June 5, 2008

Buying a big expensive vehicle is like a 10-20% pay cut

This New York Times article 'Big Vehicles Stagger Under the Weight of $4 Gas' they make this point:

"To put this in perspective, the difference between a Focus and an F-250 over five years is $60,000. The annual pretax income of a typical family in this country is also about $60,000. So choosing a F-250 over a Focus is like volunteering for a 20 percent pay cut."

I'm not totally sure about their numbers though. Yahoo Auto places the Total Cost to Own (TCO) of a Ford Focus at $33,678 and a F-250 at $64,330 So that would be a $30,652 difference. But the NYT article is ignoring resale value which is a lot different and they may make some other assumptions. o

But whether the difference is $30k or 60k the point remains the same. Buying a big expensive car or truck will cost you a lot in the long run and the extra cost is probably a significant portion of your income.

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