The summer after my freshman year of college I decided to buy a car. I walked into a dealership and learned that I had the option of financing one of their shiny new models by borrowing more money than I’d ever had in my life: no money down, just sign on the dotted line.

Tempted but skeptical, I looked at the interest rates and did some quick math. Yes, I could drive off the lot in a brand new car today and pay zero dollars out of my pocket. But the true, total cost of the payments and interest on the loan would have bought me two new cars on the spot. I turned around, walked out of the dealership, and bought a used Jeep instead – in cash. The Jeep needed a lot of work, but I realized I’d rather roll up my sleeves than rack up the debt.

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My Lesson to Share

Using credit or loans to buy something you can’t afford doesn’t change the fact that you can’t afford it. It only makes sense when the purchase delivers a return on your investment to offset the cost of the debt – like a home that will increase in value over time or an education that will boost your future earning power. Cars, on the other hand, start to lose value as soon as you drive them off the dealer’s lot.

With a little elbow grease, my junker of a Jeep got me where I needed to go. More importantly, it steered me away from taking on an expensive debt burden early in my financial adulthood. Last but not least, that old Jeep introduced me to a new passion: to this day I still love to tinker under the hood of a car.

Bobbi Rebell Writes:

Elliot's passion for tinkering with cars is a great hobby. And it kept him out of the kind of trouble Heather Thomson faced early on. He thought about his priorities and his true needs. He also did not get emotional. We’ve all heard stories about people going in to buy a practical sedan and driving off the dealer’s lot with a fancy sportscar. Clearly, you need to pay attention to what’s really important to you.

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Cars have always been a symbol of financial independence and freedom for young people. Countless movies and television ads have memorialized the ritual of a teenager getting his or her first car, and with it a taste of freedom from parents. In fact, in gathering these stories I was surprised at how often cars came up as being central to big life decisions. If your parents can buy you a car, debt free, count yourself lucky. But if you’re on the hook to finance it yourself, consider your options carefully.

Do You Really Need a Car at All?

New options have emerged in recent years that are changing the game. First and foremost, the sharing economy has come to the car business. Now, especially in urban areas where cars are seldom needed, there are lots of sharing options. They include short-term rental companies such as Zipcar as well as taxi-alternative services such as Uber and Lyft. So you may be able to avoid the entire problem of taking out a loan to buy a car.

Think carefully about whether you really need to own a car, and if not, then just say no. You can always change your mind later if your needs change.

Leasing has become much more popular among young people. The percentage of young people ages 18 to 34 who are leasing cars is up 46 percent over the last five years, according to automobile information website In fact, the same study confirmed that in the first half of 2015, close to a third of all new car purchases were actually leases.

Refinance Your Auto Loan — Check Your Rate >> found that Millennials were sticking to their budgets — doing the math and realizing that they could get a better car for the same payment by leasing. They are avoiding going into debt to own a depreciating asset, as Weissbluth points out.

The right car also changes with your life stage, and leasing avoids committing to the wrong car. The needs of a single person are different from those of a couple, and a world away from the needs of a family. Leasing allows a lot more wiggle room as the picture changes.

I spoke to a number of the survey respondents, and several told me that technology was a key reason they didn’t want to own a car. Buying a car today and owning it for the life of the car, usually more than a decade, would put them far behind the curve as technology changed. Think about what the technology in a car bought in 2006 would look like in 2016. Connor, a young entrepreneur I spoke with, admits he will always have payments. But he also told me that he will always be in the car he wants to be in.

Buying the Car

On a purely mathematical basis, buying has traditionally been proven to be the best choice. Most car loans are five years, and then you’ll be payment-free for as long as you keep your vehicle. Loans are getting longer in order to lower the monthly payments. Doing that will ultimately make the car more expensive because you’ll pay more in interest, but your lower monthly payments will help you meet other financial obligations such as paying down your student debt or having more money to invest.

As of now, the average car on the road is more than 11 years old. So even if you stretch your car loan out a little longer, you’ll have a nice stretch of years with no payments. And while cars do depreciate in value, when you do finally move on to your next car you’ll likely get something for your old car, even if you give it to charity and get a nice tax deduction.

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The Used Car Option

As I mention above, cars now last a really long time. And with all the leasing going on, there are going to be a lot more used cars available that are in great shape. So if you’re looking for value, this may be an option. Don’t be a snob.

Karl Brauer, senior director of insights and senior editor for Kelley Blue Book, points out that because car companies are going to have so many used cars to sell, they are improving their certified pre-owned programs. Warranties on used cars are as good as if not better than those on new cars. And he reminds buyers to always spend time researching before heading to the dealer. Given how much information is now available about the value of both new and used cars, there’s no excuse to not be prepared and know what you should be paying.

Getting the Best Financing

For all the effort car buyers make negotiating a price, they often let the financing slip through the cracks. Brauer says that the most important thing is to do your research before you even get to the dealer. Consider doing the following before purchasing your next set of wheels:

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  • Local credit unions often have the best deals. Banks can also have better rates than dealers.
  • Make sure you know your credit score. Brauer says buyers are often surprised that their score isn’t as high as they had thought and are left scrambling at the last minute at the dealer, figuring out if they can still afford the vehicle at a higher rate.
  • Ask the dealer to beat, or at least match, the best rate. If they do, go with the dealer. They can make the whole process run more smoothly, without you having to go back and forth while the paperwork is being done. But if they don’t, you will be prepared to take your business elsewhere.
  • Don’t relax. Watch all the numbers until the entire transaction is complete. Just because you negotiated a price for the car doesn’t mean that you can put down your guard. Pay attention to everything. If you’re trading in a car as well, fight for the best price. As it is you bought at retail and are selling at wholesale.