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This Is How Much Your Car Is Really Costing You


In the past, I’ve written about how much damage a new car can do to your finances. For most people, the only thing that drains their cashflow more than their car is their house. At least with a house, you have an asset that is likely increasing in value (if you own your house). With a car, on the other hand, it loses value every single day until one day it is worth nothing


In this article, I’m going to lay out the numbers about how much your car is really costing you and how the average person spends 25% of their time working to pay for their car.


The financial cost of buying a new car

These are the average monthly costs to own a new car.

  • Car payment: $555

  • Insurance: $100

  • Gas $150

  • Maintenance: $100

  • Registration: $12


The total monthly cost of owning a new car: $916


The total annual cost of owning a new car: $10,992


This does not even include the monthly cost of parking which if you live in New York City is more than $450 per month.


It also does not include the cost of depreciation which in the first year of owning a new car is 20% of the purchase price According to CarFax. Believe it or not, the numbers I am about to present understate the amount of your life you need to sacrifice to buy a new car.


The True cost of everything

Most people view the “cost” of things we buy in terms of dollars and cents. This is understandable because this is how products are marketed and of course, you do actually have to hand over money in exchange for the goods and services we want to buy.


However, unless you are retired, won the lottery, or just got a big inheritance from your rich uncle, odds are that you have to work for your money.


If your primary source of income is from your job, the true cost of the things we buy is not measured in dollars and cents but in the minutes, hours, days, months and even years of our life, we must sacrifice to buy things.


Hourly Take-Home Pay

So, how many hours of your life are you sacrificing in exchange for that new car? To know that, you need to know your hourly take-home pay. The amount of money you make per hour after taxes.


Hourly take-home pay= take-home pay ÷ number of hours worked.


Let’s breakdown the average person’s hourly take-home pay.


  • The average income in the U.S was $48,150 in 2017 according to the U.S Census Bureau Let’s account for inflation and assume the average income in 2019 is approximately $50,000. This is the average “gross income”, meaning the pre-tax income.


  • We don’t get to buy things like cars with our pre-tax income. We buy things with our post-tax income, the amount left over after all the taxes and other deductions are taken off our paychecks. This is more commonly referred to as our “take-home pay”.


  • The average take-home pay for an individual making $50,000 is $39, 129 according to a study done by Go Banking Rates. This means the average person earns $3,261 per month in take-home pay.


  • The average person works 1,786 hours per year or 149 hours per month. according to data from the OECD.


  • Dividing 149 hours worked per month by $3,261 in take-home pay puts the average hourly take-home wage at $21.91 per hour


You need to work until April each year to pay for your new car

We know the total annual cost to own a new car is $10,992 and that the average person's hourly take-home wage is $21.91 per hour. Dividing the hourly take-home wage by the annual cost tells us how many hours we need to work to get the money to pay for a new car.


The average person would need to work 502 hours to cover the annual cost of a new car ($10,992 ÷ $21.91).


If we assume 8-hour workdays. that would equate to 63 days worked. Remember, these are only the days that you worked. If you work 5 days per week, 63 days worked would translate into 89 calendar days.


If you started working on January 1st, it would take you until April to earn enough money to cover the annual cost of owning a new car.


The first 3 months of the year are spent working to pay for your car. The more stressful and demanding your job is, the higher the cost this is to pay.


If you still think buying a new car is a good idea, let’s play a little game.


Imagine it’s mid-February and you need to wake up at 5:30 AM to clear the snow off your car and scrape your windshield before work. As the feeling leaves your fingers you stop and reflect on the fact that you still have another 6 weeks before you’ve paid your annual car costs.


At that moment, ask yourself if you still think it was worth it to buy that new car?


Final thoughts

Your car is a money pit. If you are having a hard time paying your bills your car is one of the expenses you may want to consider either cutting out or downsizing if possible.


The true cost of a car is not only measured in dollars but in the number of hours, days and months you need to work every single year to own that car and keep it running.


Now that you know how to calculate your "hourly-take-home-wage" you can start tracking how much you spend on your car and determine how many hours you need to work to pay for your car. Give it a try and let me know your results in the comments below.


This article is for informational and entertainment purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.

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