Message #100: A question about buying a car

Hi Boyd!

In either "The Warren Buffett Way" or "BUFFETTOLOGY" the issue of Warren driving around in second-hand cars was raised.

The reason he won't pay $20,000 for a new car is...

If he invested that $20,000 and it only got a small business return of 12%, after 10 years he'd have over $60,000. So spending that $20,000 is like spending $60,000. And spending $60,000 for an object that does not go up in value is something he won't do.

Instead, he buys second-hand cars and invest the rest of the money.

Another deca-millionaire I read about buys her designer-label clothes in second-hand stores then pays the few bucks to have them altered so they fit better. She feels it's silly to buy the designer-label item at full retail price as it only loses value. Instead, the money she saves buying second-hand designer-label is invested in stocks of medical companies as she believes their profits will soar as more and more baby boomers need medicine in their old age.

The price of the Jetta reminded me of the Buffett story and thought I'd mention it, for what it's worth.

Just make sure you don't load your new car up with loads of lumber :o)

Michael Ross.




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