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My neighbor recently bought a beautiful 2016 Jeep Wrangler Unlimited. I can’t help but ogle at it every time I see it sitting in his driveway. Anytime my neighbor is outside, I’m hopeful for an opportunity to admire it more closely. It’s that amazing. He has no idea that he owns my dream car.
My Love for Jeeps
Since I started driving at 16, I’ve always wanted a Jeep Wrangler. Unfortunately, my minimum wage lifeguard position in the summer did not pay me well enough to afford one, but I got the next best thing. This isn’t to disparage my first car. I loved it, and it treated me well until I went to college. But when when I was 16, I wanted to be the cool kid driving the Wrangler.
Now that I am older, I am fortunate to be in a position to be the cool kid again and buy a Jeep Wrangler Unlimited. However, with a MSRP of $27,695 it gives me pause. I have never spent more than $10,000 on a car. Whether it was my general disinterest in cars or a defense mechanism built up from high school, I have always looked at a car as something to get me from point A to point B. Over the years, I’ve been fortunate to drive cars I like, but I’ve held off on splurging on a dream car because I convinced myself that I had higher priorities such as purchasing a house, being debt-free and even traveling.
My Car Reality
When I first bought my house at 23 years old, I had to find three roommates in order to help pay the bills. The rent that I charged the roommates was very reasonable in that they were able to save and spend as they pleased. They ended up spending much more than they saved as each one of my roommates indulged and drove brand new cars that were much nicer than mine. At the time, I envied their position. They did try repeatedly to have me upgrade my 15-year-old car, though.
The closest I got to treating myself was a few years back when my Mazda MX-6 engine blew up. I talked myself into pursuing a Jeep Wrangler or a Honda S2000. But of course, I chickened out because I didn’t want to spend more than $10,000. Lame, I know. I ended up paying $8,000 for a ten-year-old 2001 Honda Prelude that I thought was a reasonable compromise. My now wife thought that car was a terrible purchase though. She told me it looked like a weird spaceship. Thankfully she looked past it while we were dating. Needless to say, I sold the car shortly after we got married.
Since getting married, I have been fortunate to have been able to check off many goals (being debt-free, traveling) with my wife. But, for some reason, getting a nicer car hasn’t moved to the top of my list. I guess having kids will often times do that to people.
One of my new goals is in five years, I would like to move into a new home, ideally with access to a pool. Recently, I was playing around with a mortgage calculator. If in five years mortgage rates have creeped up to 4%, the total amount of interest paid on a $300,000 mortgage will be $215,000+. If I can apply the purchase of a Jeep, $27,695, towards the $300,000 mortgage, I will be able to reduce the amount of interest on the loan to $195,000. That’s $20,000 of interest saved over the 30-year mortgage. So I have to ask myself, is the Jeep really worth closer to $47,000, which is almost double the MSRP?
Additionally, if I were to invest the $27,695 in the S&P 500 for the next five years and receive the average return of 10% (a big if), I would have over $44,000 available to apply towards a mortgage, which would further reduce the amount of interest I would pay by $12,000. This, in turn, would mean that the Jeep’s cost to me was actually $59,000. I don’t know about you, but I think I could find better ways to spend $59,000 than on a Jeep.
Years ago, I wasn’t experienced enough to do an analysis like I did above. I certainly didn’t have the foresight to share this information with my roommates. But, looking back, I wonder how much their dream cars ended up costing them. Each one of them continues to rent homes, and I know that they desire to one day be homeowners. I do wonder if they delayed the purchase of their dream cars to a later date, if they would have been able to reach their other desired goals sooner.
Do you ever regret instant gratification? Do you ever look back and wish you had indulged on something which didn’t seem financially prudent? What are some instant vs. delayed goals that you are trying to reach?