The cost of a car is bigger than your monthly payment.
(4) And more . . .
These “costs of owning a car” can add up, especially if they go unrecognized at the time of purchase. Don’t be an unaware consumer on a purchase this large and this important
Did you know?
According to the Federal Reserve Bank of New York, Auto loans are the 3rd largest type of Household debt in the United States. On March 31, 2023, outstanding auto loan debt stood at $1.56 Trillion.
Home loans were the largest ($12.38 Trillion) with student loans second ($1.60 Trillion).
Pro Tip for students:
Understand the “opportunity cost” of your first car purchase. For those hearing that term for the first time, opportunity cost is what you give up
If you have not read The Missing Second Semester, Chapter 5 of the book shares a powerful example, of an 18-year old who knowingly purchases a $10,000 car in lieu of a $13,000 car (that he or she could have afforded) and chooses to invest the monthly difference in her of his Roth IRA. Hint, the “opportunity cost” is BIG!
Find out for yourself how big the $$$ difference is, with Bankrate.com’s Compound Interest Calculator. Hint, the monthly difference of $56 was hypothetically invested in the S&P 500, a 5-year auto loan was used and the student’s Roth IRA grew for 42 years.
Our financial choices have consequences. Positive choices like the one above, can be life changing.
Own your financial future.
Gene is Co-founder and CEO of Troutwood, a software company founded out of the Carnegie Mellon University Swartz Center. He is a Chartered Financial Analyst, board member of CFA Society Pittsburgh, Executive in Residence at the Black School of Business|Penn State Behrend and a part-time lecturer at the University of Pittsburgh, where he has taught Personal Finance since 2015.
Prior to founding Troutwood, Gene spent 17-years personally working with some of the largest and most sophisticated institutional investors and retirement plans in America. He is an award-winning author (The Missing Semester), has spoken in over 1000 unique high school and college classrooms, and regularly keynotes investment and education conferences across the country.
Gene holds an MBA with a concentration in finance from Carnegie Mellon University and a bachelor’s degree with a concentration in economics from Allegheny College.