Luxury cars: cars for people who like to work

Intro

Guess what… buying an economy car saves a ton of money versus buying a luxury car.  But just how much does an expensive status symbol fancy car really cost?

By my estimates, buying a new Honda Accord will save almost $50,000 over 10 years rather than buying a new Acura TL.  And these are just mid-sized cars.  Knowing that large cars generally cost more money, I’m sure the luxury vs. economy tradeoff is even worse for SUV’s and trucks.

Let’s just pause for a second to reflect on that number… an average of $5,000 per year.  For the household making about $50,000 and saving 10% of their income in a 401k (very generous assumption), buying an economy car (instead of luxury car) is equivalent to 10 years of work savings (minus the interest), hence the title of this post.

In my humble opinion, Luxury cars are a very silly thing to waste money on, particularly for the average Joe.   The essence of a car is to get one safely and efficiently from point A to point B, and luxury cars are no better than economy cars at accomplishing this.

The numbers

As mentioned above, I’m comparing the total 10-year costs of getting a new Acura TL or a new Honda Accord.  The cost information comes from Edmunds.com, and the ROI is likely understated because I used an Oregon zip code where there is no sales tax.

That being said, the drama plays out something like this:

  • 10-Year NPV: $47,961
  • 10-Year ROI: 61%
  • 10-Year Payback: 0.6 years
roi - get economy car
roi – get economy car
chart - get economy car
chart – get economy car

Conclusion

Like I said above, $50,000 is a whole lot of money, enough to cut significant time off a career and provide a sustainable income of roughly $1,000 per year going forward.  The real (financial) irony of it all, however, is that, for most people, fancy cars deliver exactly the opposite of what they promise: deprivation and austerity instead of luxury and sustained enjoyment.

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