In 2002, at age 25, I foolishly purchased a brand new luxurious automobile, a Mercedes Benz G500. I had simply gotten a elevate and a promotion to Affiliate. Why not YOLO and feed my car addiction on the time?
The G-Wagon price $78,000 out the door, which was truly a great deal on the time. Only a yr prior, a dealership in Santa Fe with import rights was promoting G-Wagons completely for $150,000+.
A yr later, I offered the automobile for a $18,000 loss as a result of it would not match within the storage of this condominium I needed to purchase. It was two inches too tall for clearance!
I made a decision it was extra accountable to purchase this two bed room, two lavatory condominium dealing with Lafayette Park than maintain proudly owning an costly automobile with a $760 a month automobile cost. That is when my love for actual property, my favorite asset class to build wealth started.
After taking a shower on my new luxurious automobile, I swore by no means to purchase one other once more. Whenever you’re in your path to monetary independence, having a pleasant automobile is the very last thing you want!
New Luxurious Automobile Costs Are Outrageous Immediately
After the G-Wagon I went the exact opposite path and purchased my mother’s 1997 Honda Civic for $7,500. I then went by way of a collection of different vehicles, together with a 1997 BMW M3, 1995 Nissan Pathfinder, 1983 BMW 635 CSi traditional, 2001 Land Rover Discovery II, and new Honda Match. All of the vehicles have been between $7,500 – $20,000, nice worth compared.
Then in December 2016, with a child on the best way, I purchased a one-year previous Vary Rover Sport for $60,000 after tax. It had 10,600 miles on it and I assumed it was good worth as a result of model new, it was promoting for about $80,000 after tax.
Given I am pondering of shopping for a brand new automobile in mid-2025, when the Vary Rover Sport is 10 years previous, I made a decision to drop by the Land Rover Seller in Redwood Metropolis after a pair hours on the pool with my kids. I hadn’t gone to a automobile dealership since 2020, so I used to be curious to see what new luxurious automobile costs have been.
After I received to the Land Rover vendor, I used to be shocked. A model new Vary Rover Sport SE price a whopping $104,600 earlier than tax, or about $113,000 after tax! That is a 41% worth enhance since 2016. The automobile is a magnificence with 23″ rims, comfortable seats, and an up to date physique fashion. However wow! That is some huge cash.
Then I checked out one other Vary Rover Sport SE mannequin on the San Francisco vendor that price $119,870 earlier than tax as a result of it had a sport package deal and safety movie. After tax, the automobile would price about $130,000. Who can afford these costs?
A Look At New Luxurious Digital Autos
After being blown away by the price of new Vary Rover Sports activities, I made a decision to take a look at some electric vehicles by Mercedes Benz as a result of it was on the best way house. Don’t shoot me for trying.
I’ve received a Tesla wall charger in my new house and Mercedes and different manufacturers will begin being appropriate with Tesla’s chargers in 2025 and past. Teslas are good however they’re ubiquitous right here in San Francisco. I needed one thing totally different.
I have been studying everywhere in the information that EV costs have declined, particularly Tesla’s common automobile worth. Finally, maybe getting an EV is the way to go. See the chart under that exhibits a giant decline in EV costs since mid-2022.
Sadly, a 2023 (not 2024) Mercedes Benz AMG EQS electrical sedan sitting within the showroom was much more costly than the Vary Rover Sport! The asking worth was $153,000 earlier than tax, or about $166,000 after tax! Spending $166,000 for a final yr’s mannequin electrical mannequin sedan can be outrageous.
Then the kiddos and I hopped right into a Maybach EQS 680 for $197,350 pre-tax. It was good, however come on now! I’d be pressured as hell driving or parking one among this stuff. One dent would price $5,000+ to repair. It’s a lot less stressful driving an old car. These luxurious new automobile costs are clearly inflated.
After being disillusioned in Mercedes Benz and Land Rover, I made a decision to not hassle dropping by the BMW dealership and take a look at their iX fashions. Why hassle once they’re simply going to cost an analogous quantity for an EV as nicely?
A Higher Spending Various
As a substitute of spending a fortune on a brand new luxurious automobile, I might purchase a well-equipped 2024 Toyota Corolla for $26,000 or a top-of-the-line Toyota Highlander for $60,000, which might save me between $106,000 and $140,000. With these financial savings, I might allocate 60% to the S&P 500, 25% to Treasury bonds yielding 5%, and 15% to a private real estate fund.
This strategy feels far more accountable, offering each the satisfaction of proudly owning a dependable new car and enhancing our monetary safety for the long run.
The idea of opportunity cost at all times weighs on me once I ponder a big buy. I can not assist however think about how far more cash I might accumulate in 5-10 years by way of compound returns if I determine in opposition to shopping for the merchandise.
Consequently, I’ve directed my indulgences towards investments in residential real estate and collectibles, equivalent to rare books. With these property, not solely can I derive enjoyment, however there’s additionally the potential to see a constructive return over time.
By no means Shopping for A New Luxurious Automobile Once more
After trying out vehicles at these dealerships, I made a decision to surrender my seek for a brand new luxurious automobile. The costs are merely unaffordable for me with out producing a big quantity of active income.
