The average new car payment in America is $750/month. That’s $9,000 a year… for something that loses value the moment you drive it off the lot.
We tell ourselves it’s “worth it” because we need reliable transportation. But the truth is, most of us don’t need the newest car every 3–5 years—we just like how it feels.
Let’s look at the opportunity cost: keep your current car for 5 more years, and instead of paying $750/month for a shiny new ride, invest it in a low-cost index fund at an 8% return. After just 5 years, you’d have $56,000. Keep going for 10 years? $153,000. Stay disciplined for 20 years? Over $513,000.
And here’s the kicker—by 20 years in, you could have bought three luxury cars in cash and still have hundreds of thousands left over.
The problem isn’t cars—it’s how often we buy them. Most “car broke” people could be “retirement rich” if they stopped the upgrade cycle.
So here’s a challenge: drive your car until it’s truly paid for—maintenance included. Take the money you would have spent on a payment, and auto-transfer it into your investment account instead.
Your future self won’t remember the new car smell—but they will remember being able to retire early.
"This is a hypothetical example and is not representative of any specific situation. Your results will vary. The hypothetical rates of return used do not reflect the deduction of fees and charges inherent to investing."