Stop Relying on a Job You Hate and Instead
Start Doing Work You Care About
Grab my FREE ‘Cheat Sheet’ below to learn the EXACT steps to:
  • Dig your way out of debt and break free from “debt slavery" forever
  • Pile up enough cash to never have to worry about money again
  • Start earning income from independent sources so you can stop relying on a job you hate and start doing work you love

How I Lost $8,000 in 4 Years from Buying a Car I Couldn’t Afford

| February 14, 2012 | 9 Comments

Is buying a nice car worth it? I’m torn, honestly. I bought my dream car (at the time) almost four years ago. I financed 100% of it too. Why? Because I was broke. When my car broke down on a road trip in the middle of California almost 2,000 miles from my home in Minnesota, I needed to think fast. I made the decision to trade it and buy a nice car. After all, I had a job and could afford the payments.


The Story

It was my second summer out of college and I scheduled a road trip from Minnesota to California and back with my brother and my friend. I had just enough money to cover the trip and continue to pay all my bills back home. When my car died in California, I lacked time and options when needing to make a decision. It happened on the Thursday before Memorial Day Weekend. I had one day, Friday to make the decision to fix my car or buy a different one. If I didn’t make the decision that day, we would have all been stuck in Fresno, California until at least the following Tuesday.

I decided to not fix the car and instead, trade it in. Once I started looking at the available cars, I quickly noticed that I didn’t like any of them. After surfing many car lots in the area, only one car was anywhere close to what I wanted, and it was not even one year old. To make a long story short, I bought it. We all left for the 2,000 mile trip back home later that same day.

When I got back home and back to work, I decided that I didn’t want to keep that car, but instead trade it for something that I would really like, since I would be paying it off for a long time anyway. This is when I traded that car for the one I have now, which was $4,000 more than the California car. Double ouch. I upgraded a car that I already shouldn’t have bought in the first place.

The Numbers

I financed $20,000 for the car, including all the baggage of the other car, and the other car before it. Someone else probably could have bought it for $19,000, but I had the car baggage, so I wasn’t so lucky. That was in June, 2008 and the car, a 2007 Pontiac Grand Prix GT, had just over 19,000 miles on it and was in almost brand new condition. The car was awesome!

Let’s fast forward four years now and take a look at its value. According to Kelly Blue Book, it’s now worth about $12,000 if I were to sell it on my own. For the record, it has only 54,000 miles on it.

$20,000 – $12,000 = $8000 drop in value

Ouch. I lost $8,000 or 40% of the purchase price of the car in four years and the value continues to drop.

My Thoughts, Financially

You know, financially, I don’t see any positives of owning this car, or any nice car for that matter. It is simply a very expensive thing to acquire and its value drops like a rock. You may say that nice cars are reliable, but that’s only somewhat true. My car has spent its fair share of time in the shop in the last four years. I almost know everyone there by name at this point.

My Thoughts, Personally

I love my car. It’s got all the bells and whistles. It has leather, heated seats, a 6 disc changer, digital temperature control, a power sun roof, a remote starter and a supercharged engine. I absolutely love it and it drives like a sports car. Even with that being said, do you know how many times during my race out of debt that I thought about selling it? Probably weekly for two years or so.

Today, It’s Just Another Important Lesson That I Learned

Now that I’ve been working hard on my personal finances for a couple years and have managed to get out of debt and get ahead, I can enjoy my nice car, finally, without feeling pressure to sell it. It’s not as hard seeing its value drop when I know that I can turn around and buy another one in cash at any time (although I probably wouldn’t). If I had to do it all over again, I would buy MUCH cheaper. If I was car shopping today, I would even buy cheaper. I guess being a financially smart adult, I don’t value the joy of driving a fancy car as much as I value hard earned cash in the bank. I didn’t always think this way (ask my family and friends). I used to love buying fancy things. I’ve grown up A LOT in these past four years. Having money saved gets me excited for my future, where as the fancy car dropping in value makes me sick to my stomach. Big difference there.

