Dave Says: Road Warrior Rule

Dear Dave,

I'm trying to get out of debt. I make good money and do consulting for a living. I put about 4,000 miles a month on my car. It's a 2012 model, and I currently owe more on it than it's worth. I've considered selling it, but I'm concerned about reliability since I'm on the road so much. Do you have any advice?

Chantel

Dear Chantel,

Rule of thumb number one when it comes to your finances is you don't want too much of your financial picture tied up in things that are going down in value. Specifically, no one needs to have more than half of their annual income tied up in things that go down in value.

You're a road warrior, so whatever you drive you're going to destroy. From a business perspective, you need a relatively low-mileage vehicle with good gas mileage that's reliable and safe. You also want something that's reasonably comfortable. Having said that, I would advise doing a lot of research and getting the least in a car that meets all those criteria.

Since whatever you drive is going to be worth nothing in about 20 minutes, I'd start setting aside some cash every month as part of a monthly budget for a newer, better car. That way, when it comes time to put the old one down, you'll have a pile of cash to go along with your trade-in.

But even in your situation, Chantel, I would never advise buying a brand-new car or leasing a vehicle. From a financial standpoint, either of those moves would be just about the dumbest things you could do!

—Dave