How Cars Keep You POOR!

How Cars Keep You POOR!


[BREATHES DEEP] Aaaaaah! Don’t you just love that new car smell? Smells like power and freedom! Actually, it smells more like petroleum-based
solvents evaporating off vinyl and plastic. Wow, buzzkill. Let’s see if you still like that smell when
you find out what it’s really costing you… I’m locking the windows. [SOUND OF WINDOWS ROLLING UP] [MUSIC] Since the auto boom of the 1950’s, cars have
become an integral part of American society. Car companies spent 14.2 BILLION dollars in
advertising alone in 2014 and that number is only rising. They convince us that once we’re behind
the wheel, our families will love us more, our neighbors will envy us, and our freedom
to go anywhere is secure. Unfortunately, they’re more likely to take
away your freedom and security. New cars are a financial triple threat. We borrow money at interest, to buy an asset
that we have to PAY to maintain and…here’s the big kicker…that drastically depreciates
in value. Wait… what IS depreciation, anyway? Hey Julia, would you like to buy some ice
cream? Uh, sure, I guess– That’ll be four dollars. I wouldn’t pay a nickel for that! But I paid four dollars for it twenty minutes
ago! That’s depreciation. Go wash your hands. Cars retain their value about as well as ice
cream on a hot day. A new car will depreciate 63% in the first
five years. 10% of that the MOMENT you drive it off the
lot! Calling cars a “bad investment” is like
calling a honey badger a bad heart surgeon. What? I mean they’re not an investment at all! Exactly. I mean, can you think of anything else you’d
spend that much money on that loses value that quickly? Oh, I don’t know. How about a garage full of beanie babies? [HORROR MOVIE MUSIC] Heh, I told you the 90’s are comin’ back. Sure, hon. And don’t think you can get out of this by
leasing either! Leasing companies set their prices so that
you pay for the depreciation of their vehicle, and when it’s over they still have an asset
they can re-sell. So let’s set a few simple ground rules that
will put you in the driver’s seat instead of being taken for a ride: Number One. Buy a car that’s 5 years old. Right away, you’re skipping the majority
of its depreciation. Number Two. Save up to buy a car in cash. Paying interest on something that loses value
is like gaining weight from exercising. All pain. No gain. Number Three. If you can’t comfortably afford to save an
amount equal to your car payment, you can’t afford it. So if you’re not saving $300 a month, you
shouldn’t take on a $300 car payment. So how much money is actually at stake? I think it’s time to…. RUN THE NUMBERS! Let’s say I buy a new car for $20,000. I put $4,000 down, and I finance the rest
over 60 months at 4.25%. My monthly payment will be– $295.42! That sounds pretty normal. But check this out. What if you bought that same car, but a 5
year old model, which costs you 63% less — or $7,400. Put your same $4,000 down, and with the same
loan arrangement, you’re looking at a payment of just $62.78/mo. That’s a monthly saving of– $232.65! I could get a massage every other week with
that! You could. Or, you could take those monthly savings and
put them into a growing asset, like a home or a mutual fund. And if you continued to do that EVERY time
you paid off the car, even at a very conservative 7% per year return, in 35 years you’d have
over… $421,459! Really? Wow. Now…is that enough to retire on? Probably not. But that’s just one thing you can start
doing now to prepare for your future. There are many, many more. Y’know, as much I like that new car smell,
I don’t think I’d spend half a mil on it. Let’s try this instead. Ooh, what’s that? EARLY RETIREMENT, BABY! Bam! And that’s our two cents! [MUSIC]

About the Author: Michael Flood

100 Comments

  1. Thing is in 35 or 40 years even a million dollars will be barely enough to live on, when you factor in inflation cost by then. So even 7% of interest on a million each year would equal 70k per year minus taxes. which will leave you with 56k after taxes. Sure that sounds decent now, but in 35 or 40 years from now 56k will be more like 36k today.

  2. Get a used car. If you have the money and want to, buy a new car. Also I love cars so, I find this offensive. Like, this is equivalent to when u modify your car and someone says "DoNt MoDiFy YouR CaR, ItS expENSive." Like, its my car I can do wtf I want to do with my car. Same with anything I own.

