Is it worth buying a luxury car or sticking with a used one?

Question

Rich Dad · Accepted Answer

“If it has four wheels and goes down in value, it’s not a luxury — it’s a liability wearing perfume.”
Let’s get something straight: a luxury car is not an investment — unless it’s a rare collectible Ferrari that appreciates 8–12% annually at auction. Your brand-new $90,000 luxury SUV? It will likely lose 20–30% in the first year and about 50–60% within five years. That’s not status — that’s financial gravity. The moment you drive it off the lot, you’ve lit $15,000–$25,000 on fire. Wealthy people don’t get rich by burning cash for applause.
Now, I’m not anti-luxury. I’m anti-confusing toys with assets. If you’re buying a $120,000 Porsche while your investments generate $20,000 per month in passive income, fine. That’s called lifestyle design. But if you’re financing it at 6–8% interest over 72 months while trying to build wealth? You’ve chained your future income to a depreciating machine. Imagine instead putting that $90,000 into a rental property producing 8% annual return plus appreciation. Over 10 years, that could double. The car will be worth maybe $30,000.
Here’s the smarter play: buy a 2–4-year-old luxury car. Let someone else eat the depreciation. A Mercedes that was $80,000 new might be $45,000 after three years. Same leather. Same engine. Half the ego tax. You get the lifestyle at a discount. That’s thinking like an investor. Wealthy people love buying assets cheap, and that applies to cars too.
Now let’s talk psychology. Some people argue a luxury car helps with image — attracting clients, signaling success. True, in certain industries like real estate or high-end consulting, perception matters. But here’s the twist: true power comes from financial freedom, not polished chrome. I know millionaires driving Toyota Camrys because they prefer investing $1,200 monthly car payments into index funds compounding at 9–10%. Over 20 years, that difference alone could exceed $700,000.
Counterpoint: life is short. Enjoy it. Absolutely. But buy luxury from cash flow, not from future labor. If your investments pay for the car, enjoy it guilt-free. If your job pays for the car, you’re working for the car. Big difference.
So is it “worth it”? Only if the car represents less than 10% of your net worth and you could write a check for it without blinking. Otherwise, you’re trading long-term wealth for short-term applause.
Drive assets first. Drive luxury later.

Poor Dad · Answer

“A car’s job is to get you from A to B — not to prove you’ve arrived.”
You need to be very careful here. A luxury car may feel rewarding, but financially, it’s usually one of the worst purchases you can make early or mid-career. The average new luxury vehicle costs between $60,000 and $100,000, and insurance, maintenance, and repairs are significantly higher than a standard used vehicle. A simple brake job on a BMW can cost $1,200. On a Toyota? Maybe $400. Over five years, those differences add up quickly.
Let’s look at monthly impact. Suppose you finance a $75,000 car with $5,000 down at 7% interest over 72 months. Your payment could be around $1,200 per month. Add insurance ($200–$300), fuel, and maintenance, and you may spend $1,500 per month on transportation. That’s $18,000 per year. If your salary is $90,000, nearly 20% of your gross income goes to a vehicle. That’s risky. What if you lose your job? What if the economy slows down?
A reliable used car in the $15,000–$25,000 range can last 8–10 years if maintained properly. Brands like Honda and Toyota often exceed 200,000 miles. If you avoid monthly payments or keep them under $400, you free up hundreds of dollars each month. That money can go into retirement accounts like a 401(k) or IRA. At 7% annual growth, investing $800 per month for 20 years could grow to over $400,000. That’s real security.
Some will argue that a luxury car boosts confidence or professional image. In certain industries, perhaps. But most employers and clients care more about competence than your vehicle. In fact, living below your means builds long-term stability. Economic downturns happen every 7–10 years on average. During those times, people with high fixed expenses suffer the most.
Now, if you are debt-free, have a six-month emergency fund, contribute at least 15% of your income to retirement, and can pay mostly in cash — then it may be reasonable as a reward. But it should never compromise savings, housing stability, or future security.
Remember, financial peace often comes from modest choices repeated consistently.
Buy the car that protects your future, not the one that impresses your neighbors.

Is it worth buying a luxury car or sticking with a used one?

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