As someone who plans to buy a new car by 2025, I’m having second thoughts. Since the average price of a new car is almost $50,000, it seems that only the rich can afford to buy a new car today.
please think about it. According to my 1/10 rule for buying cars, he needs to make $500,000 to buy the average new car. However, a $500,000 household income is the start of the top 1% income.
Even if a new car buyer broke my tenth rule and spent 20% of their gross annual income on cars, they would still be making over $250,000 a year.
Below is a chart of average new car transaction prices by Kelly Blue Book through January 2023.
By contrast, the average used car price is around $27,000. The difference between the average new car price and the average used car price is $22,388.
![Average price of a new car according to Kelly Blue Book](https://i2.wp.com/financialsamurai.com/wp-content/uploads/2023/02/new-car-prices.png?fit=1456,9999)
Owning a new car is an indicator of wealth
Based on 2023 average new car prices, owning a new car is one indicator of wealth. If you want more stats, own an average new car. People may treat you with more respect.
However, if you believe in stealth wealth, you will never own an average new car. In a land of envy and thieves, you don’t want to attract unwanted attention. As a result, I drive a cheaper old car reasonably.
Of course, you can buy a new, below-average car like a Honda Civic for $25,000, but it’s not considered wealthy. It depends on how old you were when you bought the new car.
If you’re 25 and you buy a new Honda Civic for $25,000, you’re considered rich. But buying a new Honda Civic at 60 is considered relatively thrifty. After all, median income increases with age.
So if you’re buying an average new car now, hopefully you’re over 50 or have your retirement savings squared. Otherwise, you may be working much longer than you would like.
New cars everywhere are a bullish indicator
Unfortunately, I drive 40-100 minutes a day for school and sports activities. I hate driving, but there are no efficient transportation options for kids.
When I’m driving, I always notice new cars everywhere. Then, whenever you see a car, multiply the estimated car price by 10 to derive the driver’s potential household income. It is surprising that there are many high-income families.
San Francisco also suffers from heavy traffic during rush hour. Despite the growing popularity of working from home in the Bay Area, traffic is still terrible.
But one day, to make me feel better, I changed my mindset.
Instead of being frustrated by the sheer amount of city traffic, I started to get inspired. Heavy traffic means business is booming. And when business is doing well, that means I should be able to get more passive investment income to stay free.
Get out of the traffic! A driver who double parks on a busy street is a rock!
The media love to focus on doom and gloom because negative stories get more attention. But if you’re stuck in traffic every day like I am, you’ll quickly realize the economy is doing well.
Without demand, the average new car price of about $50,000 cannot be sustained. And demand cannot be sustained unless household incomes increase at the same time.
A fool might buy a new car
Yes, rich people can be the main people buying new cars. But maybe fools buy new cars too?
After all, the average monthly payment for a new car hit an all-time high of $777, nearly doubling since late 2019. kelly blue bookEven for used cars, car payments have risen to an average of $544 per month.
But even if you call me naive, I please do not I don’t think any rational American looking for financial freedom would spend this much on a new car. What the average American thinks is irrational is also what the average American thinks is stupid.
And we are not idiots!
![average car depreciation chart](https://i2.wp.com/financialsamurai.com/wp-content/uploads/2016/02/car-depreciation-chart-30K-vehicle.png?fit=1456,9999)
We all know that a new car has the steepest depreciation curve in the first three years. Additionally, active savings and investments are essential to achieving financial freedom.
70% of Americans away from workit also means that 70% of Americans don’t want to be slaves to their jobs forever.
If you hate your job, it doesn’t make sense to spend most of your savings or pay $777 a month to buy a new car.
A new car costs about $50,000
Considering that only the rich can afford the average new car, here is a list of the most expensive new cars priced around $50,000. This way you can quickly identify who is rich and who is not.
- Lexus ES
- Audi A4, A5, S3, A6
- Volvo V60, XC60, S60
- Volvo XC60
- Volkswagen Arteon
- BMW 2, 3, 4 Series, I-4
- Acura TLX
- Tesla Model 3, Model Y
- Hyundai Genesis G80, GV80
- mercedes benz c class
- kia stinger
- Cadillac CT5-V
- Nissan Z
Including taxes and fees, some of these cars are pushing $60,000. Here in San Francisco, many of these new car models, especially the Tesla Model 3 car, are a dime.
Even a softball friend of mine drives a Model 3. So the average new car buyer has financial resources other than income.
We have more wealth than we know.
Thoughts on buying a new car for the family
The reason I’m looking to buy a new car in 2025 is because my Range Rover Sport will be 10 years old by then. I think the ideal length of time to own a car is until it hits 10 years, mainly for safety reasons.
Safety performance is improving year by year. Automotive engineers don’t just collect salaries every year. I don’t want to drive a car that is over 10 years old because I have to carry my kids.
I have driven a fairly old car before. And as with owning a rental property, something always happens.
Here are some examples of my old car breakdowns.
- The timing belt on my 15 year old Toyota Corolla broke one day.
- 18 year old 1989 BMW CSI brakes failing while parked in Best Buy lot
- The engine in my 12 year old 1997 BMW M3 started running because the transmission was failing
Your car’s spare donut tire should be replaced every 10 years because the rubber hardens and cracks. Airbags on the other hand he may fail in 10-15 years.
If a car malfunction caused an accident and a passenger was injured, I would never forgive myself if I could have bought a safer car. The time is when you have children.
I only drive about 6,000 miles a year so I’m pretty sure I can drive the car until it’s 15 to save money. Not worth the risk.
probably still buy a slightly used car
![Only the rich (or fools) can afford to buy a new car today](https://i2.wp.com/financialsamurai.com/wp-content/uploads/2023/02/range-rover-728x465.png?fit=1456,9999)
Owning a new car is great. Who doesn’t like the smell of a new car!? Instead, buy a car that is probably 2-3 years old to save money. Improving mental health is one of the top reasons to drive an older car.
Personally, I like the new design of the latest Land Rover Range Rover. Unfortunately, it costs about $150,000 with moderate equipment. If you really want to ride in style, the best thing to do is start writing more best-selling books.
It seems that today only the rich can afford a new car. are you one of them? If not, how could you afford to buy a new car at today’s astronomical prices? Reveal your financial secrets!
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