Paying interest
There are “good” debts to have. A fixed-rate mortgage for instance. You won’t get rich owning a home but a prudently purchased house in a desirable neighborhood will protect your investment over the long run. Once you have your home paid off, your cost of living falls to local taxes and maintenance. Pretty nice!
Most other loans are a huge waste of money. Credit cards at 19% or more, obviously, but also home equity lines of credit and even car loans. The problem with car loans is that new vehicles lose value instantly. You get stuck paying interest on a purchase that cannot be recouped at all. Even if the car retains its value, as some do, that early loss more than eliminates residual value once you subtract interest costs.
If you want a newer car, you’re much better off looking for an off-lease car that someone else drove for 24 months. It’s value is easier to ascertain and your existing car sold privately may generate enough cash to nearly buy the new one. Usually, too, lease cars are top-of-the-line models with all the latest features — that someone else paid for.