  3. No matter what you get. You either pay it up front or pay it later with repairs and maintenance. Cars are something you must have in the majority of the US. Key is finding something nice and hold onto it. It's a cycle. Do the maintenance gradually (bushings, bearings, water pumps, pulleys, suspension, etc..)one time through and you'll be good for another 5 or so years before another something major goes out and the cycle just continues again. Eventually it will get outdated and you must make the decision if you really need the added luxuries and features or not….most will upgrade. Just like a smart phone.
    The Engineering of the complete package and engine/power is what keeps me hooked on my older cars. I can make do with a Bluetooth dongle in the aux port or upgraded headunit, added sound deadening, and some upgraded speaker tech. As long as it quick and quiet on the highway while listening to music or YouTube, and also being comfy, I'm happy.

  4. I'm not sure how I feel about this. On one hand, one of my friends recently picked up a 3-year old Honda Accord, and within a few months, had to replace the starter. Plus, the infotainment is incredibly buggy and frustrating to use. I recently picked up a new car simply because I don't have the time to deal with maintenance, and the adaptive cruise control has been a godsend in traffic

  5. C'mon ryan gosling you sure make a lot with movies… i'm 100% positive that you can afford to have a car.

  6. One question that should've been here. What about maintenance costs on older cars vs new cars? Sure the cost on the older one should be higher. Wouldn't that factor in?

  7. I don't plan on buying a "new" car. I like my scratched and dented little beater. The dents save me money and don't hurt performance at all. Plus, since my car is only worth $1300 they are charging us less in insurance. I know how to fix it, so I wouldn't recommend everyone go that low.

  8. Land Lords. How do we still do landlords? Why is it ok and legal for one person to own as much land and real estate while others own none.

  9. All of the comments bringing up maintenance costs and warranties need to consider that while older cars are more likely to need repairs, depending on model parts,can be cheaper. As for warranty you can use the money you would have spent on car payments, interest and full coverage to save for a 1,000 emergency fund. It is more versatile and as the video said if you cant afford that much, then you cannot afford to buy a new car anyway. Many people make that mistake.

  10. I do not agree with this video at all. A car is a status symbol. Some cars symbolize wealth, whereas some cars symbolize poverty. I get a brand new car every few years, because I want safety and reliability. A new car is under warranty and has road side assistance. You don't get that with a used car. You don't buy a used car expecting nothing to go wrong with it. You buy a used car expecting things to go wrong with it. That's the exact opposite of buying a new car. After a hard's days work, my gorgeous Mercedes-Benz takes me home in maximum style and comfort. Another thing, try asking a beautiful woman on a date with an old, junkie car.

  11. Parking is extremely expensive

    Taxes are extremely expensive
    Maintenance are extremely expensive

    Gasoline is extremely expensive

    Insurance is extremely expensive
    But….

    Money can't buy the driving experience…. PRICELESS.

  12. 7% returns on mutual funds seems little high + we don’t how long you have to deposit money .

    I helped my client buying investment property for 705,000 which produces little over 5700 a month .

    Now if we compare this return to video it’s huge difference but I like the way they simplifies with humour:)

  13. Used car? Eww! Just imagine all the fart solution and hemorrhoid juices that you'll be sitting in! Hell no! I'll pay extra for new and fart solution free!

  14. I love my car. 2007 Toyota Prius that I got a few years ago. It’s only needed 1 repair that cost me less than $100 and it’s good on gas.

  15. Thumbs up if you hate cars! I wish I lived somewhere with good public transit. At least I wouldn’t have to pay for the car, insurance, maintenance, and gas, and if I’m stuck in traffic on a subway at least I can watch videos on my phone.

  16. You two have funny videos that are educational with cool animations. I never get bored watching your videos, they're just amazing!

  17. I bought a car cuz I needed one for work, in 1 year thanks to that I made triple the price of a car. Ofc fuel and maintenance have quite a cut. But if I was using public transport I'd be losing up to 4 hours a day with all the waiting and transfers, and it's also pretty expensive in Norway. "It's not the stuff that is expensive, it's you are not making enough money." Dan Lok.

  18. This is why I am glad I don't live in America.

    Many other places in the world, public transportation is actually faster and easier than driving yourself (not to mention cheaper). Whenever I'm in America, I hate that I have to always drive to do ANYTHING.

