got a great family network of vehicles I can borrow. I've got – I live very close to everything.

Now at this stage, I work close from home. So that's not a big deal. Now, what if I were in a different place though? What if I were – well, I want to give one quick calculation and I'll give you some different scenarios on me. The way I look at it, if I were doing what many of my peers did, let's say that I went out and I bought a $30,000 vehicle.

Well, if I were to go and buy a $30,000 vehicle, then each year I would have about $4,500 of depreciation assuming 15%. So in the first few years, I would lose let's say $9,000 in the first two years. At this stage of my life, I am very much in the wealth building stage.

So I run the numbers and I say let's say that I have $9,000. Let's do a quick calculation here. $9,000 today that I save, invest it for 30 years, assume 10% interest for a nice round number, $0 into the account. At the end of 30 years, that's $157,000. At the end of 40 years, that $9,000 turns into $407,000.

There are a whole lot of things that I would like to do with $9,000, not only having the money tucked aside for 30 or 40 years, but a whole lot of other things I'd rather do today than lose $9,000 of depreciation on a car. So I make different decisions.

Now, fast forward to the point. Let's assume that I'm 50 years old. I'm a multimillionaire. I've got more money than I'm ever going to spend. I'm able to fund all of the financial goals that I have and I want to go and buy a fun car. If I'm a multimillionaire, if I go out and buy a brand new Corvette for $100,000, is that going to be a big deal in my financial life?

No. My time is much less and so at that stage, if I want to go ahead and waste the money on the depreciation, it's no problem. So I can see different scenarios even in my own life in which I would make different decisions. Now, back to the farming example.

I've worked with a couple of ranchers here in Florida, cattle ranchers and grass farmers and orange farmers. One of the things that's interesting is if you put yourself in the position of a farmer or rancher, you might spend a lot more time in your vehicle and the vehicle gets used much more – it gets used a lot more than anything else.

Now, can you still buy a used vehicle? Yes. But now we're switching the transition and we're saying how much use is actually going to be put onto it. I remember being amazed at a former associate of mine, somebody I worked for in the past. I looked at his pickup truck one time.

He was a rancher and I think the thing was four years old and he had almost 300,000 miles on it. It was insane. The vast majority of that time or much of that time, the vehicle was used in very difficult circumstances, hauling a large heavy trailer with big equipment, things like that.

So the vehicle was extremely used. Now, when you put the context of savings, saving $4,000 or $5,000 up front by buying a vehicle that's a year or two old and you compare it to the life cycle of the vehicle of how much and how heavy it's used, it's a rather insignificant savings versus the intended purchase.

But that's very different than my situation right now. Understand that. The other thing that you got to understand with vehicles is not all markets are the same. We really have a luxury in the United States of America of having an amazing used car market with a tremendous supply of much less expensive vehicles that have been very lightly used in comparison to what they could be used in some places of the world.

They're at very favorable prices and the quality is extremely high. Frankly, the used car market is phenomenal simply because cars have not been used that heavily. We have primarily paved roads in the United States of America. Most cars are not beat up that much and we have a culture of steady new car sales.

So the reason that people go out and they replace their vehicle every three, four, five, six years, however long, that leads to the fact that there always being a steady supply of used vehicles. But it's not the same everywhere. That's unique to this market. I remember reading about vehicles in Africa.

There's an awesome, interesting car manufacturer that I keep my eyes on called Mobius. I came across it when I was – I like reading adventure stories from overlanders who load their family up in their cars and drive around the world basically. It's something that someday I think I'll do.

These families – this one – I read the story of this couple that drove across the Congo and they described about the abuse that their vehicle had taken driving across the Congo. The thing was ripped to shreds practically after something like 30 days of travel. They were talking about how vehicles in Africa, in that part of Africa were used.

Somebody could buy a brand new Land Cruiser or a brand new Land Rover and the thing would be essentially demolished after a couple of months of use. It's a little bit of a different decision if you were in a used market like that where vehicles had been used so heavily.

So that I don't leave it as an unfinished thought, the example of the Mobius is actually a vehicle that is – there's a founder, an English guy who's trying to have this thing built in Africa by Africans for the African context. It's an awesome little rugged SUV that he's creating and it's just very cool.

Check it out. Just do a web search for Mobius. But it's very different in that market versus here in Florida where everyone drives on the highways. Think about even going and evaluating buying a pickup truck. Here in West Palm Beach, Florida where I live, the majority of pickup trucks are driven purely as status symbols.

There's no actual practical usage to them. Go and look at any local fire department and the majority, there are usually about five pickup trucks and one jeep in the parking lot. It's a status symbol. It's a lifestyle choice. So I can find easily a hardly used pickup truck with 100,000 miles on it.

It's just been running up and down the highway all day and that can be a great vehicle that might fit my needs if I have a need for a pickup truck. Now compare that to my trying to find a pickup in West Texas and every truck that's got 100,000 miles on it has been run up and down a gravel washboard road or been loaded with a cattle trailer on the back of it for 85,000 of those miles.

