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Young Successful Professional: Why A BMW Isn’t For You


Most readers of this blog are probably not pulling in $60-70k yearly salaries.  If you’re one of the lucky ones that graduated with a professional degree and ended up getting a high paying job, then this post speaks to you.  If you’ve slowly built up your finances and feel that you are ahead of the game, then this post might also apply to you.  With success comes the need to show it.  There isn’t anything more that screams “I’m rich” than rolling up in a brand new luxury car.

In North America, the car has ultimately become the symbol of wealth.  Regardless if the person bought the car on credit, or makes monthly payments for the next 7 years, driving and owning a luxury car such as BMW, Mercedes, Lexus or Audi has become the symbol of prosperity and wealth.  Aside from owning a home, a luxury vehicle proclaims to the world that “I’ve made it!”

A luxury car may bring fame, status and attention, but what it doesn’t do is build wealth.  Everyone would tell you that a car that comes off the dealership lot loses 30% of its value the moment the wheels hit the pavement outside of the lot.  It’s no guess that in order to build personal wealth, one needs to save and invest in assets that appreciate in value rather than depreciate.  Once you gotten yourself off the ground and started building a nest egg, the worst purchase that one can make is a brand new luxury car that drains you of the only asset you have that can generate wealth passively: Your money.

This doesn’t mean that you should not buy a car at all.  Each person will have specific needs and a car might be one of them; however, when considering that a car is the single biggest depreciating asset you will ever buy, it makes more sense to buy a more economical vehicle or even buy a used one instead.  So what’s the difference when you buy a brand new luxury car versus a lessor solution?  Let’s find out.

Luxury vs Simplicity

For this example we use a brand new basic BMW 3 Series sedan with no down payment financed over 5 years.  The total cost of owning the vehicle is $46 000 in Canada.   The resale value after 5 years of the basic BMW 3 series is around $17 500 based on Auto Trader prices.  This is the assumed value of the car after 5 years.  The monthly cost of owning the vehicle is $766 for the next 5 years.

An alternative more economical vehicle might be the popular Honda Civic where a basic version of the vehicle has a total purchase price of $20 000.  A used Honda Civic of 5 years old on Auto Trader current sells for around $9 500.  The monthly cost of owning the Civic is $333 for the next 5 years.

The assumption made in this example assumes that the person has no money to start with, but can make all payments on the vehicle over a 5 year period.  The money saved from purchasing the lessor vehicle is saved and invested at the end of the year in a very conservative balanced, diversified portfolio making an average return of 6% annually.  So how much ahead is the individual after 5 years?


Buying The Luxury Car

If the luxury car was bought brand new out of the lot and that was all that was left, then the individual would have $17 500 at the end of 5 years as their net worth.  This is the remaining value of the car based on the resale value of the vehicle.

Buying The Simple Car

By buying a more economical car, it allows the individual to save and invest the difference.  With a small return of only 6%, the money saved turned into $29 078.24 after 5 years.  Considering that the simple car cost $26 000 less, the individual was able to make more than $3000 with the money saved.  No bad.

Add the final resale value of the car of $9 500 and the individual who bought the simple car now has a net worth of $35 500.   That’s more than double the net worth of the individual who bought the luxury car!

Long Term View

One of the most overlooked aspects of saving in your early years is the impact down the road that the money saved may have.  Imagine if the individual in question did not invest anything more for the next 25 years.  What would that $29 000 turn into with a return of only 6% per year:  $124 464.  Holy shit!  That $5 000 saved each year over a 5 year period turned into a difference of almost $125 000 after 25 years.

So what would happen if the person who bought the luxury car wanted to get the same amount of money as the other individuals with only 5 years of saving?  Since the individual who bought the luxury car started saving 5 years later, this person would need to save $7 500 each year for five years and invest it at 6% to equal the same amount of money as the person who bought a cheaper car.  So how easy is it to save $7 500 a year once you’ve gotten a taste of driving fancy cars and keeping up with the Joneses?  Pretty hard I imagine.


Does driving a Honda Civic versus a brand new BMW make you a lessor person?  Are you invisible to the world just because your vehicle is not made in Germany?  We probably all have dreams and goals of attaining all the luxury wants that we can think of.  As a person who is young in their career and trying to build an investment portfolio, it pays, literally, to make the proper financial decisions when you are younger rather than when you are older.

Remember that the generation before didn’t have the same type of wealth as the current generation did.  Helicopter parents have provided a much higher quality of living than can possibly be imagined a generation ago.  Make the right financial decisions to protect your wealth the same way your parents did.

Use the power of compound interest to your advantage.  The earlier you can start building an investment portfolio that will build wealth for you, the better off you will be.  Ultimately, we all want to have some fun in our lives, but waiting that extra 5 years actually makes a bigger difference than people think.

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  1. duaimei
    duaimei May 19, 2014

    I am not sure if the first line of your post qualifies 60-70k as a high paying job or not…

    To some 60-70 is ‘decent’ and 150k is high paying…

    Oh well, I liked the rest of your post, and totally agree that you shouldn’t pay for a luxury car just so it can be a status symbol.

