HIM: "But I have kids...I'm looking out for their safety...and with our lifestyle, we NEED an SUV!" And then I asked them some key questions that made them think about their "safety investment" for their children.
ME:"How much more expensive was this than say, a roomy economy car like a Saturn Ion?"
HIM: "Oh I don't know, it was $35,000." (about 22k more than the Ion...I use the Ion as an example)
ME: "Ok... do you have an account set up for your kid's college education?"
HIM: "Well, we need to start that soon, but our kids are only 4 and 2."
THEN... I sat down with him..and we experienced the POWER of MATH!
If the average 4-person family finances a car every 5 years (60 month loans are common), and this is their "starter" car, and they plan on keeping their payments about the same for the next 15 years while their kids reach college age, just on the RETAIL price, they would spend $60,000 more.
We did more math over that 15 year period
Total Retail Cost $100,000
Additional Interest - 2.9% as a guide (if they kept current interest rate) $1740.00
Cost of Gas at $2/gallon given 17 mpg, average of 12,000 miles per year = 10,000 gallons of gas = $20,000 spent in gas
So, just in gas, retail, and interest costs based on today's prices, they will spend almost $122,000 on SUVs. There may be more costs..but we used this as a marker.
Then we looked at the more fuel efficient Ion..roomy, big trunk, tons of features $13,000. 32 mpg.
Total Retail Costs $39,000
Additional Interest $1131
Cost of gas given 32 MPG, $2/gallon, 12000 miles per year = 5625 gallons of gas = $11,250
We rounded this up to $52,000 for the cost of 15 years of this kind of car.
"Well, what's that? $4700 more a year for my safety and convenience? I'm not worried."
"But what if you were able to put $4000 into an Education Savings Account EVERY YEAR for 15 years for your kids?"
$4000 a year of TAX FREE MONEY!
Even by average estimates, he would have an additional $125,000 to finance his kids' college education.
"What do you think your kids wil thank you for more at age 18? That you bought big cars and paid all that money every year for them, or will they thank you for being able to finance their education in full? So...how DO you plan on financing your kids' college education in 15 years??"
HIM: (....speechless)
It baffles me how we have probably more consumer debt than anytime in history, and folks just aren't thinking smart.