That's a very different market, very different usage, very different market. Now obviously there would be probably some price differential but my point is you need to understand why do we actually have this market. So you can't say, "Well, buy used in every country in the world or in every situation." No.

You've got to say, "What is the actual scenario that I need? What do I actually need and want?" And here's the fundamental reality. You want to make sure that you can meet your stated needs and wants at the lowest price possible. That's a good decision. Whatever method you find to be able to meet your stated needs and wants at the lowest cost is going to be the best scenario based upon the market that you have.

I'm going to talk about times in a minute where markets will change and the person who would ordinarily have chosen a used car might find themselves choosing a new car and the person who would ordinarily choose a new car might find themselves choosing a used car. Markets change. The marketplace is based upon supply and demand and you've got to figure out where do I make a good choice within this.

Now, that being said, I think for many people, they seriously should consider always choosing a used car versus a new car. This is what's so frustrating why there's such an emphasis on this as personal financial advice because when you look at the fact that very few people are wealthy, very few people are just buying cars out of extra money.

Many people, their car is sucking all their money out of their budget. And when you have a heart to help people become wealthy, you see the opportunity cost and many people don't see that. We don't teach and train people on opportunity cost. At some point, I need to do an entire show on it.

But in simplicity, basically, there's always two costs that are associated with something. There's the cost when you buy something. There's the cost of the price that you pay for and then the opportunity cost is what you could have done with the money or the resource if you hadn't made that choice.

So if you choose to go see a movie, your opportunity cost for the movie is what the other decision you could have done – you could have made with the time, the other activity you could have engaged in with that same time. And so what happens is oftentimes people aren't clear about their needs and their wants and they don't recognize what could be done with the money with the alternative use of the dollar.

So when I look at the scenario and say, "Well, if I choose to buy a – this is my thinking. I could go and I could buy a brand new minivan for $40,000 or I could buy my minivan for $5,000. That leaves me with $35,000 of investment capital. If I did nothing else other than that one decision, the $35,000 of investment capital, and if everything else were constant, it's not, but assume it is, $35,000, if I invested $35,000 today over my working lifetime of 40 years at 10% interest with no further contributions to the account, then I would probably have an extra $1.5 million in 40 years' time when I'm about 70.

That's compelling to me. When my primary need is I need a way to transport my family from location A to location B, that's the need that I have and fit everybody in the car. That's it. And so I happily will drive the $5,000 vehicle so that I can have an extra $1.5 million.

Now, that's motivating to me. That may not be motivating to you, but every person, if you go through what's my alternative use of the dollar, let's say that you're making a choice to purchase a used car for $10,000 less than the new car, then the question would be what else would you do with the $10,000?

So would you rather, young person, would you rather have this cheaper used car and a motorcycle to go with it, or would you rather have the more expensive new car? Or would you rather have the cheaper used car and take a year off and backpack around the world, or would you rather have the new car?

Or would you rather have this and stay home from work and raise your kids for a year and have a year off with your kids or have the new car? That's the decision that we're making, but we're often not clear and specific about the decision, as long as you're clear and specific about it, because there'd be many people who would say, especially at an older stage with greater wealth, there'd be many people who would say, "You know what?

I actually don't have something that I'd rather do with this money. I'd rather have this money and just simply enjoy the new car experience." Then in that case, the new car decision is probably the right one. That could be due to scale, the scale of somebody's wealth, or it could be due to lifespan.

They value the experience more than they value the money. If I didn't have a 40-year investment time horizon, my answer would be different. Let me get to some of the actual costs and benefits, some of the techniques that you can do that you should consider. The key thing to keep in mind, as I said, is the total cost of ownership.

What is the total cost of ownership of choice A, and what is the total cost of ownership of choice B, assuming that both choices satisfy your needs and wants? That total cost of ownership number is important, because you may find that your total cost of ownership would be lower with new or would be lower with used.

It's tough to get data on some of these things, though, so let's talk about what actually makes an impact. Price makes a big impact. The price that you pay for something matters, but it's actually not the number that we should be calculating based upon. We should be doing most of these calculations based upon the depreciation.

Depreciation is something you get very comfortable with in the context of running a business ledger, a business accounting system. In personal accounting, we don't often think about it. We don't recognize it. In business, you need to recognize the depreciation every single year, but in personal accounting, we don't usually even think of it.

Depreciation is very simple. It's the purchase price of the item minus the residual value when the item is sold. That's the actual cost of the item in terms of upfront pricing. It's not the total price. It's the depreciation price. If I purchase a car, as an example, for $30,000, my upfront price is $30,000, but if I sell it in five years for $15,000, my total cost was $15,000, because the vehicle has $15,000 of residual value remaining.

It's very important to make those decisions based upon the depreciation, because there are many situations in which I could see somebody purchasing a new vehicle and buying a vehicle that has a higher residual value and maybe other benefits and actually having a lower total depreciation than the alternative used vehicle.