Download my Free 'Cheat Sheet' below to get the EXACT same steps I used to dig my way out of debt and grow my net worth from $0 to $100,000 in just a few years (which allowed me to quit my job, focus on my business and take back control of my life).

Tags: ,

Category: Learning New Things

Comments (9)

Trackback URL | Comments RSS Feed

  1. Nick says:

    It’s hard to stomach the fact that cars depreciate so fast! When buying a car, I definitely won’t spend my money on a nice, fancy one. But at the same time we all want something reliable that won’t need repairs right after buying it. Finding that “sweet spot” of a used car where it’s already depreciated out it’s 60-70% (usually after about 4 years) yet still is reliable can be difficult.

    • Well said, Nick. I couldn’t agree more. While shopping around while I was considering selling mine, I found it really difficult to find something in that sweet spot. Most cars were either too “junky” or too expensive for what they were.

  2. I found your blog over at Mom’s Plans…love it so far! I agree that it IS hard to stomach the losses on a new car, but from my experience it is also hard to deal with cars that are ALWAYS breaking down. I had never believed in financing cars until this year. After years and years of paying cash for used cars that usually only lasted a year or two I *thought* that I had finally found the perfect car. It was roomy, great in the snow, and was the first car that had gotten through an inspection with no problems….it was great…until the frame broke in half while I was driving it with my children inside. I mentally could not take driving around in unsafe cars anymore so I went and bought a Hummer…the epitome of safe to me. Yes, it was expensive. Yes, the payments make my shudder every month. But the peace of mind every time that I drive it is worth the losses to me. I love my car and I realized that sometimes you have to abandon your frugal ways to be happy. You don’t have to go all out for absolutely everything, my car is my little (big) bit of fancy that I can think about while freezer cooking and growing our own food. :)

  3. Modest Money says:

    Well Kraig I was going to say that I lost way more money on my car than you. Then I read the comment about buying a Hummer. I don’t know how much a Hummer resells for, but I’m sure it would be a bigger loss than my Mustang. It must use way more gas too. At least it sounds like they were happy with their purchase. I’ve been happy with my car, but now that money is tight, I am wishing I had made a smarter decision back when I bought it.

    • Yep, I’ve been happy with my car too but I still wish I would have made a smarter decision about it all. I could sure find uses for that $8,000 in depreciation I lost. If I didn’t love the car so much, I’d still sell it today. Haha.

  4. Hans says:

    I’m in the same boat, I’m about your age as well. I just sold my supercharged Pontiac for $2800 (it sold new for $34000 in 2001), so $3000/year avg deprecation, however when I bought it in 07 with $100k for $7000, it had $4500/year depreciation. Either way, it only really cost me $1400/year. I got real lucky and put 80,000 miles on it without a major repair. However now I have $5000 cash ready for another vehicle. I’m torn between buying a newer fancy car or buying a car with cash. I drive around 60 miles a day and need something reliable. Its a hard choice, so I’m still looking.

  5. bubba says:

    Just happened across this page while I was looking for pros/cons about a purchase I’m considering. I’ve owned my current vehicle for 17 years and it now needs a lot of work done soon. I am trying to justify buying a 2-year-old certified pre-own, financing it over 72 months, for approx. $320/month. I can easily handle the low payment and probably double up on them. It’s just the overall expense… it’s a lot of money! But I’m with the other person that wants something as safe and reliable as possible/reasonable. I don’t want to save so much money that I jeopardize my family’s safety. Dunno… except that I will probably keep this car for at least 10-15 years… so maybe it makes sense…

  6. Drew says:

    God I hate to be that douchebag but I can’t help but say that a Pontiac Grand Prix is definitely not what came to mind when I read “Nice Car”

Leave a Reply

Your email address will not be published. Required fields are marked *