In 2002, I foolishly purchased a brand new luxurious automobile, a Mercedes Benz G500. I had simply gotten a increase and a promotion to Affiliate. Why not YOLO?
The G-Wagon value $78,000 out the door, which was truly a very good deal on the time. Only a 12 months prior, a dealership in Santa Fe with import rights was promoting G-Wagons solely for $150,000+.
A 12 months later, I offered the automobile for a $18,000 loss as a result of it would not match within the storage of this condominium I needed to purchase. It was two inches too tall for clearance!
I made a decision it was extra accountable to purchase this two bed room, two lavatory condominium going through Lafayette Park than hold proudly owning an costly automobile with a $760 a month automobile cost. That is when my love for actual property, my favorite asset class to build wealth started.
After taking a shower on my new luxurious automobile, I swore by no means to purchase one other once more. While you’re in your path to monetary independence, having a pleasant automobile is the very last thing you want!
New Luxurious Automotive Costs Are Outrageous Right now
After the G-Wagon I went the exact opposite path and acquired my mother’s 1997 Honda Civic for $7,500. I then went by way of a collection of different vehicles, together with a 1997 BMW M3, 1995 Nissan Pathfinder, 1983 BMW 635 CSi traditional, 2001 Land Rover Discovery II, and new Honda Match. All of the vehicles had been between $7,500 – $20,000, nice worth as compared.
Then in December 2016, with a child on the way in which, I purchased a one-year previous Vary Rover Sport for $60,000 after tax. It had 10,600 miles on it and I assumed it was good worth as a result of model new, it was promoting for about $80,000 after tax.
Given I am pondering of shopping for a brand new automobile in mid-2025, when the Vary Rover Sport is 10 years previous, I made a decision to drop by the Land Rover Seller in Redwood Metropolis after a pair hours on the pool with my kids. I hadn’t gone to a automobile dealership since 2020, so I used to be curious to see what new luxurious automobile costs had been.
Once I acquired to the Land Rover supplier, I used to be shocked. A model new Vary Rover Sport SE value a whopping $104,600 earlier than tax, or about $113,000 after tax! That is a 41% value improve since 2016. The automobile is a magnificence with 23″ rims, cozy seats, and an up to date physique type. However wow! That is some huge cash.
Then I checked out one other Vary Rover Sport SE mannequin on the San Francisco supplier that value $119,870 earlier than tax as a result of it had a sport bundle and safety movie. After tax, the automobile would value about $130,000. Who can afford these costs?
A Look At New Luxurious Digital Autos
After being blown away by the price of new Vary Rover Sports activities, I made a decision to have a look at some electric vehicles by Mercedes Benz as a result of it was on the way in which house. Don’t shoot me for trying.
I’ve acquired a Tesla wall charger in my new house and Mercedes and different manufacturers will begin being appropriate with Tesla’s chargers in 2025 and past. Teslas are good however they’re ubiquitous right here in San Francisco. I needed one thing totally different.
I have been studying everywhere in the information that EV costs have declined, particularly Tesla’s common automobile value. Finally, maybe getting an EV is the way to go. See the chart beneath that reveals an enormous decline in EV costs since mid-2022.
Sadly, a 2023 (not 2024) Mercedes Benz AMG EQS electrical sedan sitting within the showroom was much more costly than the Vary Rover Sport! The asking value was $153,000 earlier than tax, or about $166,000 after tax! Spending $166,000 for a final 12 months’s mannequin electrical mannequin sedan can also be outrageous.
Then the kiddos and I hopped right into a Maybach EQS 680 for $197,350 pre-tax. It was good, however come on now! I’d be pressured as hell driving or parking one in all this stuff. One dent would value $5,000+ to repair. It’s a lot less stressful driving an old car. These luxurious new automobile costs are clearly inflated.
After being upset in Mercedes Benz and Land Rover, I made a decision to not trouble dropping by the BMW dealership and take a look at their iX fashions. Why trouble after they’re simply going to cost the same quantity for an EV as properly?
A Higher Spending Different
As an alternative of spending a fortune on a brand new luxurious automobile, I may purchase a well-equipped 2024 Toyota Corolla for $26,000 or a top-of-the-line Toyota Highlander for $60,000, which might save me between $106,000 and $140,000. With these financial savings, I might allocate 60% to the S&P 500, 25% to Treasury bonds yielding 5%, and 15% to a private real estate fund.
This method feels way more accountable, offering each the satisfaction of proudly owning a dependable new automobile and enhancing our monetary safety for the long run.
The idea of opportunity cost at all times weighs on me once I ponder a big buy. I can not assist however contemplate how way more cash I may accumulate in 5-10 years by way of compound returns if I determine towards shopping for the merchandise.
