© 2015 Shmoop University, Inc. All rights reserved.
Financial Literacy

Financial Literacy


Porsche Turbo Convertible with the little “speed fin” on the back and the fat tires, 0-60 mph in 3.7 seconds, bright red exterior, black interior, big fat stereo system…. Sssssssmokin’ hot. And it all can be yours for $170,000, including tax and gas guzzler fees. Mom… get your checkbook.

Drive it like a bat outta Hell – assuming you don’t kill yourself or anyone else on the tight curves, or hit a deer or a moving tree… the car will be sellable on eBay 4 years later for $70,000. It’s what the deer will be rooting for, we can promise you that.

Yep, you read that number right. And we’re being generous here – in reality, the number is probably lower. But we’re talking about a decline of $100,000. In 4 years.

Of course, insurance and maintenance and gas and so on are all way more expensive than that used Taurus. But even ignoring that stuff, the car has cost you $25,000 a year. You could have rented a really nice apartment for that kind of money. The car was $500 a week.

Yeah. Two to three bucks a mile for most drivers. Seventy-five bucks a day, give or take. Mostly take. Hope you’ve been driving that Porsche to a job that pays really well.

All of these expenses are AFTER TAX. To purchase such a luxury item, you likely make a fair amount of cabbage and pay taxes in the highest rate zone. In The People’s Republic of California and New York, that means you pay roughly half of your incremental income in taxes. You haven’t done a very good job of sticking it to the Man. In fact, seems like you’re the one who has gotten stuck.

So to make that $25,000 a year, you had to EARN $50,000. Crazy.

If you’d taken the bus every day for a whopping 5 bucks each trip, you’d have a lot more cash in your pocket.

Bottom line: 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, despite what the sharp-tongued auto marketers will tell ya.

And that’s fine. Americans love cars. Losing money on them is an American pastime. Celebrate it. But just know what you’re getting into before you sign the check. Or handover the briefcase of cash, or whatever.

People who Shmooped this also Shmooped...

Noodle's College Search