Don’t Make This Major Financial Mistake

Andy Snyder|June 12, 2023

Do you want to be a millionaire? Or do you want to drive a nice car?

The latest data tells us we can’t have both.

It’s a big and growing problem in a country that faces extraordinarily rising costs and a growing list of must-have essentials.

The facts are clear. The average price of a new car in America now sits just below $50,000 – a record-smashing high. It’s not hard to see why. From a bevy of legally mandated safety requirements and cameras on every corner to driver automation that was once only imaginable, today’s cars come packed with technology and pricey features.

Like them or not… you’re paying for them.

But here’s the thing. Most folks can’t afford them, at least not without a massive loan.

It’s no surprise that the average size of a new-car loan has zoomed higher right alongside the rising price of autos. Each sale that comes off the lot now comes with an average debt of $40,000… and an interest rate of nearly 7% that’s locked in for five years.

It’s one of the nation’s greatest and gravest wealth destroyers.

Some math brings out the acuteness of the situation…

Sticking with the averages (again, this is an ordinary, run-of-the-mill new car), a new-car owner is stuck with a $792 monthly payment. It must be paid every month for five years… at which point, if history repeats, most buyers will jump right back into the new-car cycle.

In the end, interest adds another $7,200 to the car’s price tag.

But how many single-car families do you know of? Most American driveways have at least two vehicles. Many more have cars that far exceed the not-so-humble “average” we use here.

It’s destroying millions of Americans’ shot at retiring rich.

A Better Investment

What if, for example, instead of spending $800 each month on a new car, a person were smart/fortunate enough to put that money into the stock market?

The average long-term return there is just north of 10%… a figure we’ve already eclipsed this year.

Over the 60-month term of that car loan, that $800-per-month investment would add up to more than $61,000.

Over another 60-month term, it’d surge to more than $160,000.

And over 25 years, it’d be worth just a few bucks shy of a million dollars.

Do the math for two new cars, and oh boy, the amount of wealth we’re tossing away in the name of fancy new paint and the latest don’t-need features starts to look criminal.

So what’s a fella to do about it?

Buy a horse? Get a bus pass?

What a world that’d be. But we can feel heads shaking in revolt of such ideas as we write.

Most of the advice here is obvious and stale. The boring get-rich-slowly guys have covered the topic well. Don’t buy new. Hold on to your cars for a decade or more. Forget about luxury.

You know all that stuff.

But there’s more to the story. And covering that side of things is our job.

Add It Up

Walk around any new vehicle today and tally all of the government-mandated features. There are a lot – everything from marginally beneficial environmental systems to mandatory backup cameras.

In all, these Washington-derived mandates add about $5,000 to the price of a car.

And then there is the “feature inflation” in today’s vehicles.

Yes, airbags and crush zones are expensive yet important must-haves. But is parking assistance worth your retirement? Is Wi-Fi in your minivan worth working until you’re 80 years old? Is hands-free cruising worth the head start you could give your grandkids?

You know the answer.

This nation would be in entirely different fiscal shape if we went back to hand-crank windows, FM radios and manual transmissions… and if we told the government to get out of the passenger seat.

We’d still get safely from point A to B… but we wouldn’t be sacrificing our future to do it.

Carmakers don’t offer these stripped-down vehicles because few folks demand them. That’s sad.

It’s got to change.

Your future depends on it.