Today we dive into a topic that often goes unnoticed: the true cost of buying a $90,000 truck. Beyond the sticker price lies a financial landscape shaped by interest costs and missed investment opportunities. Join us as we explore the hidden expenses and potential gains associated with purchasing such a vehicle. Let's uncover the real impact on your wallet and financial future.
Full disclosure: We are not fans of ‘spend-shaming’ unless you're spending way too much on something and not saving any money.
Large, fixed expenses such as housing and transportation will cause holes in your cash flow and are the biggest lifetime expenses. Spending money on vehicles is fine, if saving is a priority as is the foundation of any financial plan.
We visited the Ford site and picked the middle of the pack 2024 F-150s, the Tremor. With taxes and no upgrades, the total cost came to $88,564.
Exploring financing options, Ford is offering 3.99% APR for 84 months.
To finance the 2024 Tremor, over 7 years is $1,211 per month assuming nothing down.
That is a high monthly payment for most people and even higher when you factor in the opportunity costs. It is like having another mortgage payment.
If one were to consider a smaller truck or SUV, like a Ford Maverick, the cost would be more than fifty percent less, approx. $47,000.
This represents a savings of $644 per month or more than $7,700 per year. Over the course of a seven- year loan, that is more than $54,000.
If you were to save $500 per month during that seven-year period at 7% annually, at the end of 7 years, that would be worth $35,796.
If you kept saving the $500 per month over a 30-year period and averaged 7% on your investments, here’s what that could look like.
The key is not only to buy a lower-cost vehicle but make sure to invest the difference. The $500 per month can be invested in a Tax-Free Savings Account making the compounding effect that much more powerful. A TFSA worth more than $500,000 can give you a lot more freedom than a Ford 150.
RBC Dominion Securities Inc.* and Royal Bank of Canada are separate corporate entities which are affiliated. *Member-Canadian Investor Protection Fund. RBC Dominion Securities Inc. is a member company of RBC Wealth Management, a business segment of Royal Bank of Canada. ® / TM Trademark(s) of Royal Bank of Canada. Used under licence. © 2023 RBC Dominion Securities Inc. All rights reserved