Let's assume for a moment that there is a hotly in-demand brand. Here, where I live in South Florida, it would be the Japanese brands, Hondas and Toyotas, and their associated luxury brands, Lexus and Acura. Hondas and Toyotas, and to some extent, Nissans, are very popular down here. They're especially popular with basically the non-ethnic white South Floridians.

I have a lot of friends from the islands. They only drive Toyotas, because those are the vehicles that come or Hondas. Those are the vehicles that are in demand there. I've got a couple of friends from Jamaica. It's one of the islands, but they only drive vehicles like that.

Down here in South Florida, where we have a high ethnic population of people from the islands, we have a high Spanish population, then those brands are very much in demand. It's hard to find a good deal here on something like a used Honda or Toyota. You got to take that into account.

Sometimes, you might be better off just simply going and buying a new one. Usually not, but you can do the calculation. Always factor in what's the actual amount of depreciation. You also got to account for all of the other costs and look at it totally, all involved. Another example would be tax costs.

What is the sales tax on the purchase price of the vehicle? That's a big cost that many people don't think about. The difference between buying a $30,000 vehicle and a $20,000 vehicle, that's $10,000 in my state, 6%-ish sales tax rate, $600 extra cost. You got to factor that in.

Also, financing costs. If you're going to finance the vehicle, what is the total cost of that financing? Then you have all of the operating costs. You've got the fuel or the energy to put into it. We've got to start changing as electric cars have become more popular. We've got to start changing our vocabulary to talk about the energy cost of operating the vehicle.

You've got your maintenance and repairs costs, which is most people's biggest fear about used car versus new car. The used car is theoretically going to require more maintenance and repairs than the new car, theoretically. You have your insurance costs and then you have other ownership costs, so paying for a parking spot or a garage space or fixing up the stereo system or buying floor mats.

This stuff adds up. Now, the big one though is obviously depreciation. This is primarily the biggest difference between a new car and a used car. We always ask the question, why is there such a difference of the value? Why is there such a depreciation for the new car? There are probably many reasons, but very simply, if there's only a tiny difference between a new car and a used car as far as the price, let's say a new car were $30,000 and the used car were $29,000, then most people would go ahead and just simply say, "I'll be the first driver.

That way I know that everything is taken care of from the beginning. I'll drive the first mile on the car." There's got to be a difference to make it worth making to incentivize people to buy the used car, but the big one is actually that knowledge. Because there's a difference, the car buying transaction is a transaction of an asymmetrical amount of information.

The buyer has relatively little information about the quality of the vehicle and the seller has all the information about the quality of the vehicle. If the buyer is looking and saying, "Here's a one-year-old car, why is somebody selling a one-year-old car?" The buyer looks at it and says, "Wait a second, what's going on here?

What's wrong with this? What's wrong? There's got to be something wrong with the car." Now, so to actually make that sale, then the seller will usually have to say, "Well, I've got an emergency in my family. I've got to unload it because I'm moving," or something like that. But the reason is that there's an asymmetrical amount of information.

So if the seller is trying to get rid of the car, then they got to get rid of it quickly. Well, you got to discount the price to get rid of it quickly. And so that's why recently purchased cars, whether it's a year, two years, three years old, they can be found at a substantial discount.

Now, that's a great scenario for you if you'd like to save money. It's not so good for the buyer of the new car. But it's all about that risk. You're taking a risk when buying a used car and there's more risk than when buying a new car. And then because of the difference in the amount of information, then you're in a weaker scenario, weaker position.

It's a big deal. That's why there's depreciation. It's all about the market. But the key is not to get exclusively focused on the purchase price, but rather look at the total cost, factoring in all of those things, factoring in everything, and then make your decision based upon that. So the reason the scales tilt so heavily in favor of the used cars is we have a large supply of quality used cars in the United States of America.

That massive supply is driven by the fact that many people choose new cars, drive them lightly and then get rid of them, but so you can find good deals. The cars today last longer than they ever have. Many people seem to have this impression that vehicle quality is the same today as it was in the 1970s where if a car reached 100,000 miles, it was practically used up.

It's not so. And you can find good quantitative evidence demonstrating that it's not so. My anecdotal evidence, I've never had a car that had less than – let's see, I guess less than 100,000 miles basically and two of mine had over 100 and almost 200,000 when I got them.

Anecdotally, I've had very few repair scenarios that were due to the mileage of the car. And there are some things that you can do to care for that. And if you talk with people who are garage owners, mechanics, things like that, 200,000 miles is probably pretty normal for many cars to be able to get to without some major scenario.

Build quality matters completely. But add up all of those costs and figure out what the total cost is and then based upon that, make your decision. Now, focus on purser's price but also focus on other things while you're making the decision. I'll give you a couple of the bits of data when my wife and I chose to buy the minivan that we drive.

What I was looking for was looking for a minivan of a certain vintage. And so there was in the minivan market, there is a – by the way, minivans, the best vehicle for – probably the best deal of a vehicle for all the benefits put together. I'll save that for another time but they're just great vehicles.

