New Luxury Car Prices Are Outrageous, Never Buying One Again

In 2002, I foolishly bought a new luxury car, a Mercedes Benz G500. I had to just gotten a raise and a promotion to Associate so I thought I had might as well blow all my money.

The G-Wagon cost $78,000 out the door, which was actually a good deal at the time. Just a year prior, a dealership in Santa Fe with exclusive import rights was selling G-Wagons exclusively for $150,000+.

A year later, I had to make the difficult choice of selling the car for $60,000, a $18,000 loss, because it wouldn’t fit in this condominium I wanted to buy. It was two inches too tall for clearance!

I decided it was more responsible to buy this two bedroom, two bathroom condominium facing Lafayette Park than keep owning an expensive car with a $760 a month car payment. My love for real estate, my favorite asset class to build wealth began.

After taking a bath on my new luxury car, I swore never to buy new again. When you’re on your path to financial independence, having a nice car is the last thing you need!

New Luxury Car Prices Are Outrageous Today

After the G-Wagon I went the complete opposite direction and bought my mom’s 1997 Honda Civic for $7,500. I then went through a series of other used cars, including a 1997 BMW M3, 1995 Nissan Pathfinder, 1983 BMW 635 CSi classic, 2001 Land Rover Discovery II, and Honda Fit. All the cars were between $7,500 – $20,000 as I saved and invested as much as I could in stocks and real estate instead.

Then in December 2016, I bought a one-year old Range Rover Sport for $60,000 after tax. It had 10,600 miles on it and I thought it was good value because brand new, it was selling for about $80,000 after tax.

Given I’m thinking of buying a new car in mid-2025, when the Range Rover Sport is 10 years old, I decided to drop by the Land Rover Dealer in Redwood City after a couple hours at the pool with my kids. I hadn’t gone to a car dealership since 2020, so I was curious to see what new luxury car prices were.

When I got to the Land Rover dealer, I was shocked. A brand new Range Rover Sport SE cost a whopping $104,600 before tax, or about $113,000 after tax! That’s a 31% price increase since 2016. The car is a beauty with 23″ rims, comfy seats, and an updated body styles. But wow! That’s a lot of money.

Then I looked at another Range Rover Sport SE model at the San Francisco dealer that cost $119,870 before tax because it had a sport package and protection film. After tax, the car would cost about $130,000. Who can afford these prices?

A Look At Luxury New Electronic Vehicles

After being blown away by the cost of new Range Rover Sports, I decided to look at some electric vehicles be Mercedes Benz. I’ve got a Tesla wall charger in my new house and Mercedes and other brands will start being compatible with Tesla’s chargers in 2025 and beyond. Teslas are nice but they are ubiquitous here in San Francisco.

I’ve been reading all over the news that EV prices have declined, especially Tesla’s average car price. At last, maybe getting an EV is the way to go.

Average EV car price coming close to average new gas powered car price

Unfortunately, a 2023 (not 2024) Mercedes Benz AMG EQS electric sedan sitting in the showroom was even more expensive than the Range Rover Sport! The asking price was $153,000 before tax, or about $166,000 after tax! Spending $166,000 for a last year’s model electric model sedan is also outrageous.

After being disappointed in Mercedes Benz, I decided not to bother dropping by the BMW dealership. Why bother when they’re just going to charge a similar amount for an EV as well?

$166,000 out the door for a 2023 MB EQS

A Better Spending Alternative

Instead of spending a fortune on a new luxury car, I have the choice between purchasing a well-equipped 2024 Toyota Corolla for $26,000 or a top-of-the-line Toyota Highlander for $60,000, which would save me between $106,000 and $140,000. With these savings, I would allocate 60% to the S&P 500, 25% to Treasury bonds yielding 5%, and 15% to a private real estate fund.

This approach feels much more responsible, providing both the satisfaction of owning a reliable new vehicle and enhancing our financial security for the future.

The concept of opportunity cost always weighs on me when I contemplate a significant purchase. I can’t help but consider how much more money I could accumulate in 5-10 years through compound returns if I decide against buying the item.

