Within 10 minutes of owning a new car, it loses almost 10% of its value. We are using a Tesla for this example, but it’s pretty much the same story for any new car.
Dumping lots of money into things that plummet in value is not how you build wealth. And this doesn’t even take into account whether you are borrowing money to buy the car. Paying interest to own a rapidly depreciating asset makes a bad financial situation worse. Investing in index funds can grow your money at roughly 10% per year over time, and buying a car can grow your money by NEGATIVE 10% per year.
But of course, most of us need a car and there’s no way around it. So it’s important to buy a car that is safe and reliable. And if we’re gonna drive a lot we might as well get a car that we *enjoy* driving, right? Well, it’s totally possible to buy a safe, reliable, USED car that you enjoy driving too. It will serve you just as well and not be a black hole that sucks up money.
As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.
-Vivi & Shane
