Money and Wealth (Part 19) – Spending (Part B) – Vehicles

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Money and Wealth (Part 19) – Spending (Part B) – Vehicles

1. One major reason that most Americans are broke (and have very little money saved), and will be for the rest of their lives, is vehicles.
   1. “There is an inverse relationship between the time spent purchasing luxury items such as cars and clothes and the time spent planning one’s financial future.” (Thomas J. Stanley, The Millionaire Next Door, p. 84)
   2. “Certainly the consumption of very expensive automobiles has a dampening effect on the probability that one will ever accumulate significant wealth.” (Thomas J. Stanley, The Millionaire Next Door, p. 86)
   3. “Most vehicle buyers are not wealthy. Thus, one might logically expect them to spend more time and energy shopping for the best deal. Our research shows the opposite. Those who are not wealthy are less likely to shop, haggle, and negotiate than those who are millionaires. Car-buying behavior does indeed help explain why some people are wealthy while most are not and never will be.” (Thomas J. Stanley, The Millionaire Next Door, p. 126)
   4. Many Americans drive new (or newer) expensive vehicles.
   5. Many Americans drive the most expensive vehicle that the bank will give them a loan for.
   6. Just look at the number of people who drive large SUVs and pickup trucks as daily drivers.
   7. Vehicles are the number one biggest waste of money because they are very expensive and depreciate quickly.
      1. If you want to be poor (or at least not wealthy) for the rest of your life, then buy new, expensive vehicles.
      2. Even less expensive new cars are a huge waste of money because they depreciate astronomically in the first 1-2 years.
   8. According to CarEdge (com/depreciation), new vehicles depreciate around 20%–35% in the first year and around 44%–55% in the first five years (see six examples below).
   9. Let’s look at some examples (next page).

Chevy Malibu

• New price (2025): $25,800
• Value after one year: $16,582
  1. Depreciation after one year: $9,218
  2. Depreciation % after one year: 35.7%
  3. Money wasted by buying a new car vs a one-year-old car: $9,218
  4. Amount of money thrown out the window each week during the first year: $177.27
  5. This does not include all the extra money wasted on sales tax and interest on the car loan that nearly everyone takes out when buying a new car.
• Value after five years: $12,498
  1. Depreciation after five years: $13,302
  2. Depreciation % after five years: 51.6%
  3. Money wasted by buying a new car vs a 5-year-old car: $13,302
  4. Amount of money thrown out the window each week during the first five years: $51.16
  5. This does not include all the extra money wasted on sales tax and interest on the car loan that nearly everyone takes out when buying a new car.

Honda Odyssey

• New price (2025): $42,220
• Value after one year: $33,852
  1. Depreciation after one year: $8,368
  2. Depreciation % after one year: 19.8%
  3. Money wasted by buying a new car vs a one-year-old van: $8,368
  4. Amount of money thrown out the window each week during the first year: $160.92
  5. This does not include all the extra money wasted on sales tax and interest on the car loan that nearly everyone takes out when buying a new car.
• Value after five years: $23,542
  1. Depreciation after five years: $18,678
  2. Depreciation % after five years: 44.2%
  3. Money wasted by buying a new van vs a 5-year-old van: $18,678
  4. Amount of money thrown out the window each week during the first five years: $71.84
  5. This does not include all the extra money wasted on sales tax and interest on the car loan that nearly everyone takes out when buying a new car.

Chevy Silverado 1500

• New price (2025): $50,000
• Value after one year: $35,080
  1. Depreciation after one year: $14,920
  2. Depreciation % after one year: 29.84%
  3. Money wasted by buying a new truck vs a one-year-old truck: $14,920
  4. Amount of money thrown out the window each week during the first year: $286.92
  5. This does not include all the extra money wasted on sales tax and interest on the car loan that nearly everyone takes out when buying a new car.
• Value after five years: $27,200
  1. Depreciation after five years: $22,800
  2. Depreciation % after five years: 45.6%
  3. Money wasted by buying a new truck vs a 5-year-old truck: $22,800
  4. Amount of money thrown out the window each week during the first five years: $87.69
  5. This does not include all the extra money wasted on sales tax and interest on the car loan that nearly everyone takes out when buying a new car.

