Buying A Cheap New Car


Hi everyone

For those of you that have read the previous post, you SO know where this post is going! 

So, the average monthly cost of a car loan is about $530 per month … roughly $122 per week. That's a sensible $30K new car at only 6% interest over 5 years (excuse my approximate mental arithmetic).

Now, most folk would say that $122 per week for a brand new car either via a personal loan or via a lease agreement is worthwhile for what you get. Maybe that is correct.

It is also fact that once we take our first car loan, then it is likely that we will always take a car loan for each new car through the rest of our life. Over a working lifetime of 40 years, that's 8 new cars. Reasonable enough.

Let's face it, usually after paying off the car over 5 years it has amassed a lot of miles and looking a bit tatty and well due for an upgrade, so we trade it in on a new one with a new loan - that's fair hey?  Or is it?

Here is an alternative thought - as follows:-

Instead of continually buying new cars on credit throughout our life, rather, invest that monthly repayment ($530) into a sensible boring index fund with average returns.

Across a working lifetime (say 20yrs - 60yrs), that $530 per month would have grown inside that index fund to this amount


Inextricably, the total purchase price of the 8 new cars across your working life only amounted to $240,000. (Hear that heavy breathing sound?  It's the elephant that has just entered the room)

Choosing a cheap sensible new car every 5 years  - compared to -  investing the equivalent monthly repayment amount actually diddles you of more than  $1.1 million dollars of personal spending money at retirement.

This is stunningly confronting math that many would rather you do not know about. 

Also, you can't unknow this concept now that you have read it (sorry, not sorry)

Take care and stay nice



  1. Phil, we need you in every school in Australia. I am happy to say I've never had a car loan, not because I did the maths, but because I seem to have been born with an inbuilt horror of debt of any kind! Astonishing figures indeed. What a pity I wasn't saving an investing the money I could have put into car loans!!


    PS possibly there is a book in the pipeline called You Do The Maths. I love crunching the numbers like you, and it has certainly stopped me spending on something I could live without many a time. There are so many things you could write about: renovate or move, car and personal loans, the cost of weekly treats over a year and lifetime etc....

    1. Ha! I love doing the math, be it on bought lunches, coffee, magazine subscriptions - it puts it all into instant perspective. A book? I think readers would be in tears after page 5 of these calculations LOL!

  2. I'm dragging the chain Phil, as I've only had 5 vehicles, one car loan, and my official retirement age is less than 10 years from now! I found it cheaper, and more convenient, to overhaul the engines in 2 of those vehicles as they developed piston problems. One of those vehicles I owned/used for 18 years so the overhaul was a good investment. I'd love a Long range Tesla but I think that's a pipe dream!

    1. C'mon! You are letting down the consumerist team haha! Yes, I have my eye on Tesla too - also a pipe dream.


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