Consequently, I’ve directed my indulgences towards investments in residential real estate and collectibles, reminiscent of rare books. With these belongings, not solely can I derive enjoyment, however there’s additionally the potential to see a optimistic return over time.
By no means Shopping for A New Luxurious Automotive Once more
After testing vehicles at these dealerships, I made a decision to surrender my seek for a brand new luxurious automobile. The costs are merely unaffordable for me with out producing a big quantity of active income.
And there isn’t any manner my spouse and I might be keen to return to work and lose our freedom simply to purchase a luxurious vehicle. It feels manner higher to drive a extra economical automobile that will get us from level A to level B at half the price. Taking out a mortgage to purchase a depreciating asset isn’t nice.
I do not know who is ready to buy such vehicles. However clearly, many individuals should be doing properly to afford such costly automobiles.
If these luxurious vehicles had been priced between $60,000 – $70,000, I might be tempted to purchase one in 2025. Nevertheless, they’re priced to this point what I consider they’re price that I’ve zero temptation to splurge on these kind of automobiles. No YOLO spending right here!
I’ve a greater answer to my luxurious automobile needs. Maintain proudly owning my present automobile for longer than deliberate.
Going To Maintain My Automotive For Six Extra Years
Initially, I asserted that the ideal ownership duration for a car is 10 years. Nevertheless, my assertion was ambiguous concerning whether or not to switch a automobile after it reaches the age of 10 or after proudly owning it for greater than 10 years. As an example, if you buy an eight-year-old automobile, would it not necessitate alternative after two years or after reaching 10 years of possession?
After cautious consideration, I’ve realized there isn’t any definitive reply. So long as you adhere to common upkeep, exchange worn-out components, and handle any points promptly, you must be capable of safely drive your automobile for over 120,000 miles. My important concern for all drivers is security adopted by ballooning upkeep prices.
My very own automobile will attain the age of 10 years in July 2025, and it is nonetheless operating easily and appears nice. It appears untimely to think about changing it subsequent 12 months, particularly contemplating that I lately invested $890 in two new tires. Moreover, I’ve already changed the leaking water pump in June 2023, the vacuum pump in February 2024, and lately had an oil change.
With solely 52,000 miles on it and a mean annual mileage of 5,500 miles, I anticipate minimal points with retaining it for one more six years till it reaches 15 years of age. By July 2030, my automobile ought to have round 88,000 miles on the odometer.
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An Costly New Automotive Makes Your Present Automotive Means Extra Worthwhile
The great thing about costly luxurious vehicles lies within the appreciation it brings to the automobiles we already possess. Upon discovering the newest costs, I’ve discovered my 2015 Vary Rover Sport to be much more worthwhile.
With a brand new one priced at $115,000 out the door, I now estimate mine to be price no less than $65,000—$5,000 greater than what I paid for it again in December 2016.
The horsepower is much like the brand new fashions and so is the consolation. Moreover that new automobile odor vs. my In N’ Out burger inside odor, I simply don’t see many advantages of driving a brand new Vary Rover Sport for a lot cash.
New Automobiles Make Upkeep Bills Really feel Cheaper Too
Provided that I will be retaining my automobile for 5 years longer than deliberate, I will be particularly diligent in addressing upkeep points to make sure it stays as secure as attainable.
For instance, I’ve seen a slight creaking sound when driving slowly over uneven pavement. That is seemingly attributable to worn sway bar bushings, which could be changed for $450. Beforehand, I may need disregarded such a minor downside. Nevertheless, now that I’ve determined to forgo spending over $100,000 on a brand new luxurious automobile, these bills appear extra cheap.
I am keen to spend $1,500 – $2,000 yearly for 5 years to deal with any points with my automobile as an alternative of spending $115,000 upfront on a brand new Vary Rover Sport. Moreover, I may earn 5% risk-free curiosity per 12 months within the cash I save by not shopping for, totaling $28,750 after 5 years!
Furthermore, if you happen to’re keen to buy a brand new automobile, I’ve found that merely washing and vacuuming the inside revitalizes its look and makes it really feel like new once more. It is exceptional what a clear automobile can obtain.
Automobiles usually rank among the many worst culprits for undermining financial independence amongst customers. Individuals continuously overspend on vehicles to their very own detriment. Let’s decide to retaining our vehicles for so long as attainable to economize. Our future selves will undoubtedly thank us.
Reader Questions
Who’s paying these exorbitant costs for brand new luxurious automobile costs? Certainly, all people should be making over $1 million a 12 months given folks rationally observe my 1/10th rule for car buying right? Why are folks keen to pay a lot for a automobile as an alternative of make investments the cash as an alternative to safe their monetary future?
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