    • bkwan
      bkwan May 21, 2014

      I agree, there are some places where 60-70k is not a lot of money like The Valley, but I think in most cities as a young professional starting out 60-70k is a good starting salary. Most people come out only with 30-40k jobs as a starting salary.

      • duaimei
        duaimei May 21, 2014

        It also probably depends on the career field of the individual. Secretaries might get $25k a year, while pharmacists might start off at $60k.

  2. The Urbanist
    The Urbanist June 17, 2014

    BMW 3 Series is not a luxury car. It is a family saloon. If you have a family of four, enjoy driving, and frequently use your car for entertainment trips, i.e. a 5/6-hour return trip every other weekend to the beach or a cottage – not silly commuting, then a 3 Series is a smart choice. The joy, comfort, and safety of driving a 3 Series vs a Civic out ways the so-called saving.

    You can buy a 2-year old BMW 320i for $25,000 (New $36,000 MSRP by the way) and drive it for 15-20 years. You will then be enjoying a BMW ride
    (possibly a future classic), going out more frequently, saving the environment some steel and rubber junk, and most importantly saving thousands of dollars on the long run – for it is reliable BMW, not an appliance.

    • bkwan
      bkwan June 21, 2014

      I agree that getting a used luxury car is a great way to save money since a large portion of the depreciation will already have passed. 15-20 years for a vehicle is a little long. Most cars on the road average 11 years which at that point there are more expenses involved in repairs. I’m not saying you won’t luck out with a great car, but most won’t make it there.

  3. […] Loans for cars will generally have a shorter time period where the amount has to be paid off. You will never see 25 year car loans like houses because a car will probably not even last that long. This means that the amount that you’ll have to pay is much higher. If you want to jump into a BMW 320i it’ll cost you $700 per month to own for 5 years. That’s a hell of a lot of money to commit to and it will drain your cash flow on a monthly basis. This is why I recommended for young professionals that buying a luxury car is not a good idea. […]

  4. Jay
    Jay November 7, 2015

    I spent 50k on a made-in Japan SUV. Having said that, it simply doesn’t not depreciate the same way mass-market vehicles do. On top of that, I plan to keep it 10 years because of its stellar reliability and quality. A 10-year old model of the same vehicle today still fetches upwards of $15,000 or more so if you look at the total cost of ownership vs buying an econobox every 5 years, the spread isn’t as large. I also don’t drink and party/restaurant every weekend either and between my wife and I, we put $15k or more a year into investments/pensions. Balance is key, and live within your means!

    • bkwan
      bkwan November 7, 2015

      I agree that balance is key to any successful management of one’s personal finance. Regularly driven vehicles regardless of cost do eventually depreciate to zero no matter how you look at it. As someone who might be starting their career or has been working for a few years, buying a luxury car really puts a damper on cash flow which is by far more important than anything else when trying to work towards financial independence. You’d be surprised just how long and far a used compact car from a reputable maker such as Honda or Toyota will go. There are many people that drive compact cars for the ten years that your luxury car will go with little or no major repairs necessary at a fraction of the yearly cost it would take. $20K over 10 years is a lot less than $50k over ten years, even if you factor in repairs and insurance. Sometimes people get too forward in their thinking and make large purchases out of vanity or emotion. That’s where things can get out of hand; however, if you can afford it, then no doubt everyone is free to spend their excess on things they enjoy.

  5. Joanne C. Sutton
    Joanne C. Sutton November 11, 2018

    May I just say what a comfort to uncover somebody that genuinely knows what they are talking about over the internet. You certainly understand how to bring a problem to light and make it important. A lot more people need to read this and understand this side of the story. I was surprised that you’re not more popular since you most certainly have the gift.

    • bkwan
      bkwan November 11, 2018

      Thanks. I would probably say that personal finance is not as interesting to read as many other topics out there on the Internet.

  6. Joanne C. Sutton
    Joanne C. Sutton November 11, 2018

    May I just say what a comfort to uncover somebody that genuinely knows what they are talking about over the internet. You certainly understand how to bring a problem to light and make it important. A lot more people need to read this and understand this side of the story. I was surprised that you’re not more popular since you most certainly have the gift.

    • bkwan
      bkwan November 11, 2018

      Thanks. I would probably say that personal finance is not as interesting to read as many other topics out there on the Internet.

  7. anthonyakpan
    anthonyakpan January 14, 2019

    Life is what you make it. One can scrounge and save every penny and still loose it all.

    As one said a bmw 3 series is far from luxury.

    The main issue I find is being complacent. The one in the Honda is very likely to stay complacent as the payments are nice and easy.

    I just bought a benz making payments what u can easily afford in an expensive city (vancouver) before now I wasent complacent. But now with more strain on my finances I’m damn right I’ll never be complacent.

    Two years from now I will be making much more than I make now, still saving and living life as one should

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