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Financial Literacy

Financial Literacy

Home Finance Home Economics Buying a Porsche

Buying a Porsche

The dealership says it's a steal at $170,000 with taxes and fees. A shiny-red Porsche Turbo Convertible with black interior, a stereo system that would melt your old car's dashboard, and fat tires. Goodbye, awkward small talk; hello, full social life.

Who could resist that?

Well, you, maybe.

At $170,000, you might think that the Porsche is practically an investment. After all, everyone loves a sports car, so even after you're done with it you could sell it for a tidy sum, right?

Right?

How Much is that Porsche in the Window?

Well, you'd get more for it than you'd get for, say, a Honda, sure. But that Honda only cost you a fraction of the price to buy. Doughnuts to dollars, if you decide to sell that sweet Porsche in 4 years, you'll be able to get maybe $70,000 for it. 

Yep, you read that number right. And we're being generous here—in reality, the number is probably lower. As soon as you drove that puppy off the lot it started depreciating or losing value. Used cars are worth a lot less than new cars, even if they're super fancy, still on warranty, and don't have much mileage on them. All that driving around with the wind whipping in your hair will have cost you over $100,000.

And we haven't even started covering all the other costs of owning that Porsche. You (or your parents or wealthy granny) may have ponied up the $170,000 for the car, but you still need to pay for

  • insurance (and that's going to cost you; check out the huge grin on the insurance guy when you tell him you want to insure a sports car)
  • gas (Porsches are not about fuel economy)
  • maintenance.

Even without all that stuff, your car is going to cost $25,000 per year over four years, which is about $500 a week. So, two to three bucks a mile or $75 per day. And that's before we've paid for gas, maintenance, and every other huge expense that goes into owning a car like that.

How Much is it Really Worth?

There's no two ways about it: $75 a day is a lot. But maybe it's worth it to you, anyway. Maybe driving that Porsche with the top down is a life-long dream and makes you feel alive right down to the tingle in your toes. Maybe you meet the love of your life because you drive a Porsche (although, pro tip: that's a red flag). You might come from a family where $170,000 is chump change and $500 a week doesn't even make a dent in your dental floss budget. Or maybe you have a snazzy job that pays millions a year. If your job pays a lot less than that but requires you to drive clients everywhere and you can claim some of your car expenses as deductibles, that could work, too.

Wanting a Porsche and buying one is not wrong. But just make sure you understand how much of that money is going to the nice man in the fancy suit.

The Road Less Traveled By

If you took that $170,000 and invested it, you could buy a condo that you could rent out at $700-$1,000 a month (depending on where you live), or you could pop the money into stocks or other investments.

Maybe that would be a better choice for you. Maybe not.

It's your money and your life, so you get to decide. Just make sure you decide with your mind, and don't let some slick flyer about cars make you drive into debt you don't want.

Cars are not an investment; they are a liability. They lose money. It would be awesome if you could find a car whose mileage goes down the more you drive it, whose paint job gets more vibrant the more it rains, and whose tires rotate themselves, but…good luck. It really is just a question of how much money a car will lose when you buy one—and how much you're willing to lose.

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