Summary

Spending too much on cars—and borrowing too much to pay for them—can wreak havoc on your financial health. One of the best ways to reduce your auto finance costs, if you don't want to pay cash for your vehicles, is to keep your loan terms relatively short and own your cars longer.

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• Car expenditures are a choice. There's no good rule of thumb about how much you should spend. It depends largely on how well you're meeting your other important financial goals and how important your ride is to you in relation to your other spending.

• Consider owning your cars longer. You can save hundreds of thousands of dollars over your lifetime simply by keeping your cars a few years longer before you trade them in.

• Don't walk into a dealership "upside down." Pay off the car you've got before thinking about buying the next one.