Would you rather have a fancy car, or a funded retirement?

If it meant you could fund retirement, would you be willing to drive a car that was a little less fancy? Or used?

It is possible to fund retirement by making different decisions about the cars you drive. Below you will see how someone can save up to $1.75 Million.

Meet Larry, Alice and Bart. They each have the same amount of money available to buy cars; but they each have a very different approach.

• Larry spends all his car money. He buys a new $55k luxury car every 4 years.

• Alice buys a new car for $36k every four years, and saves the difference.

• Bart buys a car that retails for $24k new; only he buys it 3 years used. Bart pays a little less than $12k for his used car and then he drives it for 8 years.
  

Every year a car loses value (depreciates). The following table shows the total depreciation each of our drivers pays toward cars over their entire “driving career” (age 25-65). Notice that Larry pays almost 6 times more than Bart.

The next table shows the value of investing the savings for driving a less expensive car. Larry spent all his money, but Alice and Bart invested their savings from driving a less expensive car. Below shows their savings balance after 8% annual return over the same 40 years. Bart has $1.75 M more than Larry, and $1M more than Alice.

So how can you be like Bart?

If you want reliable transportation that won’t ruin your other financial goals, there are some rules to live by. Take a look at the steps for buying a car in this Budget Lifestyle post.