At first blush, buying the latest and greatest version of the ultimate driving machine may seem like a value worthy of your hard-earned money. However, typically within months to a couple years after driving that depreciating asset off the lot, the novelty fades in proportion to the realization of the impact that the car payment, cost of insurance, maintenance and other related expenses have on your take home pay. According to the Bureau of Labor Statistics, new and used car prices are up 5 and 2 percent respectively since 2006, but auto insurance is up 50 percent and vehicle maintenance and repair increased by nearly 30 percent in the same period, while lease prices decreased by 11 percent. The next time you’re tempted to kick the tires on a set of wheels, new or used, consider the commitment you’re making to the total cost of that flashy new ride.
If you want a financial future inclusive of a net cash surplus and few financial worries, embrace good habits like setting long term financial goals, reducing and avoiding the use of debt, spending less than you earn, and paying yourself first by building your liquid savings. The future you will thank the present you.