But in the minivan marketplace, the Toyotas and the Hondas have a premium price associated with them. There is a substantial difference in the pricing. But there's a substantial discount for the American brands and for the Kia and the Hyundai. But based upon the research that I did at the time, the build quality of the Kia and the Hyundai is pretty good, pretty good, pretty comparable to the build quality of the Toyota and the Honda.

And so I was able to get a substantial massive discount by going with the second tier of brands and the build quality based upon the research I've been able to find seems to be pretty good. Now, who knows? I did have one expensive repair and again, that was probably due to mechanic error rather than to the problem of the vehicle.

That can happen on any car. So I'm not ready to say that I had a bad experience. So far, it's been pretty good. So there's a substantial discount on the purchase price. But other things that substantially benefited me, the actual cost to insure the vehicle was at that time much lower than other comparable vehicles partly due to excellent safety ratings and partly due to the lower replacement costs, so much lower insurance costs.

Additionally, because the vehicle was so cheap, I could have much cheaper insurance by not necessarily choosing to put comprehensive insurance on it. I probably wouldn't make that decision if I were buying a fancier, newer one because it would be a bigger deal in my life. I could, if this car broke down, I could go and buy a whole other car.

I could buy two Hyundais or Kias for the cost of the Honda or Toyota. And so it was no big deal for me to say, "Okay, I can get cheaper insurance costs." I was also able to find a substantial discount because of buying a high mileage vehicle. But in my scenario at this point, I don't drive that much.

And so to me, that's actually a benefit both ways. If you drive a lot, then driving a high mileage vehicle can be a benefit. And if you don't drive that much, then it can be a benefit. There's a sweet spot somewhere in that curve of usage versus repairs. I don't know where it is.

I can't find the date on it, but there is a sweet spot there somewhere. So for me, all of those things resulted in a dramatically lower cost. Factor these things into your decision-making criteria. Try to estimate your actual costs. And let's start with depreciation. Depreciation is almost always going to be your biggest cost.

So ways you can mitigate depreciation. Number one, buy a less costly vehicle. 20% depreciation on a $40,000 vehicle is a loss of $8,000 of value in one year. 20% depreciation on a $20,000 vehicle is a loss of $4,000 in one year. In just about any vehicle class, you could find a $20,000 vehicle that's just about as good as the $40,000 vehicle.

And you can especially find that in things like the SUV marketplace, luxury car marketplace. You can find it. So unless you're rich, just buy a little bit less car, and built in, you're going to have lower depreciation. This is why the scales tip so heavily in the favor of used vehicles.

Two or three-year-old vehicle, drop $20,000 in price. And the reason is because $8,000 of annual depreciation, eight times what? That'd be two and a half. You're down now again, depreciation is always based upon the year. So $40,000. So let me just explain. So $40,000, pull $8,000 off the price is now 30 $40,000, pull 8,000 off the price.

That now is down to $32,000. Well, 20% of that is only $6,400 of depreciation. So basically, you buy a three-year-old vehicle for $20,000 versus a new vehicle for $40,000. You can find a great vehicle, and you're not going to incur $4,000 in one year of maintenance costs just because the vehicle is a few years older.

So simply by choosing to buy a less costly vehicle, you'll have lower depreciation. Another way to cut depreciation costs is get an upfront deal. Now, here's what I mean. It might sound the same as, and it is the same as buy a less costly vehicle, but sometimes you can find an inefficient market, an inefficient market where you can buy a deal that you shouldn't be able to find.

So you can buy when the timing is advantageous. Examples that come to mind, I've watched and paid attention to the hybrid and electric car market. And a few years ago, the Chevy Volt just was not selling. Now, you couldn't really find a great deal on a used Chevy Volt, but you could find some phenomenal deals on the new Chevy Volts.

And they were so heavily discounted, especially through their leasing program, which is a show for another day. But you could find some deals that were so substantially great that it was a great buy for somebody who was in the marketplace. It wasn't a good enough buy for me because it was more car than I needed for my needs.

It would have been me buying a $200,000 big fancy tractor for my quarter acre farm. But the Chevy Volt had that. The Smart car a couple years ago was that way. Right now, as I record this in 2015, March 2015, the Prius is pretty low priced. Gas prices have come down.

That has a change in demand. And always remember this, the market does respond to supply and demand. The dealer, the car dealer needs to move their inventory. Inventory that's just sitting on the lot for a long period of time is not making them money. And most of them are incurring financing costs for their floor plan.

So the market will react to demand. They need to be continually moving inventory. If they're not moving inventory, the salespeople aren't making commissions. If they're not moving inventory, then the dealership is not making money. So the marketplace does respond to market conditions. The next way to limit depreciation is to buy a vehicle that depreciates at a slower rate than the market average.

How? Well, it could be that the market itself is demonstrating that the vehicle is more in demand. So back to the Prius scenario. A few years ago, I was shopping for one and disclosures and gas prices were high. At that time, people trying to sell a used Prius were sitting pretty.