Chrysler Pacifica Minivan

• New price (2025): $42,450
• Value after one year: $27,491
  1. Depreciation after one year: $14,959
  2. Depreciation % after one year: 35.24%
  3. Money wasted by buying a new van vs a one-year-old van: $14,959
  4. Amount of money thrown out the window each week during the first year: $287.67
  5. This does not include all the extra money wasted on sales tax and interest on the car loan that nearly everyone takes out when buying a new car.
• Value after five years: $17,566
  1. Depreciation after five years: $24,884
  2. Depreciation % after five years: 58.62%
  3. Money wasted by buying a new van vs a 5-year-old van: $24,884
  4. Amount of money thrown out the window each week during the first five years: $95.71
  5. This does not include all the extra money wasted on sales tax and interest on the car loan that nearly everyone takes out when buying a new car.

Ford Escape

• New price (2025): $32,740
• Value after one year: $21,373
  1. Depreciation after one year: $11,367
  2. Depreciation % after one year: 34.72%
  3. Money wasted by buying a new SUV vs a one-year-old SUV: $11,367
  4. Amount of money thrown out the window each week during the first year: $218.60
  5. This does not include all the extra money wasted on sales tax and interest on the car loan that nearly everyone takes out when buying a new car.
• Value after five years: $14,975
  1. Depreciation after five years: $17,765
  2. Depreciation % after five years: 54.26%
  3. Money wasted by buying a new SUV vs a 5-year-old SUV: $17,765
  4. Amount of money thrown out the window each week during the first five years: $68.33
  5. This does not include all the extra money wasted on sales tax and interest on the car loan that nearly everyone takes out when buying a new car.

Jeep Wrangler Rubicon

• New price (2025): $54,522
• Value after one year: $37,337
  1. Depreciation after one year: $17,185
  2. Depreciation % after one year: 31.52%
  3. Money wasted by buying a new Jeep vs a one-year-old Jeep: $17,185
  4. Amount of money thrown out the window each week during the first year: $330.48
  5. This does not include all the extra money wasted on sales tax and interest on the car loan that nearly everyone takes out when buying a new car.
• Value after five years: $24,600
  1. Depreciation after five years: $29,922
  2. Depreciation % after five years: 54.88%
  3. Money wasted by buying a new Jeep vs a 5-year-old Jeep: $29,922
  4. Amount of money thrown out the window each week during the first five years: $115.08
  5. This does not include all the extra money wasted on sales tax and interest on the car loan that nearly everyone takes out when buying a new car.

1. “If you live fake rich, you’ll become real broke.” (George Kamel – The Ramsey Show)
2. Let’s do some math and determine how much the average person spends on vehicles over 40 years.
   1. Many people buy a new car every five years, and many more do so every ten years.
   2. Buying a new truck every five years.
      • A new 2025 Ford F-250 four door truck starts at $76,975.
        1. According to the depreciation calculator on com, after five years, that truck will lose $34,677 in value and only be worth $42,298.
        2. But that doesn’t factor in interest payments, taxes, and fees.
        3. If financed for five years at 6% interest, that truck will cost a total of $100,314.11 according to the auto loan calculator on calculator.net.
        4. That means that after five years, the sucker who financed that truck will have lost $58,016.11 ($100,314.11 – $42,298).
        5. By year 5, he has spent $100,314.11 on vehicles.
      • In five years, the sucker trades in the truck for $42,298 and “buys” another one for $76,975 (it would actually be more than this because of inflation).
        1. He now takes out a loan for $34,677 ($76,975 – $42,298).
        2. If financed for five years at 6% interest, that truck will cost a total of $46,466.01 according to the auto loan calculator on calculator.net.
        3. By year 10, he has spent $146,780.12 on vehicles ($100,314.11 + $46,466.01).
        4. Every five years he will trade in his truck for $42,298 and “buy” another one for $76,975.
        5. This will cost him a total of $46,466.01 with interest, taxes, and fees every 5 years (not factoring in inflation).
        6. By year 15, he will have spent $193,246.13 on vehicles ($146,780.12 + $46,466.01).
        7. By year 20, he will have spent $239,712.14 on vehicles ($193.246.13 + $46,466.01).
        8. By year 25, he will have spent $286,178.15 on vehicles ($239,712.14 + $46,466.01).
        9. By year 30, he will have spent $332,644.16 on vehicles ($286,178.15 + $46,466.01).
        10. By year 35, he will have spent $379,110.17 on vehicles ($332,644.16 + $46,466.01).
        11. By year 40, he will have spent $425,576.18 on vehicles ($379,110.17 + $46,466.01).
      • Is it any wonder why most Americans are broke?

