I just read a statistic that most luxury cars are leased. I’m not surprised since many people who purchase cars especially luxury cars can’t really afford them. I guess this is part of the whole upgrade trend.
From $200 jeans, to $6 cups of coffee people have decided that it’s ok to upgrade to more expensive things whether they can really afford them or not. The easy availability of credit cards makes the upgrade lifestyle easy. That is until the crushing debt load kills any hope of achieving any long-term goals.
Of course the upgrade trend didn’t spring up from nowhere. It’s funded by marketers who spend BILLIONS of dollars per year to put ideas into your heads and make you think you came up with them. (I know I used to be one of them).
Now back to cars. I happen to love cars. I subscribe to a few car magazines, read the auto reviews in Consumer Reports and I’m a frequent visitor to the Edmunds.com website. I recently even bought a car and I will admit it was hard to pay cash when I know I could have leased or financed a much more expensive car that could have impressed my family and friends (well at least my parents).
Over time the difference between buying a modest car vs. upgrading and leasing a luxury car is substantial. Purchasing a $25,000 car every 10 years would cost you about $112,000 over 25 years, accounting for repairs and inflation. Leasing a $45,000 car would cost you about $320,000 or almost THREE TIMES AS MUCH! The difference is even more substantial if you were to invest your savings over time.
It drives me crazy when I read postings on Edmunds from people who are leasing their cars saying for $9,000 more over 2 years it was worth it to drive a nicer car. The problem with this thinking is that it is short term. That $9,000 could grow to $72,000 in 25 years. Plus what will the person do when their lease is over? If they do the same thing it will be another $9,000 or more in additional costs.
I now have a pretty reliable system for guessing a new prospect’s net worth before our first meeting. If they drive up in a really nice car, almost inevitably they are not on track to meet their long term goals. The nicer the car the more in trouble they usually are. An old car is usually a good sign that they are quite wealthy. One of the wealthier prospects arrived by city bus.
A fancy car is a sometimes a good predictor of income but not of wealth or ability to meet long-term goals.
Perhaps its time we upgraded the importance of our own life goals and used or money to achieve them vs. purchasing $6 coffee, $200 jeans, and luxury cars.