Gas prices were through the roof and so the market price of the used vehicle was extremely high. If you can anticipate that in the long term, it's hard to do. But if you can anticipate it, you might be able to do better. Some of the cars that depreciate the lowest, things like Jeeps.

I don't know if you've ever gone out and shopped for a used Jeep, but the prices are extremely high. So they depreciate pretty slowly. Novelty cars like Mini Coopers, sometimes things like diesel pickup trucks, depending on the gas prices again, is another big deal. So the market might be a limited production market.

It might be a luxury car market and you might find a certain type of the limited luxury car market that depreciates more slowly. If you go out and you buy a Ferrari Enzo, it's tough to find a substantial discount on a used one versus a new one. It's a unique, very small market.

Now, if you go buy a Chevy Malibu, man, you can find those things for pennies on the dollars all over the place. Shop your market. Another way to limit depreciation is take better care of your vehicle so it depreciates at a slower rate and sells more quickly. Remember, any market still has competition.

So when you're a seller of a car, your car is in competition against all of the other cars currently for sale. And if you can demonstrate a superior product, maybe you can mitigate the fear that a buyer has about their lack of information, back to that asymmetrical amount of information.

Maybe you can save all of your maintenance records, have them carefully organized from the beginning. Your car can look better. We all know that intuitively, but it's good to actually identify it. And so if you take better care of your vehicle, you'll limit your depreciation. Or you can buy a vehicle and keep it longer.

Remember that depreciation is always the highest up front. But if you can keep an item for longer, then you can limit and spread out the impact of that cost. So even if you buy a new car, keep the car for a very, very long time. That's why so many people stay poor from constantly leasing and upgrading new cars, because they're always operating a vehicle at the most expensive point.

If you buy a new car every four years, you're automatically basically kissing goodbye 50 to 70% of the value of the car. And you're always operating a vehicle in that most expensive price range. Even if buying a new vehicle is a decision you made, just keep your car for 15 years.

And the impact of that decision is much lower. And it could, in fact, if the car served the needs for the long period of time, it could in fact be a lower cost than somebody who bought used at two years old and kept the car for six years. I don't know, you have to run the numbers in your scenario.

But just always calculate in the purchase price and the residual value. Now, how can you turbocharge these things? Do all of the above. That's the key. You don't ever have to just do one thing. So if you really want to get the best deal on a car, then buy a less costly vehicle simply because it's used.

Get an upfront deal because you're buying at a weird time scenario. Let's say, again, I just focus on gas prices because they're very connected to us. But you're buying a used vehicle that's a three-year-old vehicle that's out of favor because of the gas prices. And then you're making sure that you choose a vehicle that has a lower overall depreciation rate and you're getting an upfront deal.

You're buying from a distressed seller, buying in cash, something like that, buying quickly. And then you take better care of the vehicle and then you drive it for a very long time. Well, now you've mitigated your depreciation costs in every area. And that's where your best benefits are going to be.

But don't forget about all the other stuff as well. Fuel costs or energy, obviously, the lowest cost to operate a vehicle is going to be better. So one of the things that's interesting to me is looking at this from a behavioral perspective. Let's say that my choice is between buying a used expensive – I'll just use a used expensive SUV versus a new commuter car.

And let's say that I have a pride issue that I've got to drive a car that's of a certain fanciness and I'm not willing to drive a used commuter car. So I'm going to buy a new commuter car. If those are my choices between A and B, it very well may be that I'll save enough on the used commuter car – excuse me, on the new commuter car and gas to justify the fancier car and get a better deal over the used SUV.

Calculate the total cost. Now, anybody listening to the show is probably – you're probably not stuck between those two decisions. And the reality is it's almost never a good idea to upgrade a vehicle based upon gas prices alone. You need to have a – either – if you're going to upgrade a vehicle based upon gas prices, you either need to have a level swap or go to a cheaper vehicle almost every time.

I built a gas calculator years ago in Excel to demonstrate this to people and it was from my dad. He was trying to think through – he had a 1995 Chevy van at one time which incidentally, other anecdotal evidence for the quality of vehicles in my family, a couple of cars that we've had – we have had a couple of Chevy vans, all of which ended up with more than 200,000 miles on it.

We had a Chevy Caprice at one point that was stolen with 327,000 miles on it, little cost. Vehicles can simply last is my point on that. But with this van, he was trying to calculate based upon his commute, had a low value of the van but very expensive fuel cost, didn't need the van anymore.

He was trying to calculate the switch to a more – a fuel-efficient car. Unless the car were an even swap, I could not make it make financial sense. I simply couldn't even with this atrocious gas mileage of a large full-size van as compared to a commuter car. There's got to be other reasons for it other than fuel and energy.

But if you can get a vehicle that has lower total lifetime fuel costs, it's going to be better. Now, one of the costs that I do want to include here that most people don't think about would be the cost of downtime. The cost of downtime is a major impact or can have a major impact on some decisions but probably not yours.