  19. You forgot to mention maintenance gets more expansive for older cars.
    According to my grandfather who had a successful car repair since my mother was born, car manufacturers manufacture spare parts for a vehicle only up to about 7 years after it hit the road. After that, it's only second hand and offbrands which will raise the cost significantly.
    Not to mention, every year the car standards shift a little bit, so an inexperienced repair crew may have problems if the car is even 5 years old, which would raise the price (granted, if you are a professional that can't handle 5 year old tech in a 120 year old industry you probably shouldn't be repairing cars)

    Though I don't think the difference on the maintenance is enough to offset the savings, but these are just my 2 cents

  20. I always wonder who is out here buying a new car. My dad thought us to ALWAYS buy used cars. I got a 2014 Nissan Versa used in 2016 for $8,500. The original owner spent $16,000 on it. In just 2 years and and 35,000 thousand miles later, the car has depreciated $7,500 in value. I got a great deal on it. I just checked the car's current price and on average it's $6,464 to $9,254. Why would ANYONE ever buy a new?

  21. You need to factor in the plethora of mechanical issues that can cost you when you’re driving a five year old car…especially if it’s North American

  22. My " money pit " 1999 vehicle.. with over 288,000 miles on it.. is still cheaper to run then buying a new car. I plan on driving that thing.. till it can't no more. So I agree with this video..
    Plus.. Insurance is WAY cheaper !

  23. I feel like you guys did not include the cost of maintenance on a five-year-old car because it definitely makes up for the rest of that car payment that you saved

  24. Hey, I don't know about Beanie Babies, but Lego kits are a good investment. Don't open them and wait until the one you bought is no longer being sold, and people pay much more money for them.

  25. At the 1.51 mark question .. I thought that was the perfect time for her to say diamonds.. Diamonds are worthless but people still buy them, at least cars have some function

  26. This video was like talking to my relatives. They want to give me all kinds of advice and even though they're not wrong, it's depressing hearing it.

  27. this video is for a person looking to buy a new car. but if you use a car for work and getting around car is a must. this video is poorly laid out.

  28. Sure, a used Dodge will cheap but the problem with this video is that buying a late model reliable, safe, efficient car (Toyota or the new Honda Civic shown in this video) won't depreciate as much as claimed. I bought used cars all my life except for my past two Hondas because 1-3 YO clean used versions of the same cars were almost as expensive as a brand new one – which had a full warranty, no questionable history, and I could pick the color.

  29. Some people just need a car to get from A to B. Others, a car is their life style. Different strokes for different folks. Nothing is black and white. Get a nice car you like with low interests, pay the minimum. Insurance and gap will take care of it if it's total. If you pay a car in cash and you total it, there goes your money. Remember a used car comes with high unpredictable maintenance cost and a new car does not.

  30. P.S. do your research on used cars cause some will have trouble even at 5 years and some might run like new (like Toyotas) personal opinion.

  31. I helped a College student get 2018 Lexus for 20k @ dealership auction through connection. Toyota is only car company with appreciation and dirt cheap to maintain. http://usedfirst.com/

  32. Good luck with the 7% yr return over 35 years! if u can easily, as u said, guarentee that investment then ur in the wrong business and could become the worlds richest person

  33. I'm from America but have been working in China for the past five years. I sold my car before I came and I NEVER want to buy another. I use DiDi (Chinese Uber), the bus, and metro every day. I was so tired of paying for gas, insurance, car repairs, etc.

  34. It makes a lot of good points, but neglects the fact that you'll be paying more for maintenance on a used car and that there can be an 'opportunity-cost' if that car gets to be unreliable.

  35. I totally agree on the fact that new car is not an investment at all and will keep you poor.

    But all the numbers and facts in this video are oversimplified and exaggerated.

    1) what's the maintanence cost of 5 years old car compared to new car?

    2) housing is an investment? Whats the rate of rent increase over last 5 years compared to last 10 years
    3) Auto loans have one of the lowest interest rates from banks. So instead of buying car with full cash, if I'm confident that I can beat the bank rate of interest with my investment, i would happily go with a loan.

    Making all these points, I am repeating again, car is not an investment, and definitely leads to spending more.

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