Clark Howard: This Change to Your Car-Buying Habits Could Add $250K to Your Retirement Account
Money expert Clark Howard and his team are famous for handing out blunt, practical financial advice to a worldwide audience. In a recent blog post, the Howard team tackled their latest target: the new-car habit that's quietly draining your wealth.
New cars now average nearly $50,000, according to Cox Automotive, and most buyers finance that purchase only to turn around and trade it in for a newer car once the loan is paid off. Howard's team ran the numbers on what happens if you break that cycle, and the answer is a six-figure swing in your retirement account by the time you stop working.
What's the Problem With Buying New Every Few Years?
According to Experian's Q1 2026 State of the Automotive Finance Market Report, today's average new-car buyer typically puts their purchase on a financing plan lasting six years at 6.5% APR after a 10% down payment. Then, even if the vehicle is in perfectly serviceable condition after that six-year period, they trade that ride in for another new car, kicking off the same cycle all over again.
“Repeat that pattern for a working career, and a lot of money flows out the door," wrote Howard's staff. "Some of it goes to dealers and lenders. Some of it goes to insurance and maintenance. Most of it, eventually, just disappears into depreciation. None of it ends up working for you."
How Much Money Can You Save Buying Used Instead?
Here's what Howard's team recommended doing instead: Buy the same model of car, SUV or truck you desire, but opt for a model that's a few years old. You’re keeping most factory warranties, the same safety features and other gizmos and tech functionality, while cutting approximately $16,000 that would otherwise be sent straight to the dealership during each cycle.
If that $16,000 is invested instead of spent every six years — assuming an average annual rate of return — your balance would grow to approximately $251,000 after 30 years thanks to compounding.
Other Car Decisions That Can Pad Your Retirement Fund
Howard's experts expanded their argument to include two other options that could also end up driving a lot of dough into your retirement nest egg if executed properly.
Drive Your Car for Longer
If you keep your vehicle for twice as long — expanding the ownership cycle from six years to 12 — you'll be cutting the number of cars you buy in half. If you think of each car you don't buy as $50,000 you don't end up spending, Howard's team estimates that you could add $99,000 to your retirement account by the end of 30 years. That’s a definite bonus when it comes time to enjoy your senior years.
Opt for a New Car That's Cheaper
If you're dead set on buying new, Howard's team says the model you pick still matters, a lot. Their example: choosing a $34,000 new car over a $49,000 one saves about $15,000 per purchase. Repeated across a career, that's roughly $240,000 over 30 years — nearly the same payoff as the used-car strategy, without ever setting foot on a used lot.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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