Here is the great news about the huge waste of money called “Car Ownership.” This could be the last vehicle you ever own because the whole model is about to be disrupted by technology. Why own a car in the world of autonomous vehicles and ride sharing? Why not borrow transportation at a much reduced price when needed? Why not have use of a vehicle as a subscription type service that could remove all the wasted costs of car ownership? But the reality is we are not quite there yet, therefore we need an affordable car at the moment and preferably one that delivers superior value.
It makes sense because a car is a depreciating asset that sits dormant and unused 90% of the time, what a waste! It costs to insure, maintain and pay gas and taxes, nasty wealth destroyer! Change can’t come fast enough! These developments could greatly benefit those seeking financial independence since car ownership is such a huge hit to our individual net worth.
All said, we are not quite there yet, give it 5-10 more years. In the meantime, you need to get to work and fun places, therefore you need a car. But here is more good news, many “middle of the road” brands and models boast the same technology and quality of so called “luxury” brands, but at a much lower price. For the last 15 years my go to car has been the Honda Accord.
Honda Accord Perfection
I think the Honda Accord has delivered the complete package at an affordable price for years. They are also getting better and better. In addition, cars like the Accord continually incorporate advanced tech seen on luxury vehicles. In other words, have your cake and eat it too, whatever that means.
In this day and age it makes no sense to buy luxury, there I said it! I know in these go go good times of all time high asset values it may be unpopular to talk against luxury cars. But if you can basically get the same value at half the price, why not do it?
Nobody needs some fancy “luxury” car to get “luxury”. Many common brands have adopted many luxury and tech features at a fraction of the overall cost. Here are a few comparisons to consider:
1. Subaru Outback vs Mercedes
The Subaru has it all. Great ride, safety, comfort, etc. the newer Subaru’s are loaded with luxury tech: touch screens, adaptive cruise control and the advanced eyesight safety system. The eyesight system uses several cameras to be an extra set of eyes. It will even warn the driver and apply the breaks if you are about to crash into something. Most Subarus received high marks by Consumer Reports for reliability and customer satisfaction.
Yes, the Mercedes may have a few minor refinements, but at a huge cost. Why pay $30,000 more! That is $30k that can be used to fund those early retirement dreams.
2. Toyota Camry vs Audi A6
By now you might think I’m crazy. The newer Camrys gain top scores by Consumer Reports with a starting price at about $24,000. The Audi A6 is obviously a great car, but it starts around $50,000!
I understand I am going to get an earful about how beautifully engineered the Audi is, but is it worth $30,000 more when you factor in taxes and fees! $30,000 invested in your low cost index funds could be a large chunk of your FI building blocks! $30,000 invested in dividend producing stocks could spin off $1,000/year in extra income for life and grow over time!
3. Honda Civic vs Porsche
I think the new Civics look sweet! Why buy a small expensive Porsche when we can get a sweet Civic! The new Civic comes in at $18,000 and gets up to 42/mpg. US News & World Reports gives it an 8.8/10 ranking. What can we say, it’s great!
4. Chrysler Pacifica minivan vs Mercedes
I have driven many times in the new Chrysler Pacifica and I love it. It is the ultimate family car of the future. When inside I feel like I am in a cool Star Trek space capsule. It’s safe, roomy, tech, versatile and comfortable. I can’t understand why someone would pay $20,000 more for a Mercedes station wagon or SUV, it is simply not worth it.
5. Nissan Leaf vs Tesla
If you are wanting to really save money over the long run on transportation then we should consider going electric! The new redesigned Nissan Leaf looks amazing and received high marks. I think Tesla’s are awesome, but even the base model is still pricey. Hopefully as production ramps up the Tesla will come down to the base $35,000 price. In the meantime the Nissan Leaf seems like an awesome alternative.
People typically buy certain brands to signal to world that they are important. The luxury car makers push this message with their billion dollar ad campaigns. If you want to build True Wealth you will realize this is not important. We all know the end goal is to reduce our price of transportation as much as possible. But we have to realize some people need a car now, most of our City’s have done a bad job at creating seamless alternatives to individual car ownership. Thankfully this is changing fast and perhaps we will all be richer for it.