I remember 10 years ago when I moved to Ohio I bought myself a used Lincoln Town Car. I loved that car – leather, heated seats, wood veneer on the dash, smooth ride. It was awesome. It also ended up costing me well over $3,000 out of pocket in the one year I owned it before moving back to New York (where I now have a whole fleet at my disposal, courtesy of the MTA – hey if it’s good enough for Mike Bloomberg, it’s good enough for me).
How did this happen? I’ve got two words for you my financially frugal friend: resale value.
Sure You Want to Look Good, But…
Look, I get it – you want to look cool. You want to get your midlife crisis on by riding around in a fancy car which you think makes you look hot to younger women (BTW, it doesn’t – it just makes you look like you’re trying too hard). But if you actually want to be rich, you need to think beyond tomorrow morning and the shiny car in the driveway.
The fact is that a car has to be thought of as an investment, not a toy. It’s an expensive piece of machinery and if you’re just picturing yourself flying down the highway with the top up then you’re doing something financially silly.
Oh and by the way, it’s more likely you’re not going to be driving down the highway with the wind in your hair. You’re going to be crammed into a tiny cockpit while stripping your engine in stop and go traffic, all the while screaming at the idiot with the mini-van in front of you who can’t seem to figure out how to speed up.
So Why Should I Care about Resale Value?
Tell you what, let’s try an experiment. Grab a few hundred dollar bills. You got ‘em in your hand? Good. Now walk over to the stove, turn on the flame and light them on fire. That’s pretty much what you’re doing if you don’t carefully consider resale value of your car.
Kelly Blue Book is considered the gold standard for calculating resale value of all kinds of cars. They recently published a list of predictions for cars in the 2016 model year that are likely to best hold their value. Go ahead and look.
Want a car to hold its resale value? Well of all the vehicles on that list, there’s a Camaro, which is expected to lose 40% of its value after just 3 years and that’s pretty much it. Every other car on the list is by a solid mid-level car maker like Toyota, GMC and Subaru. And let’s face it – the Camaro isn’t really a luxury car either – it can be had in the $25,000-$30,000 range.
Lots of Luxury Vehicles to Be Had Cheap
Want more proof? How about riding around in an Aston Martin DB-7? You can then show up somewhere and say, “Bond, James Bond” while demanding a martini, shaken not stirred. Out of your price range you say? Yup – you’d be right about that. Brand new, these beauties ran more than $200,000. That’s a whole lot of moolah.
Ah, but pity the poor chump who bought it brand new. Popular Mechanics reports that this once $200,000 car can be had for just $34,000. For those who don’t remember their high school math, that means the car can be had for just 16% of its original cost. Heck, at that price, I’m tempted to buy one myself.
How about a nice Bentley? How It’s Made recently did a piece on how these beautiful vehicles are all largely hand assembled. Popular Mechanics again reports that you can get one for around 15% of the original purchase price.
Even the vaunted Porsche brand name isn’t immune. Investopedia reports that these beauties are some of the best investments you can make if you want to buy a luxury vehicle. Cheat sheet found though that the Porsche Cayenne was going for just 22% of its original resale value.
Hey look, I get it – we all want to look cool and pretend that we’re not really getting all that old. But the fact is that it happens to all of us and the flashy car isn’t going to do anything but drain your wallet.
Of course, if you happen to have the kind of wallet that can support buying such a car, well why not? I mean, if you’ve learned from us how to be wealthy then you can afford to show off a little bit. But for the rest of us, don’t put the cart before the horse(less carriage).