Rev up your engines because we’re about to dive into some serious money-saving tips when it comes to wheels! 🚗💨 I love my little car, I do, but let’s face it, cars are like that avocado you bought yesterday – they start depreciating faster than you can say “road trip.” I’ve done a fair bit of research on costs, fees and car values, which is probably ironic since I drive an 11-year-old Honda and try to ride my bike instead of using the car whenever possible.
Here’s the scoop: Self-made millionaires don’t splash the cash on brand-spanking-new rides only to watch their value plummet. Nope, they’re all about the long game. They opt for second-hand gems and plan to keep them for the long haul. Why? Because while everyone else is shelling out for monthly payments for car loans or leases, they’re stacking up cash for their next big investment.
Let’s take Warren Buffet for example. As I write this he is currently the sixth-richest person in the world with a net worth of $131 billion, yet he still drives his (discontinued) 2014 Cadillac XTS. He could afford ANY luxury car that his heart could desire but he chooses practicality over luxury. His 10-year-old car was bought for him by his daughter Susie when he wanted to replace his last used car. He prefers to buy a used car with cosmetic damage which is still functional, but most importantly, cheaper. This new (to him) Caddy had hail damage. He’s awesome.
So, here’s the plan: If you’re eyeing a new set of wheels, consider going pre-loved. Snag yourself a reliable ride and commit to keeping it around for the long-term. Bonus points if you can pay off that loan quicker than a Formula 1 pit stop! Double bonus points if you can save up and pay for the car outright. Remember, paying interest is NOT conducive to building wealth.
The world bombards us with flashy advertisements, and shiny showroom floors lure us towards the allure of new cars. It’s easy to overlook the financial wisdom of buying used. But as the saying goes, “a car loses value the moment you drive it off the lot.” This couldn’t be truer. New cars usually depreciate by around 20% in the first year alone!
Now, imagine flipping the script. Picture yourself cruising down the highway in a reliable, pre-owned vehicle that’s already taken the biggest hit in depreciation. That’s the beauty of buying used. Not only do you sidestep the initial depreciation, but you also avoid the hefty price tag associated with brand-new cars.
But let’s not stop there. The savvy approach to saving money on wheels extends beyond just buying used. It’s about embracing a mindset of financial prudence and long-term planning. Instead of succumbing to the smell and visuals of flashy new models every few years, consider committing to your wheels for the long haul. I know, I know, pulling up to the lights in Ol’ Trusty Rusty doesn’t look as sexy as the shiny new BMW behind you, but let’s put some perspective on this.
Think about it: every month you spend making payments on a car loan is money that could be invested elsewhere. By opting for a reliable, pre-owned vehicle and paying off your loan ahead of schedule, you free up cash flow to fuel your financial goals. Whether it’s building an emergency fund, saving for a down payment on a house, or investing for retirement, every dollar saved on car expenses is a step closer to financial freedom. Say your car loan is $500 a month for four years, and say that instead of the car loan, you decided to invest that $500 over four years at a modest 7% instead, the total value of your investment would be $28,265.65, with your total interest earned as $3,765.65. Food for thought. Okay, let’s look at some specifics.
In 2023, 1.7 million new cars were delivered in Canada and Ford’s F-Series truck was the top-selling auto brand in Canada. The basic 2024 F-150 XL with no bells or whistles costs $56,672 including sales tax. Ford’s payment scheme has you paying 1.99% interest for 84 months…that’s 7 years, with a monthly payment of $724. At the end of the 84 months, you will have paid a total of $60,816 for your truck. I’ve just found a 7-year-old F-150 XL for sale locally, it’s in a showroom for $30,820. That’s almost 50% less than what you paid for it.
That same showroom has a 2017 Toyota Corolla for sale for $14,800. What if you’d saved $724 a month for the last 18 months? You could buy a 2017 Toyota Corolla from the same showroom. You then continue to save $724 a month (on top of your regular savings of course), for the remaining 66 months. You’d save a total of $47,784. Now, what if that $47,784 was earning a nice 8% in investments? Well, you’d have a nice little nest egg of $60,948. That’s MORE than what you were going to spend to purchase the blooming truck!
And let’s not forget the environmental benefits of buying used. By giving a second life to an existing vehicle, you’re reducing the demand for new car production, which means fewer resources are consumed and less pollution is generated. I mean, do we really need 1.7 million new cars a year in Canada? It’s a win-win for your wallet and the planet!
So, the next time you find yourself fantasizing about that shiny new truck or luxury SUV, take a step back and consider the long-term financial implications. Ask yourself: is the fleeting thrill of a new car worth the long-term financial burden? Or would you rather embrace the freedom and flexibility that comes with owning a reliable, pre-owned vehicle and work on building your wealth?
Remember, the journey to financial freedom could start for you behind the wheel. So buckle up, rev up those engines, and embrace the art of saving money on your wheels. Your wallet – and the planet – will thank you for it! 🌱💰
Let me know if you have any other car vs wealth examples!