I had this in mind for a long time now and finally, I see some authoritative entry on the WSJ about how “lousy” buy a car, really is.

Here is an excerpt from the article on the Wall Street Journal :

The fact is that for most of us after our houses and maybe college educations for the kids (at a really, really good college) cars will take more of our money than anything else. And Detroit (and Nagoya and Stuttgart) want as much of that money as they can possibly get.

Hence all the expensive advertising trying to convince you that you’ll feel better about yourself — and others will feel better about you, too — if only you drive a particular car.

What hogwash! Get past the marketing and advertising and when you buy a car you’re buying something very simple: a steel box with wheels that contains about 150,000 miles. You can buy an expensive box of miles, a mid-priced box of miles or a really cheap box of miles (read “used cars”) and you’ll generally get the same thing: 150,000 miles (less, of course, the number of miles a previous owner put on a used car). The only difference is how much you pay to go each one of those miles.

Hidden Cost

But here’s the real catch: any one of those cars winds up costing you a lot more than you think. Sure, there’s sales tax and operating costs and insurance, all of which take an additional toll on your wallet. But what I’m really talking about here is opportunity cost: every additional buck you spend on that box of miles is a buck that you no longer have to invest and watch grow in value for years to come.

If you save $10,000 by buying a Toyota Camry instead of a BMW and invest that $10,000 in stocks with an average annual return of 10%, at the end of 10 years (about when your Toyota is coming up on that 150,000-mile mark) you’ll have $25,937.

At that point, save another $10,000 by buying a less expensive car, invest it, and the combined savings on those two cars will, 10 years from that second purchase, be worth more than $93,000. (That’s $67,275 from your initial $10,000 investment 20 years ago and another $25,937 from your latest $10,000 savings.) Can driving a car that is $10,000 more expensive than another really be worth nearly $100,000 to you?

Isn’t that true? Who would want to spend hard earned money on lousy cars that no one is interested about? I mean, Of course, it is a matter of ” Status” and the fact that you own a beauty on wheels is a reflection of where you stand in the society — now does that mean our man Mr. Buffet is a no good and couldn’t manage to buy himself a decent car? No, it means that he has brains and most people don’t have.

If buying a car is a sign to SHOW the society where I stand, I have other ways to do that and I don’t really have to indulge in a CAR.

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