I think that is honestly something we think about. We may not admit it openly but I think in the back of our minds it is definitely going on. And the automobile marketers know that it is, so they feed into that by appealing to the vain part of us when we consider what car to purchase/drive. Maybe we should back up and ask the question: Should our vehicle say something about us?
Next to your home, the second largest purchase you’ll likely make (or loan you will take out) is for an automobile. It may often be one of the first loans you take out as well, since so many of us start driving an automobile as soon as we reach the legal age. Unlike flat panel televisions, the cost of automobiles is just going up. I still remember sitting with my Dad at a dealership in the late 1980’s and the salesman was trying to explain the value of the vehicle he was considering and my father responded “you know I didn’t spend this much on my first house”. Fortunately I haven’t spent more for a car yet than our first home cost, but there are definitely cars on the market that would be in that price range, and I better watch what I say, because my turn may be coming soon.
I have never lived in a locality with great mass transit options, so an automobile has always been a requirement to get to the places I need to go to. Do I need to get to work in a Ferrari or will a Honda get the job done? How about you, will a Toyota sedan fulfill your vehicle needs or do you have to drive a Mercedes or Jaguar? Again, there is nothing wrong with the luxury cars, as long as you can check your motives and know that you are completely within your budget and still have money left over for saving, giving, and the like.
Do you need a new car with that new car smell or will a used or certified pre-owned vehicle get you in the car of your choice at a lower cost. The fact is certainly true that a new vehicle loses tremendous value as soon as you drive it off the lot, so why not let someone else take that hit and buy a gently used model instead?
Depending on the model/size/features you desire in a car, you can easily save $5,000 to $10,000 by purchasing one that’s used. And if you buy 10-12 vehicles over your life, that’s $189,000 to $378,000 after you factor in 5% compound interest and the savings from each vehicle purchase.