Out of all the things I've written about on M$M – cars are by far my favorite. Every time you mention a new car in the personal finance world, you get some really interesting discussion/commentary from readers that will defend their position harder than politics.
So far what I've noticed is that readers are divided into four groups:
- They really try to avoid driving new cars (and a lot of the De$troyers drive stuff that's even older than my 04 Yukon!)
- They bought a new car and then realized they didn't like the payment, and are now working on paying it off early.
- They like new cars and think I'm a [email protected]$$ for saying it's not a good financial decision.
- They are legitimately “car people”, and are truly passionate about cars.
All four of those are fine, and I've really learned that people are going to do whatever they want anyways. I just try to provide my thoughts on cars, and hopefully people get value from it.
Related: I Deserve a New Car, Right? Wrong.
One thing we can all agree on is that cars lose value freakishly fast
When I was doing research for this post, it was a little tough to nail down the exact amount that a car depreciates when you drive it off the lot.
The amounts ranged from 10% – 20%, so I think it's fair to say that there is a pretty significant drop in value right after you make the purchase.
So that actually got me thinking – what if EVERYTHING in life lost value almost instantly like new cars. Not only would it totally suck, but it also shows how ridiculous it really is that they depreciate so fast. 🙂
Here are some examples I came up with:
After months of searching, you and your spouse buy your first home for $200,000! Your realtor hands over the keys, and as soon as you unlock the door the house is worth $180,000.
You finally are able to make a big contribution to your 401k!!!!! You log in, type in $10,000 and click submit. The website asks you to confirm your $9,000 contribution as $10,000 comes out of your bank account.
The perfect doggie came across your news feed and you head to the shelter to adopt your new best friend. You sign the paperwork and your buddy instantly becomes 10% less friendly and develops a limp (I would have used cats but we already know that they're a-holes).
At the alter, you both say “I Do” and simultaneously remember something you don't like about each other.
You're at the drive through and need to get a quick lunch. You order a #1 and pull up to the second window (because nobody uses the first one anymore). They open the window, sneeze directly on your fries with precision, and then hand it to you.
For all these months, you've been working so damn hard to impress your boss and over-perform. He finally calls you into his office and congratulates you – you're getting that well deserved promotion. Your desk immediately gets moved to the basement and someone stole your red Swingline stapler.
*Bonus* Sports Game Tickets
My wife and I were brainstorming different things that would suck – and I thought this one was pretty good. You take someone out on a date to a sports game and have KILLER tickets. As soon as they scan your ticket at the front gate, your seat gets moved to ten rows higher than you thought it would be (with a crappier view).
My thoughts on new cars…
To be clear – I don't think that people who buy new cars are dumb or anything along those lines. But the reality is that it's just not a great place to put your cash. They lose a lot of value quickly. Period. Unless it's a collector car, you just won't see that value back.
Do you need cars to get to work and carry out your life? In most cases, absolutely. But my fear is that a lot of car buyers associate them with a social identity that doesn't actually matter to anyone. If you have a nice car, your friends will mention how great it is on Facebook or Snapchat once or twice, and then literally not ever care about it again.
If you take anything away from this post, it should be this:
Car companies spend billions of advertising dollars to convince people to purchase new cars. As a person who would LOVE to have something nicer than my $6,000 Yukon, I know that a nicer car only takes away from my goals of financial freedom rather than add to the quality of my life.
Don't give in to the advertising, and avoid the ridiculous depreciation they bring if possible. If you do buy a new car, drive it into the ground and be proud of how long you keep it rather than how new it smells.