How Cars Keep You BROKE! (The Truth)

Summary

In this video, Marco from Whiteboard Finance explains how owning cars can keep people financially burdened. He outlines key reasons cars are valued, such as nostalgia, work, and status, but highlights the financial drawbacks, including borrowing costs, depreciation, and maintenance. Marco uses statistics and examples to show how car payments can inhibit wealth building, advocating instead for investing the money that would have been spent on car payments. Over time, this strategy could lead to significant financial growth, demonstrating the power of delayed gratification and smart investing.

Takeaways

• 😀 Cars are highly regarded due to nostalgia and the memories they create, such as freedom and life experiences.
• 🚗 Cars are essential for work, from commuting to making a living as an Uber driver or a handyman with a pickup truck.
• 💼 Cars can boost status and credibility, especially in professions like sales or real estate, where a luxury car signals success.
• 💸 The car industry is massive, with global manufacturers spending $38.5 billion on marketing in 2018, showing the scale of the industry.
• 📉 Cars depreciate quickly, losing 63% of their value within five years, with luxury cars losing value even faster.
• ⚠️ Borrowing to buy a car adds interest payments, which increases the total cost of ownership, as you’re paying for a depreciating asset.
• 🔧 Car ownership includes ongoing maintenance costs, such as insurance, brakes, tires, and oil changes, which further reduce its value over time.
• 📊 The average U.S. car payment is $551 for 69 months. If invested at 7%, this could grow to $46,343 over the same period.
• 💡 Delaying the purchase of a new car and investing the difference could result in significant long-term gains, with $551 monthly invested over 20 years growing to $279,652.
• 📈 While 7% investment returns aren't guaranteed, historically the stock market has averaged 7-10% over decades, making this a strong long-term strategy.

Q & A

What are some reasons cars are highly regarded by people?

Cars are highly regarded because they are linked to memory or nostalgia, provide a means of earning income, and symbolize status. Many people associate their first car with freedom and memorable experiences, while others rely on cars for work or to project success.

Why are cars linked to positive memories for many people?

Cars are often linked to positive memories because they represent freedom, independence, and memorable events such as parties, music, and special occasions. For many, their first car is associated with a new level of freedom from their parents.

How can cars be a source of income for some people?

Cars can serve as a source of income for jobs like Uber drivers, handymen, and real estate agents. These professions rely on vehicles to either perform tasks, transport tools, or meet clients.

Why is car ownership often perceived as a status symbol?

Car ownership, especially of luxury brands like Mercedes or BMW, is often perceived as a status symbol because it signals success, whether or not the person is actually financially well-off. This perception plays a key role in how others view the individual.

How much did car manufacturers spend on marketing in 2018?

In 2018, car manufacturers spent $38.5 billion on marketing globally, with $18 billion of that spent in the United States.

What are the three main ways cars can keep people financially burdened?

Cars can keep people financially burdened due to borrowing (with interest), depreciation (as cars lose value over time), and maintenance costs (including insurance, repairs, and regular upkeep).

How much does a car typically depreciate in the first five years?

On average, a new car loses about 63% of its value in the first five years. It also loses about 10% of its value immediately after being driven off the lot.

What are some examples of ongoing car maintenance costs?

Ongoing car maintenance costs include insurance, brakes, rotors, tires, oil changes, and other routine repairs. Even pre-paid maintenance plans come with upfront costs that impact your ability to invest elsewhere.

How much was the average car payment in the United States in 2019?

According to USA Today, the average car payment in the United States in March 2019 was $551 per month over a period of 69 months.

How much could $551 invested monthly for 20 years at 7% interest grow to?

If $551 was invested monthly for 20 years at a 7% return, it would grow to approximately $279,652, with about $147,000 of that amount being earned in interest alone.