How much is your car payment?
I drove to the bank the other day to deposit some funds into my account. I used the drive thru ATM and was waiting in line behind this nice BMW. I noticed it but didn’t think anything else about it.
The car in front of me finishes their transaction and it’s now my turn at the ATM. There is a receipt, left by the previous car, so I remove it and continue with my transaction. I complete my deposit, collect my card and receipt and move forward.
I realize I have 2 receipts in hand and put mine away. However, I notice the other receipt, the new BMW driver’s receipt, shows a withdrawal of $250 and a balance of $21.
This made me think, $21 in the bank. Hmmm, is that car really worth it?
Don’t break the bank on a car!
According to Car and Driver magazine, the average monthly car payment is $733.
That is a huge sum of money to pay out monthly for simply transporting yourself from point A to point B.
Image by Markus Steidle from Pixabay
Are you being taken for a ride?
The average auto loan term is 6 years, and the average car payment is $733.
“But I lease!” Doesn’t matter. People who lease merely make that car payment in perpetuity.
What if you invested that “car payment”?
If you invested $733 per month over 6 years, averaging an 8% return you would have $64,526.83.
In another 10 years without adding a dime, you would have $140K, in 20 years you would have $300K.
Wait! How am I going to do this? I need a car.
Yes, the key here is NEED versus WANT. Keep that paid off car or downsize to a car you can pay cash for or pay off quickly. It probably won’t be new. It probably won’t be as sexy as that luxury car. But it will help secure your financial future. Now THAT, is sexy!
The car payment is keeping the middle class from building wealth.
The car payment is keeping the middle class from building wealth. Yes, I said it.
Auto loan debt is the third-largest debt category after mortgages and student loans. The difference is a mortgage is an appreciating asset. It goes UP in value over time. A student loan, an investment in yourself, if taken out wisely, can actually increase your income in the future.
But a car loan? A car is a depreciating asset. It loses 40% of its value over 5 years and that’s just the average! The depreciation value on luxury cars is much higher!
But everyone has a car payment, don’t they?
The real question is, do you want to be like everyone else? Do you want to be in debt forever?
Release yourself from trying to keep up with the “Joneses”. The “Joneses” are in DEBT.