CARS: The Real Cost – PART 1 : PRICE

If you walked into a car lot and saw these prices, what would you do?

Quality used car: $4,000
New economy car
: $219,220
New mid-level car
: $354,127
         (This isn’t even the start of it!!)

Really, sticker price says little about the actual cost of cars.

The real cost of a car includes gas, maintenance, taxes, re-sale value – and especially duration of ownership, which keeps you from having to buy another car.  The lost opportunity costs with that extra money spent from each car type eclipses the much smaller differences in initial sticker price. Those numbers above are actually FAR, FAR worse…

We’re going to grind out the truth of the cost of cars in a super-potent 6 article series.  Right now, let’s focus just on sticker price:

Of course, we have to use ‘Quality Used Car’ as our barometer, so let’s begin there:

#1 – 8 YEAR OLD, USED ECONOMY CAR WITH 100,000 miles: (High quality brand that can ensure 200,000+ miles: Honda, Toyota, Ford Ranger, Subaru) = $4,000

#2 – NEW ECONOMY CAR:
$17,000
(with taxes) = $13,000 more than #1 above
If you kept that $13,000 and invested at 6%, in 30 years you would have actually lost $78,293.48
If you used that $78,293 to pay yourself residual interest through retirement, that would equate to $4,698 per year… over the following 30 years that would equate to an additional $140,927, which means the total loss from buying a new car versus a reliable used car is really $219,220.
– The average person probably buys 4-5 cars in a lifetime.. so this type of loss really adds up.

#3 – NEW MID-LEVEL CAR:
$25,000 (with taxes) = $21,000 more
– If you kept that $21,000 and invested at 6%, in 30 years you would have actually lost $126,474
– If you used that $126,474 to pay yourself residual interest through retirement, that would equate to $7588 per year… over the following 30 years that would equate to an additional $227,653, which means the total loss from buying a new mid-level car versus a reliable used car is really $354,127.
– Remember, 4-5 cars in a lifetime and that number just represents the losses for one of them!

As mentioned in the intro, the REAL initial sticker price for buying these cars:

Quality used car: $4,000
New economy car
: $219,220
New mid-level car
: $354,127

Buying these cars over YOUR LIFETIME:
Compound Interest has a lessened impact the later you get in life.  To gather a rough value of buying these cars over a lifetime, we got lazy and just multiplied the cost of each car by 3.

QUALITY USED CAR: $30,000-$40,000 (with some repairs included in this price)

NEW ECONOMY CAR: $657,661

NEW MID-LEVEL CAR: $1,062,381

         This stuff can be a mind-blow for the best of us… and this ONLY accounts for sticker price… it does not account for difference in gas, standard maintenance, repairs, property taxes…

Every car has a great variation in all related costs. Fixing a BMW or even a Mini Cooper might cost you 4 times as much as other cars. Putting Low-profile tires on a car might cost four times as much as regular tires… there are simply losses much deeper than sticker price, and we have to that next.

SAGA can save your friends! Feel free to like and share!

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