Self-made millionaire: Buying a new car is 'the single worst financial decision'

David Bach: Don't ever buy a new car

A brand new car looks and smells good — but it's never worth the price, says self-made millionaire and bestselling author David Bach.

"Nothing you will do in your lifetime, realistically, will waste more money than buying a new car," he tells CNBC Make It. "It's the single worst financial decision millennials will ever make."

That's because the moment you drive it off the lot, the vehicle starts to depreciate: Your car's value typically decreases 20 to 30 percent by the end of the first year and, in five years, it can lose 60 percent or more of its initial value.

To make matters worse, "most people borrow money to buy that car," says Bach. "Why would you borrow money to buy an asset that immediately goes down in value by 30 percent?"

The good news is, you can get a shiny, nice-smelling car without breaking the bank, Bach says: "Buy a car that's coming off of a two- to three-year lease, because that car is almost brand new and you can buy it at that 30 percent discount."

David Bach, bestselling author and co-founder of AE Wealth Management 
Source: CNBC Make It

A car coming off lease is typically in very good condition and doesn't have many miles on it. Because it's not pristine, though, you can buy it for a fraction of what it would cost to buy it new.

If you're still not convinced, Bach recommends thinking about how much a new car will cost you over the long run: "Here's how the car companies get you: They want you to focus on monthly payments. And they'll get those monthly payments down to you where you can afford it.

"Don't think about monthly payments. Think about annual payments. Think about the entire term of the loan."

He continues: "If you're spending $500 a month for that car, well, that's $6,000 a year, not including the car insurance or the gas. That could be two months or three months of your income. Run the numbers and then ask yourself: Do you really need a car that nice or could you buy a car that's less expensive — maybe a little older — but still looks good and still runs?"

Kevin O'Leary: Don't buy a car, do this instead

Bach isn't the only money expert who feels this way. Personal finance expert and star of ABC's "Shark Tank" Kevin O'Leary also warns against buying a new car.

"I use my phone to call Uber or Lyft, and they take me around the city. I save a fortune. I feel good about it," O'Leary says. "I hate cars."

And Suze Orman, who keeps her cars for 12 years or more, says to buy used and choose a model that you can afford over one that looks impressive. "One of the best ways to build financial security is to spend the least amount possible on a car that meets your needs," she wrote in a 2017 blog post. "Forget about the bells and whistles you want. Paying less helps you pay off the car faster."

Don't miss: Jay Leno: Don't lease a car. Buy.

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Suze Orman: Why you should buy instead of leasing a car