People worry about this a lot. If my car breaks down on me, I'm going to have a problem with my job. Does it happen? Yes, it does. But you as an individual, if you are just simply operating as an individual, the marginal difference of your not missing a day of work or having to work from home for a day or two when the car is in the shop, it's probably going to be worth a much lower – it would be a much lower cost than the cost of the guaranteed depreciation from buying a new vehicle continually.

That may not be the case, however, if the vehicle is an integral part of your ability to create income. So imagine if you're running a fleet of trucks for let's say a large supermarket chain or for a logging company or some scenario in which the vehicles actually make you money.

One day of downtime, two or three missed loads might have an actual cost to you of – I mean it could be tens of thousands of dollars, maybe more. So when you compare the cost of downtime, you've got to calculate how to avoid that and that's why you'll see – for example, I noticed down here where I live, Publix is the largest and most popular supermarket chain.

The Publix trucks, they're brand new as I understand it. There's some kind of leasing arrangement. They're almost always brand new. They're in a few years old and then they're leased, they're run and then they're slipped out. I'm sure that their accounting team has sat down and has decided that that is the best way for them to operate and accomplish what they need to accomplish because the potential cost of a load sitting on the side of the road with a broken down truck and a store that is missing some of the key ingredients, it's too much of a cost for them.

It might be the same for you but it's probably only the same for you if you actually have a business that's dependent upon that asset to create money. So you need to calculate that, the cost of the downtime. Understand also other costs such as financing costs. I've never borrowed money for a car.

I think it's for the most part a silly idea. I can design a few situations in which it theoretically can make sense but it's almost never a good idea. But if you add that in, it can be a substantial increase in the cost, especially if you're at the bottom end of the market where you're paying a very high interest cost.

Then of course also calculate any other maintenance, repairs, trying to estimate that, the insurance costs, the ownership costs. When you add all these things together, for somebody who is focused on needs, I think that in the market that we live in, the United States of America, you'll almost always wind up with a choice of a used vehicle, almost always.

There's simply such a flood of vehicles that are great quality vehicles at much cheaper prices available in today's world that when you start compounding these things, cheaper purchase price, the ability to pay cash instead of finance because of the cheaper purchase price to strip out financing costs, the ability to carry collision insurance only instead of comprehensive insurance so you have lower insurance costs.

You have lower ownership costs because you don't have to pay for the covered garage to maintain this car. You're happier parking it out on the street. I mean, there are so many ways to compound this that almost always the question is what is the best financial decision? You're probably going to wind up with a used vehicle.

But there may be different – there may be unique situations. Like I said, if I were in my former boss's shoes running a ranch and putting 300,000 miles on a vehicle in a very short period of time, would I worry too much about that year or two of depreciation up front?

I wouldn't. I probably wouldn't. You get to a point at which you're making enough money that the scale is not that big a deal. There's a Mercedes dealership right near my house. I've met a couple of the sales guys in there and people just trot in and trade out the cars once a year just for fun, just to keep current.

It leads to an excellent used car market for the Mercedes brand down here. The key is figure out what you actually need and then look and calculate the total cost. It is hard to find the data. I ran a scenario recently and it was with a friend of mine who keeps careful records.

This was one of those perfect used car scenarios. It was a Honda Accord. He had done everything. We calculated out and I calculated that with his current ownership cost, it was something like $385 a month. It was astounding because of the amount of repairs that he'd had on the vehicle.

When you compare that to the cost of him going out and leasing something cheap and run the numbers on that, if he could find a good deal, it was comparable. This is not always a simple decision, which is why there's so much debate about it. You actually have to find some data and it's hard to find the good solid data.

It's hard to know in advance. Because you don't know, is this car going to be great and it's a used car and I'm going to run it for 10 years and it's not even going to have a single problem? Or is this car going to be a bunch of problems?

At the end of the day, you're still guessing pretty much. That's what you're doing. Hopefully, you can make an educated guess. Hopefully, you can do that. Remember that you might be able to solve some of your needs without actually owning a car. I am convinced more than ever after now a few years of my wife and I having one car instead of two, that the route that we took of downsizing to one car is a tremendous route for many people to consider taking.

Even just one of the costs that I always hated was all the time spent just sitting on the oil change place, getting your oil changed or a new set of tires on two cars. Just going from two to one is a dramatic time savings. Recently, for the first time a couple of months ago, I took Uber and Uber, they have an Uber.

Uber is active here in my area. I took Uber. I think for many families, if you're keeping a car for that every now and then scenario, go ahead and try the actual cost of using some of the ride-sharing services like Uber and Lyft. Go ahead and calculate what would be the cost of renting a car for the long over the road trip.

Try to find a way that would solve it without owning a car. I really believe – just make the comment here but many people who are stuck in that two cars because we sometimes need the second one, if you just switch to Uber, using Uber as that second time and feel free with doing that, you might save enough money to where it's worth dropping from two to one.