• Buying a new truck every ten years.
  • A new 2025 Ford F-250 four door truck starts at $76,975.
    1. According to the depreciation calculator on com, after ten years it will lose $49,603 in value and only be worth $27,372.
    2. But that doesn’t factor in interest payments, taxes, and fees.
    3. If financed for five years at 6% interest, that truck will cost a total of $100,314.11 according to the auto loan calculator on calculator.net.
    4. After 10 years, the sucker will have lost $72,942.11 ($100,314.11 – $27,372)
    5. By year 10, he has spent $100,314.11 on vehicles.
  • In ten years, the sucker trades in the truck for $27,372 and “buys” another one for $76,975 (it would actually be more than this because of inflation).
    1. He now takes out a loan for $49,603 ($76,975 – $27,372).
    2. If financed for five years at 6% interest, that truck will cost a total of $65,467.78 according to the auto loan calculator on calculator.net.
    3. By year 20, he has spent $165,781.89 on vehicles ($100,314.11 + $65,467.78).
    4. Every ten years he will trade in his truck for $27,372 and “buy” another one for $76,975.
    5. This will cost him a total of $65,467.78 with interest, taxes, and fees every 10 years (not factoring in inflation).
    6. By year 30, he will have spent $231,249.67 on vehicles ($165,781.89 + $65,467.78).
    7. By year 40, he will have spent $296,717.45 on vehicles ($231,249.67 + $65,467.78).
  • Is it any wonder why most Americans are broke?

1. Buying a new SUV every five years.
   • A new 2025 Ford Explorer Platinum SUV starts at $52,250.
     1. According to the depreciation calculator on com, after five years, that SUV will lose $24,134 in value and only be worth $28,116.
     2. But that doesn’t factor in interest payments, taxes, and fees.
     3. If financed for five years at 6% interest, that SUV will cost a total of $68,837.58 according to the auto loan calculator on calculator.net.
     4. That means that after five years, the sucker who financed the SUV will have lost $40,721.58 ($68,837.58 – $28,116).
     5. By year 5, he has spent $68,837.58 on vehicles.
   • In five years, the sucker trades in the SUV for $28,116 and “buys” another one for $52,250 (it would actually be more than this because of inflation).
     1. He now takes out a loan for $24,134 ($52,250 – $28,116).
     2. If financed for five years at 6% interest, that SUV will cost a total of $33,044.09 according to the auto loan calculator on calculator.net.
     3. By year 10, he has spent $101,881.67 on vehicles ($68,837.58 + $33,044.09).
     4. Every five years he will trade in his SUV for $28,116 and finance another one for $24,134.
     5. This will cost him a total of $33,044.09 with interest, taxes, and fees every 5 years (not factoring in inflation).
     6. By year 15, he will have spent $134,925.76 on vehicles ($101,881.67 + $33,044.09).
     7. By year 20, he will have spent $167,969.85 on vehicles ($134,925.76 + $33,044.09).
     8. By year 25, he will have spent $201,013.94 on vehicles ($167,969.85 + $33,044.09).
     9. By year 30, he will have spent $234,058.03 on vehicles ($201,013.94 + $33,044.09).
     10. By year 35, he will have spent $267,102.12 on vehicles ($234,058.03 + $33,044.09).
     11. By year 40, he will have spent $300,146.21 on vehicles ($267,102.12 + $33,044.09).
   • Is it any wonder why most Americans are broke?

1. Buying a new SUV every ten years.
   • A new 2025 Ford Explorer Platinum SUV starts at $52,250.
     1. According to the depreciation calculator on com, after ten years, the SUV will lose $34,866 in value and only be worth $17,384.
     2. But that doesn’t factor in interest payments, taxes, and fees.
     3. If financed for five years at 6% interest, that SUV will cost a total of $68,837.58 according to the auto loan calculator on calculator.net.
     4. That means that after ten years, the sucker who financed the SUV will have lost $51,435.58 ($68,837.58 – $17,384).
     5. By year 10, he has spent $68,837.58 on vehicles.
   • In ten years, the sucker trades in the SUV for $17,384 and “buys” another one for $52,250 (it would actually be more than this because of inflation).
     1. He now takes out a loan for $34,866 ($52,250 – $17,384).
     2. If financed for five years at 6% interest, that SUV will cost a total of $46,706.62 according to the auto loan calculator on calculator.net.
     3. By year 20, he has spent $115,544.20 on vehicles ($68,837.58 + $46,706.62).
     4. Every ten years he will trade in his SUV for $17,384 and “buy” another one for $52,250.
     5. This will cost him a total of $46,706.62 with interest, taxes, and fees every 10 years (not factoring in inflation).
     6. By year 30, he will have spent $162,250.82 on vehicles ($115,544.20 + $46,706.62).
     7. By year 40, he will have spent $208,957.44 on vehicles ($162,250.82+ $46,706.62).
   • Is it any wonder why most Americans are broke?