Consequently, I’ve directed my indulgences toward investments in residential real estate and collectibles, such as rare books. With these assets, not only can I derive enjoyment, but there’s also the potential to see a positive return over time.

Never Buying A New Luxury Car Again

After checking out cars at these dealerships, I decided to give up my search for a new luxury car. The prices are simply unaffordable for me without generating a significant amount of active income.

And there’s no way my wife and I would be willing to go back to work and lose our freedom just to buy a luxury automobile. It feels way better to drive a more economical car that gets us from point A to point B at half the cost.

I don’t know who is able to purchase such cars. But clearly, many people must be doing well to afford such expensive vehicles.

If these luxury cars were priced between $60,000 – $70,000, I’d be tempted to buy one in 2025. However, they are priced so far what I believe they are worth that I have zero temptation to splurge on these type of vehicles. No YOLO spending here!

I have a better solution to my luxury car desires. Keep owning my current car for longer than planned.

New luxury car prices are outrageously expensive and not worth the price
Mercedes-Maybach EQS 680 (electric) for $197,350 pre-tax

Going To Keep My Car For Six More Years

Initially, I asserted that the ideal ownership duration for a car is 10 years. However, my statement was ambiguous regarding whether to replace a car after it reaches the age of 10 or after owning it for more than 10 years. For instance, if you purchase an eight-year-old car, would it necessitate replacement after two years or after reaching 10 years of ownership?

After careful consideration, I’ve realized there’s no definitive answer concerning maintenance and safety. As long as you adhere to regular maintenance, replace worn-out parts, and address any issues promptly, you should be able to safely drive your car for over 120,000 miles.

My own car will reach the age of 10 years in July 2025, and it’s still running smoothly and still looks great today. It seems premature to consider replacing it next year, especially considering that I recently invested $890 in two new tires. Furthermore, I’ve already replaced the leaking water pump in June 2023, the vacuum pump in February 2024, and recently had an oil change.

With only 52,000 miles on it and an average annual mileage of 5,500 miles, I anticipate minimal issues with keeping it for another six years until it reaches 15 years of age. By July 2030, my car should have around 88,000 miles on the odometer.

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An Expensive New Car Makes Your Existing Car Way More Valuable

The beauty of expensive luxury cars lies in the appreciation it brings to the vehicles we already possess. Upon discovering the latest prices, I’ve found my 2015 Range Rover Sport to be even more valuable.

With a new one priced at $115,000, I now estimate mine to be worth at least $65,000—$5,000 more than what I paid for it back in December 2016.

The horsepower is similar to the new cars and so is the comfort. Besides that new car smell vs. my In N’ Out burger interior smell, a new Range Rover Sport for so much money just isn’t worth it to me.

New Cars Make Maintenance Expenses Feel Cheaper Too

Given that I’ll be keeping my car for five years longer than planned, I’ll be especially diligent in addressing maintenance issues to ensure it remains as safe as possible.

For example, I’ve noticed a slight creaking sound when driving slowly over uneven pavement. This is likely due to worn sway bar bushings, which can be replaced for $450. Previously, I might have disregarded such a minor problem. However, now that I’ve decided to forgo spending over $100,000 on a new luxury car, these expenses seem more reasonable.

I’m willing to spend $1,500 – $2,000 annually for five years to address any issues with my car instead of spending $115,000 upfront on a new Range Rover Sport. Additionally, I could earn 5% risk-free interest per year, totaling $28,750 after five years!

Moreover, if you’re eager to purchase a new car, I’ve discovered that simply washing and vacuuming the interior revitalizes its appearance and makes it feel like new again. It’s remarkable what a clean car can achieve.

Cars often rank among the worst culprits for undermining financial independence among consumers. Americans frequently overspend on cars to their own detriment. Let’s commit to keeping our cars for as long as possible to save money. Our future selves will undoubtedly thank us.

Reader Questions

Who is paying these exorbitant prices for new luxury car prices? Surely, everybody must be making over $1 million a year given people rationally follow my 1/10th rule for car buying right? Why are people willing to pay so much for a car instead of invest the money instead to secure their financial future?

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