Also, recognize the next phase of cars is going to be self-driving and electric and it's here. I've said for a while, it's a decade or two. I'm convinced at this point, it's less than a decade where it'll be normal within a decade that it'll be normal that a bunch of us have self-driving electric cars.

That's going to completely change the marketplace. It's going to make deals. It's also going to make more efficiencies. Then when you start compounding these technologies, if you're not paying attention to this, do so. It's here. When you compound Uber type of connections with self-driving, I think a decade – again, maybe two for this but I think it'll be very normal in the future.

We'll pull out our smartphone and when we need to ride somewhere, we'll click a button just like Uber works now. You click a button on your smartphone, you tell it where you need to go and a self-driving taxi is going to pull up. We jump in and it's going to take us and drop us off and that's going to be in many cities.

That's going to be the primary way of transportation works. It's not sci-fi. It's here now. Every bit of technology has been created and it's only waiting on legislative regulatory changes for it to happen. I want to close this show with a couple of topics from the Patreon page. I put out – I try to do this plenty of time in advance but I put out on the Patreon page what the show topic is going to be for tomorrow and I invite people to comment.

When I put this show topic out for the patrons of the show, which by the way, if you're not a patron, you can be one. This is one of your benefits. Go to RadicalPersonalFinance.com/patron, check out all of the Patreon benefits. You can do this at any level, even a buck a month.

I'll share this stuff with you. I got a lot of questions. I want to answer some of these questions specifically. John says, "How do you put a dollar value on the emotions involved when your cheap used car breaks down?" John, it's a great question because I think this is the number one reason why people make poor car decisions.

You get into a point of stress. Usually, it's because many times the people when they're buying, trying to buy cheap used cars, cheap used cars, cheap used cars, car is breaking, car is breaking. They reach that point of stress and they say, "I've had it. I just want a car that works." That is a very prime time when it's very possible to make a poor decision.

Now, I'm not saying it's always a poor decision to buy a new car. It can be a good decision, but the key is avoiding that stress. I think that's the big one. Try in advance to have your plans worked out. Try to stay ahead. A comment that Marcus made on John's comment, he said, "That's why we have three cars.

My wife and I have three cars. The good one, hers, the beater, mine, and the old beater, which is the spare. Then they can rotate the cars around if one breaks." That's a good strategy. I think also Uber is a good strategy. Knowing that you have cheap transportation can be a workable strategy.

Evan talks about buying new with an extended warranty versus buying used as is. Evan, I think that one's so hard to answer. You got to go on the data. Here, I would lean heavily on data like sources like Consumer Reports and buying carefully. All cars are not made equal.

It's foolish to compare a cheaply built piece of junk car with a well-built quality car. Go with the data. Go with the Consumer Reports data. Go with the other quality data. I think you can make a good decision on the used cars. Again, it's got to be a personal scenario.

Peter asks about depreciation. Is it non-linear? What are the average percentages or anything else that comes to mind on depreciation? Peter, depreciation, it's hard to measure because it's individual to the actual car. It's also individual until you actually go out and figure out what the sale is. Oftentimes, how do you calculate your actual depreciation when you sell the car if you have to go and differentiate a dealer price and a private party price?

The numbers that I've seen is generally pretty consistent. The first year depreciation is somewhere between 20% to 25%, maybe 20% to 30% depending on the car. It could be less for some other cars and then basically about 15% to 20% per year. I usually use in my mind 15% per year as the number that I go based upon but it varies depending on the car.

If you go out and search, you can find some cars that have low depreciation like I've mentioned, some of the Japanese brands and also things like Jeeps. Of course, other costs as well. It's going to cost you a lot more to be driving a Jeep every day than a Toyota Corolla.

J.Y. says, "What about electric vehicles negating much of the maintenance of the Rube Goldberg contraption we call modern internal combustion engines?" I think this is going to be changing dramatically quickly. If you look at how effective the electric cars are now, Tesla changed the game. I'm so thankful for the people that are supporting Tesla and buying their vehicles.

They changed the game. In a decade, I think it's going to be very normal that many of us will drive electric vehicles. I've run the prices on them for myself. I've still not gotten to the point where it's worth it for me to go with an electric vehicle but I think for many people, it will be.

If I were at a different phase of my wealth building journey, if I had the money and I just wanted to simply support it, I would probably make a choice to support. I'd have something like a Tesla to make a choice to support it. The future is bright. You look at some of the stuff that's done, some of the research that's done with vehicles that can run over a thousand miles on a gallon of fuel.

Now, of course, these are super slow, super light vehicles but there's some amazing research that's being done and there's no reason for us to have the atrocious performance that we have now. We recognize the market hasn't demanded it in the past. People are demanding it now. Car manufacturers are filling the market.

Rocky asks, "Does your used car have to be cheap? We bought an almost new Yukon and saved over $10,000. I put a warranty on it that'll cover me for seven years." I think no, Rocky. I think for me, that is one of the ideal scenarios. If I were wanting to drive a fancier car, I would focus on that couple-year-old space, especially if you get one off lease where somebody has just come in and off lease from a good part of the country where you have a few concerns.