1. Keep in mind, these figures are for only one vehicle per household. Most people have at least two vehicles.
2. Is it any wonder why most Americans are broke?

The following are Dave Ramsey’s thoughts on buying new cars and financing cars, with which I wholeheartedly agree.

“Myth: Car payments are a way of life; you’ll always have one.

“Truth: Staying away from car payments by driving reliable used cars is what the average millionaire does; that is how he or she became a millionaire.

“Taking on a car payment is one of the dumbest things people do to destroy their chances of building wealth. The car payment is most folks’ largest payment except for their home mortgage, so it steals more money from the income than virtually anything else. USA Today notes that the average car payment is $464 over sixty-four months [it was $734 over 68.48 months in 2024 – CEW]. Most people get a car payment and keep it throughout their lives. As soon as a car is paid off, they get another payment because they “need” a new car. If you keep a $464 car payment throughout your life, which is “normal,” you miss the opportunity to save that money. If you invested $464 per month from age 25 to 65, a normal working lifetime, in the average mutual fund averaging 12 percent (the seventy-year stock market average), you would have $5,458,854.45 at age sixty-five. Hope you like the car!

“Some of you had your nose in the air as intellectual snobs when I illustrated how bad Rent-to-Own is because you would never enter such an establishment, and yet you are doing worse on your car deal. If you put $464 per month in a cookie jar for just ten months, you would have more than $4,000 for a cash car. I am not suggesting you drive a $4,000 car your whole life, but that is how you start without debt. Then you can save the same amount again and trade up to an $8,000 car ten months later and up to a $12,000 car ten months after that. In just thirty months, or two and a half years, you can drive a paid-for $12,000 car, never having made a payment, and never have to make payments again. Taking on car payments because everyone else does it does not make it smart. Will your broke relatives and friends make fun of your junk car while you do this? Sure they will, but that is a very good sign you are on the right track.

“Having been a millionaire and gone broke, I dug my way out by making a decision about looking good versus being good. Looking good is when your broke friends are impressed by what you drive, and being good is having more money than they have.” (Dave Ramsey, The Total Money Makeover, pp. 32-33)

“Today I am convinced that my wife and I are able to do anything we want financially partially because of the car sacrifices we made in the early days. I believe, with everything within me, that we are winning because of the heart change that allowed us to drive old, beat-up cars in order to win. If you insist on driving new cars with payments your whole life, you will literally blow a life’s fortune on them. If you are willing to sacrifice for a while, you can have your life’s fortune and drive quality cars. I’d opt for the millionaire’s strategy.” (Ibid, p. 34)

“No, you can’t afford a new car unless you are a millionaire and can, therefore, afford to lose thousands of dollars, all in the name of the neat new-car smell. A good used car that is less than three years old is as reliable or more reliable than a new car. A new $28,000 car will lose about $17,000 of value in the first four years you own it. That is almost $100 per week in lost value. To understand what I’m talking about, open your window on your way to work once a week and throw out a $100 bill.

“The average millionaire drives a two-year-old car with no payments. He or she simply bought it. The average millionaire is unwilling to take the loss that a new car dishes out; that is how they became millionaires.” (Ibid, p. 37)

“The car dealer will tell you that you are “buying someone else’s problems.” Then why do they sell used cars? Wouldn’t that be morally wrong? The truth is that most slightly used cars have gotten all the kinks worked out of them and were not traded because they were bad cars. Since almost 80 percent of the new cars this year will be fleeced [Ramsey’s word for leased], more than likely you are buying a car that came off a lease. My last two car purchases were one- and two-year lease turn-ins with low miles.

“If you understand what I am saying about this huge loss in value, you now realize that 0 percent interest isn’t really “no cost.” While the money to borrow isn’t technically costing you, you are losing so much in value that you have still been taken. Zero percent, however, is used quite often by guys (seldom gals) to rationalize their “need” for some new wheels. So even though the interest rate is attractive, pass it up because the whole transaction still means throwing $100 bills out the window each week.

“Some people want to buy a new car for the warranty. If you lose $17,000 of value over four years, on average you have paid too much for a warranty. You could have completely rebuilt the car twice for $17,000! Also, keep in mind that most manufacturers’ warranties will still cover you when buying a slightly used car.” (Ibid, p. 37-38)

“What if your kids really got this message early enough and applied it to buying cars? Starting with their first car at age sixteen, they could go their entire lives without a car payment. Most Americans can’t even fathom that. You could retire a multi-millionaire just by avoiding car payments! Why don’t they teach that in school?” (Dave Ramsey, Dave Ramsey’s Complete Guide to Money, p. 16)

“I hear this a hundred different ways every day: “You’ll always have a car payment. Car payments are a way of life. You’re always going to have a payment, so you might as well drive a nice car.” That is one of the biggest lies in the debt industry, but it has been packaged so well that most people believe it. And trust me, if you go through life thinking you’ll always have a car payment, there will be plenty of people who will help you to always have a car payment.

