I was reading the NRMA’s Open Road magazine the other day and their comparison between two vehicles grabbed my attention.

Here are a couple of quotes from the article:

• “These vehicles have a surprising number of similarities and are almost inseparable in performance, ride, handling, fuel economy, quietness, comfort and build quality.”
• “Unless looks and status are a primary concern, the $30,000 car is the logical choice over the $50,000 car.”

Cars are one of the bigger-ticket items we spend money on and your car buying decisions will have a profound impact on how much money you will have to spend on other things in life.

The problem is that our brains are very good at living in the ‘now’ and not so great at thinking about the longer-term implications of what we do. This is why car salespeople don’t have to try very hard to get us to buy more car than we need.

The numbers are alarming!

What if I told you that spending an extra $20,000 on a car today will actually cost you $150,000 in 25 years time?

Where did I get that number from? Well, if a 30-year-old spends $20,000 less on a car and invests the difference instead, and those investments get a return of 8% per annum, that money would grow to just under $150,000.

How many cars will you buy in your life? Imagine this impact over the course of your life!

What would you do with an extra $150,000? Is a $20,000 more expensive car going to give you $150,000 worth of satisfaction? Only you know the answers to these questions.

Now, I’m not suggesting you never buy a new car. But as the NRMA article points out, you can get a brand new $30,000 car that’s essentially the equal of a $50,000 car. What car can your ego live with?

I promise, there is no judgement here. I can’t stress enough that value for money is dependent on what’s important to you.

I realise that some people love cars! There are some beautiful machines out there. For those who genuinely love cars, it’s a passion and that passion should be indulged just like others indulge in expensive fishing rods, golf clubs, bikes, handbags, travel – whatever it is they are passionate about.

If you’re not a car enthusiast, buy the cheapest car your ego can afford.

That will leave more money to spend for you! It’s your hard-earned money, so spend it as you choose. One of the easiest ways you can improve your financial future is by not tying up money in a car that you didn’t really need to spend quite so much money on.

As Will Rogers said, “Too many people spend money they haven’t earned, to buy things they don’t want, to impress people they don’t like.”

Funny thing is, it’s a bit the same when it comes to financial stuff. My days are filled helping people get better value for their money when it comes to things like investments, insurance and superannuation. Come and have a chat if you think you could benefit.

Cheers,

Daniel