That's a real sweet spot. I think one of the ideal scenarios is when you're a few years into a model year. For example, on the Yukon, what year was it? I think it was 2007 at which Chevy and GMC changed the badging of those things. If you buy the model year, I think a sweet spot is if you get to something like 2010 and then you buy a 2007 or 2008 model year, then your car is still very current.

If it's in good condition, it looks very fancy and new until they change the badging in the future. You get a substantial discount on the price. You're driving a very fancy current-looking car, so you get all the benefits of the image of the fancier car. You get the discount on the used car and that stays current for quite a while.

For me, that's a big benefit is buying those cars that are a couple years old. Now, I'm not at the stage where that's important to me. I'm still at the very beginning wealth-building stage. For me, I would rather have a vehicle that's substantially cheaper in order to have more money available for other goals.

But that changes throughout your time, throughout your lifespan. In the beginning, you have more time than money and so you've got to get all your money working for you for later in life. Later in life, you have probably more money than time and then you're looking for a different scenario.

The key I think has to do with the actual marketplace. You have to actually look at your actual marketplace and you have to shop to see what's available. I had a relative recently who was looking for a car and they were shopping the used market and there just simply wasn't a supply of vehicles in the category they were choosing.

There was no good supply of quality vehicles in which case, chose to buy a new one. Then finally, Carl makes a comment about the quality and recommendations. He says here, I'm going to read it just so that you know because he makes a comment that he's in the industry.

"Assuming one is not wealthy and is looking to get there and/or minimize debt, I can't see a reason to buy new. Consumer Reports is a good source for ratings and recommendations on used cars. After five years, two-thirds of the depreciation has been incurred. Cars are better quality than ever.

200,000 miles is a lot versus 100,000 miles 30 years ago. My opinion is a result of 30 years of buying used, five to 10 years old, in the car business for the last seven and most importantly, reading Millionaire Next Door. Give a gift to your future self and buy a five-year-old car." Carl, I can't think of a better thing to end on.

Hopefully, this has given you some ideas and I agree with Carl's assessments. Hopefully, this gives you a way to think about it. I would encourage you just to look carefully at your own situation. If you make a list of your needs and your wants and again, remember the concept of opportunity costs and you say, "You know what?

I don't care about missing out on the $10,000 of depreciation," or you shop your actual market, make a list of them, make your own decision. But pay attention to where money is flowing out of your life. One of the things that I like about business accounting that I wish we taught in personal accounting and I'm trying to teach it to you now is in business accounting, you always have to account for depreciation.

If I were running a tractor in a business, every year I would depreciate that tractor and I would incur a cost from using accrual-based accounting. I would incur a cost of a depreciation cost for that tractor and then I would actually be able to see it on my expenses.

As an example, if you wanted to replicate this or mimic this in your personal financial accounting, take your personal cash flow statement and figure out how much your vehicle depreciated in value last year. So if your vehicle was worth $15,000 at the beginning of the year but now you could probably only sell it for $11,000, then account for that with a $4,000 expense of car depreciation.

That's a much better way to do it than to account for it with purchase price or just monthly payment costs, things like that. Now, it's a little bit clunky to maintain all these statements, so this is primarily more of a mental concept, but recognize that. For me, that's where the decision is all about.

Recognize that depreciation is guaranteed and so I need to have the car that fits what I need and want. Recognize the amazing opportunity that we have in the United States of America with a healthy supply of used vehicles, but also recognize that market could change and it does change.

So hopefully this gives you a bit of a background. I didn't go too much into leasing versus buying. Someday I'll do a show on the taxes and the cost and the comparisons. I'll do a show on how to get a good lease deal because you can get good lease deals, but like anything, you have to negotiate them.

I'll do some shows on how to get good deals when buying. My list of topics is way too big for me to ever get through them all. Hopefully this was a good introduction to it. Thank you all so much for listening. I appreciate each and every one of you.

Go to RadicalPersonalFinance.com/patron if I've saved you money today. Cheers, y'all. Thank you for listening to today's show. If you'd like to contact me personally, my email address is joshua@radicalpersonalfinance.com. You can also connect with the show on Twitter @radicalpf and at facebook.com/radicalpersonalfinance. This show is intended to provide entertainment, education, and financial enlightenment, but your situation is unique and I cannot deliver any actionable advice without knowing anything about you.

Please, develop a team of professional advisors who you find to be caring, competent, and trustworthy, and consult them because they are the ones who can understand your specific needs, your specific goals, and provide specific answers to your questions. I've done my absolute best to be clear and accurate in today's show, but I'm one person and I make mistakes.

If you spot a mistake in something I've said, please help me by coming to the show page and commenting so we can all learn together. Until tomorrow, thanks for being here. Hey parents, join the LA Kings on Saturday, November 25th for an unforgettable Kids Day presented by Pear Deck.

Family fun, giveaways, and exciting Kings hockey awaits. Get your tickets now at lakings.com/promotions and create lasting memories with your little ones.