“We Americans love our cars. We put our whole identity in them, like we’re actually saying, “I’m a Lexus.” We’ll drop $600 a month on a payment just to impress someone at a stoplight that we’ll never meet. That’s crazy, and it’s not at all how real millionaires behave. The average millionaire drives a nice, slightly used, two- or three-year-old car that they bought with cash, and they practically never drive a brand-new car off the lot.

“People always say, “Well, Dave, if I were a millionaire, I’d be able to pay cash for a car, too!” No, you’re not getting it. These people don’t buy with cash because they’re rich; they’re rich because they buy cars with cash! Think about how much the average American spends on car payments over his lifetime. The average payment is around $464 a month right now. If you invest $464 in a good mutual fund every from age thirty to age seventy, you’ll end up with more than $5 million. Now, I love nice cars, but I’ve never seen one worth $5 million!

“If you call my radio show, struggling to get out of debt, you can almost guarantee that the first words out of my mouth will be, “Sell the car!” If you want to take control of your money, you’ve got to amputate the out-of-control lifestyle. For most people, that starts with the car payment.” (Dave Ramsey, Dave Ramsey’s Complete Guide to Money, p. 86)

Here’s what Dave Ramsey has to say about leasing a vehicle, which is the most expensive way to operate one.

“Have you ever wondered why car dealers focus most of their advertising and sales techniques on leasing instead of buying? Let me clear it up for you: they make more money on a lease than anything else (with the exception of the repair center). Car leasing is a total sinkhole of financial waste. If a dealer sells you a car for cash, they make about $80 profit. That’s not a great deal for them. If they sell you a car on payments, they do better; they’ll make around $775 by selling the loan to another bank. If they can get you to lease it, however, their profit jumps up to more than $1,300 per car. So let’s see… cash sales make them $80, and a lease makes them $1,300. Which one would they possibly prefer you to take? Duh.

“A good friend of mine runs a luxury car lot. According to him, about 78 percent of the cars that drive off the lot are lease deals. That means three out of every four of his buyers take bad deals in order to look like something they’re not. They’re broke, and they’re doing broke people stuff. You see, rich people ask, “How much?” Broke people ask, “How much down and how much per month?” When a rich person says she can afford it, she means she can actually afford the car. When a broke person says she can afford it, she means she can probably make the monthly payment as long as there are no emergencies and she doesn’t lose her job. You’ll never get rich as long as you do broke people stuff.” (Ibid, p. 87)

How millionaires buy cars versus how broke people do so.

1. The following is from 1996.

“How do millionaires go about acquiring motor vehicles? About 81 percent purchase their vehicles. The balance lease. Only 23.5 percent of millionaires own new cars (see Table 4-1). Most have not purchased a car in the last two years. In fact, 25.2 percent have not purchased a motor vehicle in four or more years.

“How much do millionaires pay for these vehicles? The typical millionaire (those in the 50^th percentile) paid $24,800 for his most recent acquisition (see Table 4-2). Note that 30 percent spent $19,500 or less.

“Also note that the average American buyer of a new motor vehicle paid more than $21,000 for his most recent acquisition. This is not much less than the $24,800 paid by millionaires! Moreover, not all of these millionaires purchased new vehicles. How many indicated that their most recent vehicle was used? Nearly 37 percent. In addition, many millionaires indicated that they traded down recently―that is, purchased lower-priced vehicles than they had before.

“What is the most that these millionaires every paid for their motor vehicles? Fifty percent of the millionaires we surveyed never spent more than $29,000 in their entire lives for a motor vehicle. About one in five, or 20 percent, never spent more than $19,950. Eighty percent paid $41,300 or less to acquire their most expensive motor vehicle.

“What if we separate out from our sample those millionaires who told us they had inherited their wealth―nearly 14 percent of the millionaires in our sample? The typical wealth inheritor spent in excess of $36,000 for his most expensive motor vehicle. In sharp contrast, the typical self-made millionaire paid much less―approximately $27,000, or almost $9,000 less than millionaires who inherited their wealth. Thus, the typical American buyer of a new motor vehicle today spends about 78 percent of what the typical self-made millionaire does for his most expensive motor vehicle.” (Thomas J. Stanley, The Millionaire Next Door, pp. 112-113)

And that, my brethren, is why most Americans are broke.