Mr. Hobo Millionaire

Cars Are Money Pits and Kill Wealth Building

 

Raise your hand if you’ve heard the following: “Cars depreciate 20% when you drive off the lot.”

I had heard that many times in my life, but it never really sunk in until later in life when I started analyzing common expenses and building wealth. My goal with this post is for that saying (and MUCH more) to sink in, regarding what buying cars (especially new cars) does to your wealth building.

A $30,000 car financed over 5 years is about $500 per month. Most people look at a $500 car payment these days as no big deal. If you’re saving at least 3 x’s that amount per month AND you’re going to keep the car for 10 years, MAYBE you can justify doing 5 years of payments on a 30k car. Maybe. I still don’t advise it, but at least you’re using the car a long time AND you’re saving $1500/month to build wealth. For the rest of you, if you do this your entire life, and have little-to-no wealth built in 30-40 years, you have basically driven multi-million dollars cars your whole life. I hope you really enjoyed them! Because if you had spent less and saved the difference, you would have added millions in wealth. Don’t believe me? Check out these numbers…

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