Confession: I love cars. If you look up the term gearhead in the dictionary, my picture will be there. Trust me, I know the appeal of a nice ride. However, one of the most common sources of trouble in people’s financial life is the automobile.
The auto industry is very clever. Analysts have long figured out, if you get people to borrow money, they tend to spend more. That is why cars are often marketed in terms of monthly payments, not the total price. In fact, more profit is made on the financing of cars than the sell of the car itself.
The average car payment is 545 dollars a month. It is not unheard of for people to say “You’ll always have a car payment.” If you invest 545 dollars every year from age 25 to age 65 in the S&P 500, you will have 6.4 million dollars!!!! Furthermore, cars drop in value like a rock. Typically cars are worth only 40% of their initial value after five years. Is a nice ride worth giving up a chance for millions? Absolutely not!
In reality, many cars we consider normal are luxury items not long ago. Here’s a list of a few things very common in the modern automobile:
Leather seats, sunroofs, 300+ horsepower engines, An engine control unit more powerful than the one that put a man on the moon, traction control, and lane keep assist.
We like to live high on the hog in terms of what we drive. All it takes to meet your needs is to get from point A to point B safely, reliably, and in comfort. This does not require a $50,000 truck or SUV.
Don’t sacrifice your prosperity just so you can impress other people or even yourself. Buy a reasonable car that you can afford in cash and live in the peace of knowing your cashflow is in tact. The money you don’t spend on cars can be used to change your own life as well as your family tree.
If you’d like to learn more about how to approach purchasing your next car contact me at fortfinancialcoaching@gmail.com or call 501-712-0793,