Sticker shock is setting in for millions of Americans who want to purchase a new car.
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According to Kelley Blue Book, the average price of a new car approached $37,000 last year, reaching an new all-time high. The average monthly payment is now $551, which represents a 10 percent bump in just three years.
Chris Hogan, the author of 'Everyday Millionaires' and Ramsey Solutions financial expert, said it all boils down to bad math.
“We have an appetite for debt -- especially when it comes to car loans” Hogan told FOX Business' Maria Bartiromo on Tuesday. “You look at this, there’s been a 75 percent increase in car debt since 2009.”
Hogan also pointed out that the value of a car generally doesn’t get better with age.
“This is an alarming trend where people are throwing $550 and more away per month toward an asset that’s going to depreciate," he said. "And what I mean by that is, as you drive a car off the lot, if you roll the window down, you can hear 15 to 25 percent of the value leaving the car.”
The problem in Hogan's opinion, is that consumers need to take a longer-term view of the process.
“The bottom line is, it boils down to math and really not understanding how debt works," he said. "You see, when you pay interest, you’re paying a penalty for using someone else’s money. And so regardless of whether people are buying homes or not, I would rather them save up and pay cash and then own a car outright and drive it without a payment.”