Outside of a home, one of the biggest expenses for most people is a car. A car can help you get to work to provide for your family, allow you travel long distances at your leisure, and give you a sense of freedom. However, spending too much on cars can lead to debt accumulation and this could negatively impact your net worth.

I call those who would rather drive the fancy car and have no emergency saving – Autoholics.  My definition is the buying of automobiles that are more than you can reasonably afford which results in problems.

I have known people whom both would lease and buy expensive vehicles. To most of their chagrin, the price of that freedom on four wheels was not worth it.

The moment you drive a car off the lot it goes down in value. Therefore, if you brought the car back within 1 hour of purchase the car would be worth less than what you just paid. Because of this a car is a depreciating asset, and must be chosen carefully to avoid having consistent negative equity in a vehicle over the course of your entire driving career.

If people are not careful, you could easily spend anywhere from $50,000 to a couple hundred grand on cars in a lifespan.  Those numbers do not include maintenance. That’s right, just the sticker price!

I am not saying not to buy a car. What I am saying is to choose what cars you buy carefully as you do not want to have a car parked in your garage that you cannot afford to fix because the repairs cost $8,000. And that number is not a typo, I actually knew someone who owned a BMW and that was the repair cost.

I have seen people paying $300, $400, $500, or even $600 car notes for five or more years. I actually know someone who has had a car payment almost her entire adult life. If you added those amounts up, it would be some pretty big numbers.

If you were to invest $100,000 in the stock market, with a return of 8%, you would have a million dollars in 30 years.  Even a $10,000 investment would net you $100,000.

With the average price of a car, even used, being $10,000-$20,000 thousand dollars it is worth considering cheaper alternatives. When the goal is to build wealth and have financial independence, then instead of choosing an expensive car go for the one that is more practical but still looks pretty decent on a postcard.  But the best looking car is the one that’s paid for no matter what brand it is.