Your Car, Your Wealth

I’ve always preferred to buy low mileage cars that are 2-5 years old because they often sell for less than 50-60% of their original sales price. I’ve financed a few of them and had car payments ranging from $151 to $275 per month. My Toyota Avalon passed 232,000 miles last month and began to have the minor problems that eventually lead to major repairs. Luckily, it sold quickly and I found a low mileage ten year old car at an affordable price.

Before finding that car, I stopped at a few dealerships to see what they had to offer. Wow, what happened to car prices over the past couple of decades?  In 2011, the average new car sold in the United States for over $33,000. Thanks to low interest rates and easy financing, many people are able to buy new cars but at a substantial cost to their long-term wealth. The higher your car payment, the less you have left to save and invest. Given the increase in sales prices, the average American is paying $350 or more per month!

I like well made cars and I enjoy driving. I would love to fly down the road in a BMW M3 convertible, but I’m not willing to sacrifice my future wealth for the privilege. Take a long hard look at what you really need for transportation. Consider the costs to your wallet now and to your wealth later.

Just $100 per month invested in a long term equity fund over a twenty year period may grow to $33,000 at a paltry 3% return or over $77,000 at a more historical rate of 10%!

About Paul Puckett

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