Car Buying Quandaries Cleared Up

The rollout of vehicles for the new model year is just down the road, and if you're thinking of getting one, you may have some questions about the best route to take.

Enter financial guru Dave Ramsey, who chats with co-anchor Hannah Storm on The Early Show Tuesday.

Ramsey says you may want to steer clear of new cars and opt for used. He also addresses buying vs. leasing, those employee discounts so many car companies are offering, and the best way to buy a car if you choose to.

EMPLOYEE DISCOUNTS: GOOD DEALS?

Simply put, no, says Ramsey, who advocates that you never buy a car new, because it loses 60 percent of its value in the first four years, according to Kiplinger's Personal Finance magazine.

Ramsey points out that the largest thing we buy except a house is a car, "and it goes down in value as soon as you hit the corner." If you buy a $28,000 car, in four years it will be worth about 11,000 bucks."

"I'm not against people having new cars," says Ramsey. "I'm against them having you. We spend a tremendous amount impressing somebody at the stoplight who we'll never meet. It makes you broke and keeps you broke."

He insists no one should ever buy a car new, unless they're a millionaire.

Which leads to the next question:

HOW DO YOU RECOMMEND BUYING A USED CAR?

Ramsey suggests buying a car that's two or more years old. "Let some one else take the butt kicking on devaluation," he advises.

And pay cash: Save up and buy a cheap car, then continue to save money to buy your next car.

If you pay cash and then pay $378 in car payments to yourself for 11 months, you'll have $4,000. Then trade your $4,000 Honda Accord in, add $4,000 and buy a better one for $8,000. Then pay yourself $378 for another 11 months, then trade that car in for $8,000, add the $4,000 you saved and buy a nice used car for $12,000.

If you want a newer — not new — car, save for it. Ramsey says: "For a period of time, you can win financially and later buy whatever you want."

According to the National Auto Dealers Association, the average amount that Americans spend per month on a new car is $378 for 84 months.

SHOULD I LEASE OR BUY IF IS STILL WANT A NEW VEHICLE?

Two words: don't lease.