How Much is Your Car Costing You?
When it comes to dating I’m at a distinct disadvantage. Without my own wheels it’s tough – ever tried picking up a girl for a date in a taxi?
Economists call this opportunity cost; the money I save in not owning a car comes at a cost, namely, the unlikely event of pulling a pash on public transport.
Most people want a car for convenience, but the choice of chariot is not simply motivated by need for transport. If it was we’d all be driving second-hand Subarus.
Status symbols
To some, the car they drive is a symbol of their lot in life, and the moulded metal in their garage says as much about their personality as what comes out of their mouths.
Marketers have successfully shaped this image for decades – the horseless carriage is a freedom machine, a sexual stimulant and a status symbol rolled into one.
But at what price? Whether you care to admit it, the car you drive comes at a big cost. So let’s pop the hood and work out just how much your motor is costing you.
“One of the golden rules of wealth is to avoid, wherever possible, borrowing for things that fall in value.”
Exhausting expense
These days it’s probably cheaper to fill your car with Chanel Number 5 as petrol prices climb to record highs. Higher fuel costs are only part of the problem. According to the RACV most family cars now cost more than a quarter of the average weekly wage to run.
Most people get hot under the collar about rising petrol prices – few maintain that rage when it comes to the overall costs of running a car, which can be thousands of dollars each year.
Let’s say you buy a new Holden Astra for $23,990. According to the experts at the RACV, running costs for the Astra are $146.11 each week. After five years the car will cost you nearly $38,000 – and it would now be lucky to be worth $11,000. That’s what you call wealth destruction.
Australians love their shiny wheels. Sales of new cars have been going through the roof. Industry experts are predicting that we will buy a record one million new cars this year.
To move that many new cars off the factory floor, manufacturers have become skilled at selling the dream. The new-car smell has become a pheromone for many a consumer, and just like a serial playboy, there’s always a new model around the corner to tempt you.
New finance experts
Car manufacturers have also become experts in financing – after all, how many of us have a spare 30 grand to throw at a new car? The largest car maker in the world, General Motors, makes more money from lending people the money to buy its cars than it does from making them.
New-car salespeople will often tell you it’s better to buy new, because with a second-hand car you could be inheriting the previous owner’s problems – like the fact that it almost sent them broke.
What the manufacturers don’t say, of course, is that one of the golden rules of wealth is to avoid, wherever possible, borrowing for things that fall in value. The same goes for the mysterious world of leasing cars for a “tax break”. This form of finance has been a boon for car salesmen as it muddies the picture (and the cost) of buying a car so much that it bamboozles the average buyer.
Think about it logically. The Government isn’t in the business of enacting legislation so people can buy expensive cars. In many instances, the tax benefits can be eroded by hefty fees and charges.
Vehicle value?
As with all financing there is a cost, and it comes out of your pocket. Many times it’s the people with the best cars who are the least able to afford them.
Driving a flash car may impress people and increase your self-esteem, but it can keep you from building up assets that increase in value over time.
Sales figures show that most people are mesmerised by the hypnotic spin that success comes with all-wheel alloys and leather interior. Luckily I’ve met a girl who shares my views – and her car!
Tread your own path!
