How Cars Keep You BROKE! (The Truth)

welcome back to whiteboard finance my name is Marco and I'm here to help you master your money and build your wealth today we're talking about how cars keep you broke so all over the world cars are like a prized possession they're highly regarded people love their car so what are some quick reasons as to why cars are so highly regarded so in my personal opinion I think the first one is that cars are linked to memory or nostalgia okay so everyone remembers their first time either driving a car or owning a car it allows them to get away from their parents that allows them to get freedom if you will and those memories are linked to parties music legal and illegal activities which I will not mention on this channel I'm trying to keep it PG here but at the end of the day the car is always linked to positive memories so the first one is memory or nostalgia the second and I think that this is actually the most important is work so people obviously need to get from point A to point B in order to earn an income obviously you can be an uber driver and your car can actually be a source of income you can be a blue-collar worker to where you're a handyman with a pickup truck and you have all your tools and basically all your stuff and your supplies are in your car and then finally I think if you're in a sales role whether you need to get to clients offices or say you're a real estate agent for example you obviously need to show up to showings you need to have open houses you're doing this with cars and not only that your clients will perceive you as successful if you pull up in a nicer car say you pull up in a Mercedes oh you must be the best real estate agent in the world because you can afford a Mercedes right and then finally I think the biggest reason is status so people with nicer cars again are perceived as successful whether it's true or not they could be up to their eyeballs in debt and they could be just keeping up with the Joneses but hey they got that nice Mercedes or BMW so people perceive them as successful okay so let's talk about some quick stats about the car industry this is something that I found very interesting in 2018 car manufacturers globally okay the entire world spent 38 point five billion dollars on just marketing alone and about eighteen billion of that was in the United States okay so why do you think car manufacturers are spending so much money trying to get you into the dealership and move metal that's because it's a huge industry okay it's a huge industry that supports a lot of people and a lot of jobs now let's get into the meat of this video so the way cars keep you poor is a combination of three things okay the first is that most people cannot afford to pay cash for a car so they're borrowing and with borrowing comes interest you're borrowing money to get you into a car that depreciates over time meaning it loses its value and you also have to maintain it so we have borrowing money you have to pay interest to get you into depreciating asset that you have to maintain over time okay so with depreciation new cars on average typically lose 63 percent of their value in the first five years and not only that brand-new cars the second you drive them off the lot they typically lose ten percent on average of their value okay so for easy numbers if you have a $20,000 car the second you turn the key and leave the lot that car is now worth eighteen grand you just lost $2,000 like that and typically that number is even higher with German cars or luxury cars so let's talk about maintenance you're always gonna have ongoing maintenance with the vehicle you have insurance you have brakes rotors tires oil changes all that good stuff and if you're someone in the comments saying Oh Marco that came with my plan I prepaid all the maintenance upfront blah blah blah you're still paying for it and not only that you're paying for it upfront which is actually hurting your opportunity cost to invest that money and things that can grow over time that's known as the time value of money okay that's that's actually a topic for another video so let's get into the action meat and potatoes and the numbers of how much this car payment actually costs you according to USA Today in March of 2019 the average car payment in the United States of America is 551 dollars at 69 months Wow I don't know about you 551 dollars is a lot of money to me maybe my viewers are a lot more you know wealthy than I am but that's a big number to me imagine paying that over five point seven five years that's what 69 months is so since this is a financial Channel and people actually want to see the math if you invested this 5:51 over 69 months into an investment vehicle that makes you seven percent that's going to be worth forty six thousand three hundred and forty three dollars and fifty seven cents okay with you contributing roughly thirty eight thousand dollars and you making eight thousand three hundred and twenty four dollars in interest alone over these 69 months so is it worth that you guys is financing that car worth you making almost fifty thousand dollars in about six years I don't know about you but that's a lot of money to me so what a lot of people do is they pay for cars with cash and they take the difference that they would have had in a car payment they invest it and when they need a new car in about five or six years guess what they do they sell the car that they currently own and they go by pay cash for a brand new car or you can choose to do whatever you want with this money so let's imagine that you invested this 7% instead of over sixty nine months which is what the average term for the loan is let's say you invested five fifty one over seven making seven percent over twenty years so after twenty years do you know how much this money turns into it turns into two hundred seventy nine thousand six hundred and fifty-two dollars okay with you contributing roughly one thirty two and making 147 thousand dollars just in the compound interest alone by doing absolutely nothing and just sitting on it now is seven percent guaranteed absolutely not however the stock market over decades has averaged seven to ten percent yes there's some ups yes there's some downs but over the course of twenty years you're gonna end up somewhere right around seven percent so I hope this video was a opening and enlightening that you can see that if you just delay gratification for a little bit and you invest the difference this is what you'll come out with at the end over 20 years if you want to invest over you know five and a half years five point seven five years you're still making 46 grand assuming 7% interest so if this video was powerful and you actually see the numbers how they work share this video with one friend I put a lot of effort into these videos some guy in the last time when I said that in my other video he said you sound like a car salesman so if I discount this video by five hundred dollars 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Channel: Marko - WhiteBoard Finance

Views: 541,253

Keywords: how cars keep you broke, car depreciation, car financing, car finance explained, whiteboard finance, cars lose money, dave ramsey buying a car, personal finance, how cars keep you poor

Id: _qOaT8dnnpA

Length: 7min 57sec (477 seconds)

Published: Tue Apr 30 2019