Lessons I Learned From Buying a Luxury Car in College

When I was 20 years old, the transmission on my mother’s 2002 Volvo s80 (what I was driving at the time) blew. The cost to have it replaced with a used transmission would be about $3,500 while the cost of getting a new one would have run me about $5,000. So I had to make a decision: (1) Pay to have the transmission replaced, or (2) Purchase a new vehicle.

At the time, I was driving a lot between work, school and an internship and wanted something reliable and felt a used transmission was not the safest choice. As for buying a new transmission, I felt like it was a lot of money to spend on a car with over 120,000 miles and I was itching to try something new.

It didn’t take long for me to get “approval” from my parents to purchase a new car and I quickly found a 2009 Mercedes C300 that was listed at $10,800 with 57k miles. After a very brief discussion with my dad, I withdrew $5,000 from my checking account and purchased the car. Throughout this blog post, I hope to share some of the lessons I learned after making that purchase.

No matter what you tell yourself, buying a luxury car in your early 20’s is almost never a smart financial decision. When I purchased my car, I had about $15,000 in student loan debt and a little over $21,000 in cash savings. Generally, you want to keep your monthly car payment (and all other vehicle expenses) at around 10% of your gross monthly income. Given that I was in school, in a standard month, I could expect to make about $800. With a car payment of $199.34, I was spending roughly 25% of my NET income on the payments alone. Thankfully, my parents paid for my insurance but when it came to maintenance and gas, that was my responsibility (and rightfully so).

As I write this, I am a couple days away from having owned my car for 3 years. In the time that I have owned the car, I have spent $27,898.81 on my car between payments, gas and maintenance. That is roughly $28,000 that could have been invested, $28,000 that could have been saved; $28,000 I could’ve used towards a down payment on a home or rental property. Instead, it is $28,000 that I spent.

Had I invested the money, assuming an average rate of return of 7%, it would be worth over $34,000 today.

There were months where I spent more than I made and overall, the car had a negative impact on my ability to create long term wealth. Always make sure to calculate the long-term impacts of your financial decisions!

When it comes to buying any vehicle, never rush the process. From the moment I saw my car online, to the moment I handed over my down payment, roughly 5 days passed. It took me less than 1 week to inspect and purchase my car. In that time, I failed to adequately research things to know when purchasing a vehicle, particulars on financing a car, and what to expect when it comes to maintenance.

You see, I understood that maintenance for a European car would be expensive, but I never incorporated it into my budget. At the time, I had roughly $21,000 saved and the car was listed at $10,800; it needed a new set of rear tires, so the total cost came out to $11,300. Not only did the car cost more than 50% of what I made in a year, it cost more than 50% of what I had saved! When it comes to buying a car, the general rule of thumb is to spend no more than 10% of your net income on a car payment. This means, if after taxes you make $50,000, you should not spend more than $417/month ($5,000/year) and no more than 20% of your net income on all car related expenses.

Whenever you rush something, you increase your chances of making a mistake. Ever rushed through a test? Rushed to complete an assignment? Or maybe you were in a hurry to catch a flight and forgot to pack something. Regardless, I am sure you have made a mistake or two while rushing to do something.

Here are some of lessons I have learned from rushing my car buying decision:

Don’t fall in love with a car! Doing so may cause you to overlook some more important considerations as your entire focus will just be on getting that exact car. When I bought my car, I was going to work, school and had an internship so I needed a car. I told myself that I deserved a Mercedes and that I didn’t have enough time to look for another car. As a result, I didn’t ask a lot of questions, I didn’t do enough research, and my entire focus was on getting the deal done.

A common mistake (and one that I made) is telling car salespeople how much you would like to spend on your monthly car payments. Why is this a mistake? The problem with doing this is that from this moment forward, the salesperson will structure the deal around that monthly payment, even if it means you’ll be paying a 6-year loan.

Instead, focus on the total cost because this is how much you will truly be paying, and this number can’t be as easily modified or misleading as your monthly payment.

Yes, you read that correctly. When I think about my car, so much comes to mind. I think about the absurd amount of money I’ve spent on it, the constant frustration that comes with regular (and expensive) maintenance, but more importantly, I think of the joy it brings me and all that I’ve learned from my purchase.

Growing up, I would see men in suits driving nice cars and think “that’s going to be me someday”. Whenever I saw an African American/Black man or woman driving a luxury car, I felt a sense of pride and excitement because it made me feel that owning a luxury car was possible. This is why, when I was purchasing my car, I did it partially because it felt like it was not just a major accomplishment for a 20 year old, but also an accomplishment for a young, black man. Whether this was a valid reason for my decision is still up for discussion.

Driving a luxury car increased my self-esteem. Whether you want to accept it, people judge you based on the car you drive. Being that I was young (still am) and struggling with self-confidence, having a nice car made me feel more confident. Whether I was arriving at work, an interview, or just headed to school, I felt better about myself.

One of the major reasons I do not regret my decision is because it is a constant reminder for me of the product of hard work. Not only this, but my car offers me an escape. Could this be true for any car? Probably, but I have owned three cars over the course of my life and none of them have been as fun or as relaxing to drive as my Mercedes (when I don’t need to have something fixed).

In the end, my car has taught me so many lessons. It has shown me the importance of not trying to impress people, taught me some hard lessons on saving money, and it has encouraged me to do more research before making any large purchases.

If I could go back in time, I would do it all over again; because what is life without a couple mistakes?

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