Is your car keeping you poor?

Everyone treats their car like it is their baby. Almost every one of us owns a car or two these days. It is an integrated object in our society. We give it names, notice its funny little quirks and much more to make ours. It conveniently takes us from place to place, but your car may be doing something evil that you are not aware of.

Many of us use our cars as status symbol. Our family, coworkers, or even friends will like us more. Maybe we use to make others envious of us. It creates an illusion our freedom is secure for us to go anywhere. Unfortunately, it does the opposite, it is more likely it will take away our freedom and security. We borrow money so we can purchase the car, the money we borrow has an interest, and we need to pay to maintain the car. Do not forget, once it comes off of the lot the car dramatically depreciates in value. New cars typically depreciate 60% in the first five years. Want to avoid it by leasing your car? Well unfortunately leasing companies already know about this. They set their prices so that you will be also paying the depreciating costs of their vehicle. In the end, they still have an asset they can attempt to sell. Would you still consider your car as an investment, in something that loses value that fasts?  

Well, what are your options to avoid losing a large chunk of the expense on your car? First, buy a used car that is at least five years old in cash. Right off the bat, you are skipping a major part of its depreciation without needing to pay interest on something that is already depreciating. If you cannot buy it cash, make sure you save an equal amount to your car payment. Without having a comfortable amount to pay off the car payment each month, you simply cannot afford to own a car during these times.

With the money you could potentially save from ugly costs it comes with a car, you could get more spa visits or you could put the saved money in growing assets that earn you money.  This is one way you can prepare for the future. As much as we like that new model and the smell of an old car. Is your wallet looking that good as that new car?


Lucas Zhang was a Finance major at Ohio State University. He writes about finance, mortgages, and technology for Irish Mortgage Brokers. 

Relevant Links: Paycheck to Paycheck, New Car costs

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