Introduction
For most people, purchasing a car, whether new or used, will be one of their biggest financial outlays. The thought of driving yourself wherever and whenever is just too convenient for us not to take advantage of, which makes the purchase of a car seem like a wise investment for the average person.
But the reality is that buying a car can come with dire financial repercussions. In this article, we will discuss three reasons why cars keep you poor, and what you can do about it.
1.Cars Depreciate in Value Drastically
To start us off, let's talk about the drastic speed at which a car depreciates. Any sane person will make an investment with the sole intention of turning a profit. This is why you'll find serious investors flooding avenues such as real estate, the stock market, forex, and even potential business investments in order to increase their personal fortunes.
But when it comes to car ownership, you find that the opposite is true. Instead of getting higher returns from your initial investment, you'll unknowingly be throwing away a big chunk of your money the moment your car starts gaining mileage. In fact, the chances of your car appreciating in value are nil, which means that from a business standpoint, a car is strictly a liability. It requires constant financial expenditures, with the most common ones being gas, insurance, and repairs.
However, these costs pale in comparison to how much value you lose when you buy a new car. Within the first year alone, a new car's value depreciates by about 15% to 25%, depending on the model. This means that in case you decide to sell your newly bought car after one year, you only sell it for 75% of its initial price. If you add up the amount of money you pay for your car and all the related financial charges, such as interest, you'll find that a 25% depreciation brings down the value of your car by a very significant margin.
2.Buying a Car on Loan Will Put You in Debt
The next reason why cars keep you poor is that they leave a big roadblock on your road to attaining financial freedom, and that roadblock is debt. Apart from mortgages and college debts, car loans make a large percentage of debts in most households. And for anyone who is financially aware, you should know that skyrocketing debt is the biggest indicator of a less-than-ideal financial life. So before you make the decision to buy a car, first ask yourself if you can pay cash for it.
If your answer to this question is a difficult-to-accept "no," then you should sit down and rethink your decision. Because most car companies will not tell you this, but the truth is auto loans will have you paying way more than the car's real price. Car loans come with high-end interest rates, such that by the time you are done with your monthly installments, your bank account will be starved. If you have to buy a car, it is more advisable to pay for it with cash.
3.Costly Car Expenses
How much money do you think goes into your car on a monthly basis? Truth is, car expenses are probably one of the reasons why your finances are at a standstill. And if you want to get your dream of achieving financial freedom off the ground, you need to consider more economic options when going from point A to point B
. Because regardless of which part of the world you live in, there's no denying that owning a car is expensive. If you're thinking of purchasing a car, brace yourself for an endless list of car expenses. With the rising prices of new cars, even most middle-income earners are unable