Personal Finance Challenge #29: On Being Car Poor

Just like people sink a lot of their hard earned money in a house, people sink their hard earned money into a vehicle.

It is hard to understand from a logical basis. Just running the numbers shows how fast cars depreciate, fall apart, need repair, need maintenance, etc. They are one big black hole of death for your money.

The funny thing is, it is easy to understand why people buy vehicles from an emotional basis. They are an extension of themselves!

That’s right. For most people a car is a very emotional attachment. The same way that your hand is an emotional attachment. It is a part of you.

For whatever reason, cars in the U.S. and many other places in the world become status symbols instead of simply a way to get from point A to point B.

People buy vehicles they can’t really afford and/or vehicles they will never use to their full potential.

Why does the new graduate who landed his or her first “high paying” job decide to buy a Mercedes Benz?

Why does a family that has just had their first child decide it is time to buy an SUV that they will never take off road?

Why does a person buy a big expensive truck that they will never haul anything with on any regular basis?

Perhaps the advertising executives that help sell those products have a better stranglehold on your mind then you ever previously imagined?

It is the same fallacy that promotes buying a bigger house then you need…

You got a high paying job! You not only deserve a Mercedes Benz you also can afford it.

You had a baby! Pretty soon you will have more so buy the SUV now.

You are a man! You deserve a big man truck that you can haul big objects with.

Is this the type of logic you use to rationalize buying the vehicle you desire?

Perhaps it would be better to work out your logic on paper? Take your time in making a buying decision, especially one this huge. Do the research and write down the pros and cons of various vehicles.

Ask yourself some questions. Do I need this vehicle for my work, family, lifestyle, etc? Or do I simply want it for reasons I can’t describe very well? Will I still want this vehicle 5-10 years from now? How much will it cost to maintain this vehicle vs. another vehicle. Will gas prices go up in the near future and will I be able to afford gas for my vehicle?

There are a lot of questions to ask, and unfortunately most people don’t ask these questions. They decide on a vehicle like they decide what to wear in the morning.

Yes, we can argue buy used or new till we are blue in the face. I think buying new can be great in one situation and bad in another. Same with used. Great in one situation and bad in another.

If you think beyond simple arguments such as the new vs. used car debate you can actually get somewhere close to making a wise decision about what vehicle is best for you.

And by best I mean what is both functionally best and financially best for your situation. If your job requires that you have potential work clients in your car then it is functionally best to buy a comfortable car that is spacious enough to accommodate them.

If all you do is drive your car to work, and pick up a few groceries every week, then it is functionally best to buy a small gas efficient car that won’t break down on you.

Don’t buy the pretty status symbol car if its not required for work. Don’t buy the big SUV you will never use fully. And certainly don’t buy the big truck if you never haul anything. It’s that simple folks.

This is our 29th challenge in The Personal Finance Challenge Series…

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  1. […] It 25. Believe It 26. Celebrate Your Milestones 27. Mind Over Matter 28. On Being House Poor 29. On Being Car Poor 30. On Being Food Poor 31. Procrastination Kills, Or Kill Procrastination 32. Negotiation Makes It […]