I have a 25 minute commute to and from work each day. During my commute, one of the thoughts that always crosses my mind is:
“Can these people really afford all of these luxury cars I see on the road?”
The more I think about it, the more I think that a lot of these people are probably trying to keep up with the Joneses and are in debt up to their eyeballs! Now, I am sure there are some people that drive around in these luxury cars that really can afford them because of a high salary. However, I just see way too many on the road to think that everybody can afford them. Let’s just use a hypothetical example.
Ex: Purchase Price of Car: $45,000
Loan Term: 60 months
Interest Rate: 4%
Down Payment: $4,500
In this example, the payment would be $745/month. In addition, insurance costs will be significant for a luxury car. A $745 car payment on top of a mortgage, utilities, and everyday living expenses seems crazy. I would be really interested to know what the repossession rate is on luxury cars. I tried to do some research and dig up that number, but I wasn’t able to come up with anything. If anyone does happen to find that statistic, I would be really interested to know.
Now, I will admit I made a stupid decision when I finished college. I bought a brand new $23k car right out of college. To make things worse, I financed the entire $23k over 36 months. That resulted in payments of about $650/month and hurt my balance sheet for a long time. I still regret my decision to do this because it definitely set me back. However, I was living with my parents and had no other expenses, so the $650 was a lot more manageable for me. Regardless, I made a stupid decision. The more I think about it, the more I think I just wanted to have the best car of my group of friends. I wish I could go back 4 years and smack 22 year old Dave right in the face for acting so stupid.
I guess it worked out for me that I learned my lesson while I was still young and didn’t have any other real obligations at the time. Unfortunately, there are a lot of people that aren’t so fortunate and make the mistake later in life that leads to repossession of cars, foreclose, and even bankruptcy.
Does anybody else ever think about this when they see luxury cars all over the place?
image credit: David Villarreal Fernández