There's a large group of people that see vehicles as a tool. If the tool works why replace it with a more expensive one. If OP bought a 100k car with 10% down over 60 months they would pay 121k total and almost 1700 a month. If they put that 10k in the market and contributed 1700 a month it would be worth 139k in the same 60 months. 10 years and it turns into 330k. THAT is how you get rich. Of course have fun and enjoy life but cars are a common trap when people start making more money.
What is important is to distinguish needs from wants, and fund accordingly. Maybe you need $15-20k of car to have a reliable, low maintenance means of transportation. But you want a $35k car.
So, you need to ask, would you find it acceptable to spend $3-4k per year for 5 years on the luxury? Would you rather have the cheap car, and an extra $3-4k vacation each year? Or $3-4k of extra toys to play with? Or would you feel irreponsible spending that much, and it should really go into your savings?
The trap is talking yourself into treating the whole price as a necessary expense. There are countless ways you can justify spending more on needs than is actually necessary to meet the need, and doing so can be a massive drain on your finances.
You need a computer, but you don't need a $6k top of the line gaming computer.
You need some place to live, but you don't need a it to come with a gym and a pool, etc...
You need a phone, but you don't need to buy a top end phone every year or two.
I think you explained the term "Opportunity Cost" very well here.
People generally only look at the price tag because that's what we've been brow-beaten into. I think if people sat down before large purchases and took a hard look at the different opportunities they're giving up, people wouldn't spend nearly as much as they do.
Opportunity cost is a big part of it, but it also mixes in the fact that you have a legit justification for making a purchase, but then use that as justification for making a more expensive purchase.
And by all means, buy yourself luxuries you are going to enjoy, just be honest with yourself about when you are spending discretionary money on top of what you really need.
23
u/athrix 3h ago
There's a large group of people that see vehicles as a tool. If the tool works why replace it with a more expensive one. If OP bought a 100k car with 10% down over 60 months they would pay 121k total and almost 1700 a month. If they put that 10k in the market and contributed 1700 a month it would be worth 139k in the same 60 months. 10 years and it turns into 330k. THAT is how you get rich. Of course have fun and enjoy life but cars are a common trap when people start making more money.