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Few people can afford a new car these days, and for good reason. The average price for that new-car smell hovers around $48,000. That’s a pile of cash.

Really, cars are money pits. That’s why the car you can afford is the one you can pay cash for. We’ve talked about this before—the fairytale of cars as sound investments.

Sure, ultra-luxury cars rise in value, but mid- and low-end cars depreciate. It’s a sick joke. Ferrari values jump over time. But when you buy a Toyota Corolla or a Honda Civic, its value tanks as soon as you drive it off the lot.

And if you take out a loan to buy a new car? Well, you’re essentially setting money on fire through interest payments. Simply put, you’re living beyond your means.

Fancy Cars Will Drive You Nuts

I spend a lot of time in Miami and see plenty of fancy cars: Ferraris, Lamborghinis, Bugattis, McLarens. You name it. In South Florida, a Porsche is like a Honda. They’re everywhere—luxury vehicles are just part of the scene.

As a Corvette owner, I understand the allure. My Corvette isn’t the most luxurious car, but I’d still call it “fancy.” And I drive it everywhere, even though it stresses me out. I’m always checking the Weather Channel to see if it’s going to rain—because rain leaves water spots on my car. Then I feel compelled to wash it. And I’m always parking it in the back of lots so nobody dings the doors. If someone parks next to me, my blood pressure skyrockets. It’s insanity.

Honestly, there are days I wish I hadn’t bought the Corvette, because of all the hassles.

Say No to Loans

Now, my other car, a cheap Toyota Highlander, gives me no headaches. I don’t worry about it at all, despite its constant rattling. Seriously, it’s like a school bus lurching down the road. It runs as though someone loosened all the nuts and bolts. It’s falling apart, nearing its demise.

But you know what? There’s something nice about owning a piece-of-junk car. There’s a better chance you can pay cash for it, so there’s nothing tying you down. No huge loans to make payments on. No nail biting when it comes to your credit score.

One way to think about your spending is to ask yourself, “Am I being completely irresponsible?” I think deep down, most people know the answer. But sometimes they make irresponsible purchases anyway.

Now, I’ve bought some dumb stuff over the years, but I’ve never gone into debt to do it. When it comes to my Highlander, I’m going to drive this trash can on wheels into the ground. I’m getting my money’s worth, and if it dies on me, whatever. I can always buy another clunker and pay cash for that one too.

Shrug Off the Fender Bender

An Instagram model rear-ended me once. I was driving on I-5 to Tacoma for a triple-A baseball game. I was in a rental car—I won’t go into the nightmare of dealing with the insurance—but it got me thinking about my Corvette versus Toyota. Had I been in my Corvette, that fender bender would have sent my cortisol levels through the roof. If I’d been driving my Toyota, though, I would’ve brushed it off.

Here’s the takeaway: Buy a gently used car, pay cash, and then drive it until it dies. You’ll be in much better shape than the guys who finance fancy cars they can’t afford.

Jared Dillian

P.S. Have questions about your money? Drop me a note at jared@jareddillianmoney.com with all the details, and we might just tackle it on the BE SMART podcast.