Most of the luxuries, and many of the so-called comforts of life, are not only indispensable, but positive hindrances to the elevation of mankind ~ Henry David Thoreau
When purchasing a new car, one has two options – a moderately priced functional car and a fancy luxury car. Many people today are willing to spend more and buy a luxury car. Do you think, it is a good decision? It may not be. Here are some reasons why.
A majority of self-made millionaires will get rich because they don’t spend much on luxury cars, expensive houses, finest clothes, etc. They become rich by spending moderately, not overspending and by accumulating wealth.
Self-made millionaires never spend on luxury and fancy cars. According to “The Millionaire Next Door” a bestselling book, ninety percent of typical self-made millionaires have never spent more than $17,900 (around Rs 8 lakh) on a car. You may be surprised, but it is the truth. Half of the 10 most popular vehicles in America’s wealthiest neighborhoods are non-luxury cars.
Car is a depreciating asset
Buying a car is not an investment. In fact, it is a depreciating asset – car loses its value over a period of time. The value of the car drops below the value of the cash that it was purchased for. The drop in value is called ‘depreciation’. A car loses its value in the first year itself and then it depreciates every year. The fact is, a car loses its value once it is out of the showroom.
Better to go for a functional car
For instance, you have two options to decide on which car to purchase – one is a luxury car worth $50,000 (around Rs 25 lakh) and a normal functional car worth $11,000 (around Rs 6 lakh). After two years, the resale value of the luxury car becomes $35,000 (around Rs 17 lakh), whereas the resale value of the functional car becomes $7,700 (around 4 lakh). (considering 30% of depreciation after 2 years).
You can clearly see that you will lose around $15,000 within two years, if you purchase a luxury car. You will lose only $3,300, if you purchase a regular car. Hence, if you purchase luxury car, you would lose more money when you consider selling it.
Understand the difference between rich and wealthy
There is a great difference between rich and wealthy. Rich people show-off their status by spending lavishly on luxury cars, foreign vacations, dining at 5-star hotels and living in expensive houses. Whereas, a wealthy man will live below his means and accumulate his wealth to maintain his wealthy status.
A wealthy man has a control on his emotions and won’t get carried away by fancy things, for him purchasing a luxury car is waste of money. Instead he is very much satisfied in owning a functional car.
Wealthy feel happy to drive
Moderately priced mid-sized cars
Low-profile cars – reliable, affordable and convenient
Not very expensive, neither a sub-standard car
If you want to be wealthy, you need to be frugal and live below your means. Even if you can afford purchasing a luxury car, think twice before you make this decision.