And there is not any method my spouse and I might be keen to return to work and lose our freedom simply to purchase a luxurious vehicle. It feels method higher to drive a extra economical automobile that will get us from level A to level B at half the fee. Taking out a mortgage to purchase a depreciating asset isn’t nice.
I do not know who is ready to buy such vehicles. However clearly, many individuals have to be doing nicely to afford such costly autos.
If these luxurious vehicles have been priced between $60,000 – $70,000, I might be tempted to purchase one in 2025. Nevertheless, they’re priced thus far what I imagine they’re price that I’ve zero temptation to splurge on these kind of autos. No YOLO spending right here!
I’ve a greater resolution to my luxurious automobile needs. Hold proudly owning my present automobile for longer than deliberate.
Going To Hold My Automobile For Six Extra Years
Initially, I asserted that the ideal ownership duration for a car is 10 years. Nevertheless, my assertion was ambiguous concerning whether or not to exchange a automobile after it reaches the age of 10 or after proudly owning it for greater than 10 years. As an example, if you are going to buy an eight-year-old automobile, would it not necessitate alternative after two years or after reaching 10 years of possession?
After cautious consideration, I’ve realized there is not any definitive reply. So long as you adhere to common upkeep, exchange worn-out components, and handle any points promptly, you must be capable to safely drive your automobile for over 120,000 miles. My essential concern for all drivers is security adopted by ballooning upkeep prices.
My very own automobile will attain the age of 10 years in July 2025, and it is nonetheless working easily and appears nice. It appears untimely to contemplate changing it subsequent yr, particularly contemplating that I lately invested $890 in two new tires. Moreover, I’ve already changed the leaking water pump in June 2023, the vacuum pump in February 2024, and lately had an oil change.
With solely 52,000 miles on it and a median annual mileage of 5,500 miles, I anticipate minimal points with retaining it for one more six years till it reaches 15 years of age. By July 2030, my automobile ought to have round 88,000 miles on the odometer.
Automobile Funds On A Depreciating Asset Makes No Sense
Take a look at this TikTok video of automobile service individuals and their automobile funds. As a substitute of paying automobile funds, would not it’s higher to speculate your cash?
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An Costly New Automobile Makes Your Current Automobile Means Extra Priceless
The fantastic thing about costly luxurious vehicles lies within the appreciation it brings to the autos we already possess. Upon discovering the most recent costs, I’ve discovered my 2015 Vary Rover Sport to be much more precious.
With a brand new one priced at $115,000 out the door, I now estimate mine to be price at the very least $65,000—$5,000 greater than what I paid for it again in December 2016.
The horsepower is much like the brand new fashions and so is the consolation. Apart from that new automobile odor vs. my In N’ Out burger inside odor, I simply don’t see many advantages of driving a brand new Vary Rover Sport for a lot cash.
New Vehicles Make Upkeep Bills Really feel Cheaper Too
On condition that I will be retaining my automobile for 5 years longer than deliberate, I will be particularly diligent in addressing upkeep points to make sure it stays as protected as attainable.
For instance, I’ve seen a slight creaking sound when driving slowly over uneven pavement. That is doubtless on account of worn sway bar bushings, which will be changed for $450. Beforehand, I may need disregarded such a minor downside. Nevertheless, now that I’ve determined to forgo spending over $100,000 on a brand new luxurious automobile, these bills appear extra affordable.
I am keen to spend $1,500 – $2,000 yearly for 5 years to deal with any points with my automobile as an alternative of spending $115,000 upfront on a brand new Vary Rover Sport. Moreover, I might earn 5% risk-free curiosity per yr within the cash I save by not shopping for, totaling $28,750 after 5 years!
Furthermore, for those who’re keen to buy a brand new automobile, I’ve found that merely washing and vacuuming the inside revitalizes its look and makes it really feel like new once more. It is exceptional what a clear automobile can obtain.
Vehicles usually rank among the many worst culprits for undermining financial independence amongst customers. Individuals incessantly overspend on vehicles to their very own detriment. Let’s decide to retaining our vehicles for so long as attainable to economize. Our future selves will undoubtedly thank us.
Reader Questions
Who’s paying these exorbitant costs for brand new luxurious automobile costs? Absolutely, all people have to be making over $1 million a yr given individuals rationally observe my 1/10th rule for car buying right? Why are individuals keen to pay a lot for a automobile as an alternative of make investments the cash as an alternative to safe their monetary future?
Make investments In Actual Property And Shares As a substitute Of A New Luxurious Automobile
Paying cash for a brand new luxurious automobile is a waste of cash, particularly in case you are not financially unbiased but. Vehicles are depreciating property that will not make you cash sooner or later. As a substitute of paying for a automobile you do not want, use that cash to spend money on actual property and shares as an alternative.
Check out Fundrise, my favourite non-public actual property investing platform. Fundrise was based in 2012 and manages over $3.3 billion with over 500,000 buyers. The agency focuses on single-family and multi-family properties within the Sunbelt, the place valuations are decrease and cap charges are greater. For many buyers, investing in a diversified non-public actual property fund makes essentially the most sense.
Personally, I’ve invested $954,000 in non-public actual property since 2016 to diversify my publicity and earn extra passive revenue. Because of this, I have been capable of prolong my freedom for work for a lot of extra years. Fundrise is a sponsor of Monetary Samurai and Monetary Samurai is at present invested in Fundrise funds.
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