You should never buy new cars, right? That seems to be one of the cornerstones of personal finance. The millionaire next door doesn't. And what about our favorite billionaires? We love to hold up Bezos, Zuckerberg, and others as proof, pointing to the fact that they don't drive new cars either.
If used cars work for them, then that's great! But we figured it was time to let you know that some millionaires do actually buy new cars…and I am one of them!
Read on if you'd like to learn more about what flipped the money script for us and to see what money milestones you might want to tackle first before saying yes to a new car.
Never Say Never to Buying New Cars
“Do you plan on buying a new car?” If you would have asked me that question a few years ago, I likely would have given a slightly different answer.
I am a saver. I take a great deal of pride in saving and building up my net worth. Goal setting is important to me, and I want to make sure that my saving and spending align with my goals.
So several years ago, I likely would have told you that I would never buy a new car. We were pushing hard to pay off all of our debt and to become mortgage free. I also had the dream of becoming a young millionaire. That meant that we were focused on reducing our expenses and increasing our income in order to invest more and pay down debt.
But now our goals have shifted, especially since we built such a strong financial foundation for ourselves. As a result, I'm giving a very different–and maybe very surprising!–answer to the new car question: Yes!
Building a Strong Foundation Before Buying a New Car
Before you ask me to turn in my personal finance card, I think it's helpful to clarify our financial picture.
Here are several things that we tackled first before even thinking about making this purchase:
- Built an emergency fund of around 3-6 months of expenses
- Paid off my $30,000 student loan and Nicole’s $20,000 car loan
- Reached Coast FIRE with $500,000 invested
- Became mortgage free on our $500,000 home
- Hit a millionaire family net worth in our 30s
- Transitioned from full-time to part-time work (for both my wife and me)
- Created a generational wealth plan for our children so they graduate student debt free, buy their first home and retire comfortably
These accomplishments took time and dedication. They also took a great deal of planning, goal setting, and evaluation. We really had to get our financial ducks in a row in order to accomplish these things. That left us in the perfect position to have a little less discretion when it came to doing some discretionary spending.
Does everyone who wants to buy a new car need to do all of these things? Of course not. But because we accomplished so many of our goals–and more goals than we maybe even initially imagined–we realized that we had a different type of money freedom.
If we were still struggling to pay our bills or felt like we were drowning in debt, a new car definitely would not have been the move for us to make!
Cashing In Our Taxable Brokerage to Buy a Car in Cash
Due to our financial foundation, we started to reconsider how we looked at things. Initially, we set up a taxable brokerage the same reason many people in the FIRE community do so.
Nicole and I envisioned ourselves retiring early, long before we were eligible to draw down our 401ks and Roth IRAs. As a result, we intended to use the money in our taxable brokerage account as a bridge between 50 and 60. It was going to be the path that we walked until we were traditional retirement age.
However, we realized that entrepreneurship put us on a new path. I am no longer trying to frantically stop all work. Instead, I found a job I love. The Marriage Kids and Money podcast and community opened up so many doors for me, and I find it so fulfilling. As a result, I don't see myself ever totally exiting the workforce. I work between 20-30 hours per week and so does my wife Nicole.
The fact that I love the work that I do and that we have already hit our Coast FIRE numbers means that our taxable brokerage account is no longer a bridge account. Instead, we decided to use this money to bring us joy now.
After decades of planning for the future, we realized that it was time to have some fun and spend some money now.
What We Bought and What We Considered
So with some careful consideration and a big push from Nicole, we drained $50,000 from our taxable brokerage account and bought a brand-new car. Specifically, we bought a 2023 Ford Mustang Mach-E.
As someone who is from Detroit, it felt fitting to go with a Ford. While I know there are plenty of people who would choose a Tesla as their electric vehicle, I liked the Mach-E a lot.
In addition to thinking through the exact vehicle we wanted, we also made sure to consider the ramifications of draining our brokerage. There will be some tax implications for us in the next filing year. As a result, we are doing some thoughtful tax planning and fully expect to absorb the cost of the car and the tax implications with what we took from our brokerage and what we had in a smaller sinking fund.
Other New Car Considerations
It's important to remember that our decision to buy a new car isn't the same as someone blowing their budget on an impulse buy at Target. We spent more money than you'd spend at Target, but we also put some real thought into it–and made some careful considerations!
There were other factors at play, too, when we started thinking about buying a new-to-us car versus a brand new car.
Some of the other reasons I happily purchased this car include:
- A sizeable electric vehicle tax credit for new car purchases
- Less maintenance and fewer future headaches
- The wild increase in used car prices
- Our old Audi was turning into a money pit
- I wanted to!
When I purchased this car, we were eligible for a $7,500 clean vehicle tax credit. That made the math a little bit more compelling.
Plus, the idea of buying an electric vehicle promises to be one that future me will appreciate. I no longer have to worry about stopping for gas or dealing with oil changes. Instead, I can charge my car in my garage and end up with less overall maintenance. Saving money and time is a huge win in my book!
A common push in the personal finance movement is to never buy new cars–instead, always consider used cars first. But anyone who has been following the news over the past few years or car shopping themselves, probably knows that used car costs reached astronomical heights during the pandemic. They haven’t really fallen after the fact either! That fact was another reason that we started to consider buying new.
While it’s true that we may have been able to push our previous vehicle farther, my Audi was racking up plenty of costs. The car was 13 years old, and as a result, the repairs were becoming more costly and more frequent.
Most important, though, is the fact that I really wanted to buy this new car. I’ve never purchased a brand-new car before. So the novelty of physically handing a check to the dealer for the FULL amount in cash was fun for me.
Additionally, after checking so many boxes and hitting so many money milestones, it felt like it was time to make my money work for me in another way. I wanted to spend my money in the most convenient way possible. That meant buying brand new from my phone…in cash!
Final Thoughts on Millionaires Who Never Buy New Cars
I’m not here to tell anyone how to spend their money. It’s true that some millionaires won’t ever buy new cars. But some will! This one just did, and I don’t regret a thing.
It’s important to remember that personal finance is personal, and we never truly know someone’s full financial picture from the outside looking in. If you have a goal or a series of goals, it's fine to use your money to achieve them. In fact, that's the whole point of tracking dollars and cents in the first place. Money is a tool you can use to build the life you want. And if you drive a new car in that life you want? Enjoy it!
Are you on Team Never Buy New Cars? Or would you consider buying new?
Please let us know in the comments below.