Vehicle purchase decisions are often the largest financial decision that many people make. As your net worth grows, these have a smaller impact on your financial well-being. However, they can have a crippling effect on your ability to grow wealth if you aren't careful. For example, if my net worth is $100k and my car is worth $20k, that can drag my net worth down considerably if it depreciates by 20%. That would have a 4% reduction in my total net worth. If my net worth was $500k, that effect is minimized to 0.8% reduction in net worth. To keep myself on track and help decide when to make a change, I have my own personal rules around when to buy, repair, or sell cars.

My laws of car-buying in a nutshell:

1. You (the consumer) lose every time a car is bought or sold.
2. Cars are not investments.
3. We get really confused about what we actually need in a car.
4. Financing cars hides the real costs of ownership and keeps you in a perpetual cycle of lose-lose.
5. If you spend the car's value in repairs in the past year, it's time to trade it in.
6. Vehicles are fun, it's okay to have something you like when you are able to afford it.