I am just in the process of buying a new vehicle. For me it is a bit of a challenge because I like a manual transmission and almost no one offers one anymore, but… I found one I really like. It is the new Honda HRV. It is just a small SUV but has lots of space for us and should be easy on gas.
After making the decision, I got to thinking about all of the bigger fancy cars I see around and wondered how much more they would cost than mine – so I did a calculation and it is pretty shocking.
My vehicle costs $360 per month and we put on about 25,000 km per year. I chose a Jeep Grand Cherokee as a comparison. It is not really a fancy vehicle but a full sized SUV that lots of people buy.
I did a calculation from the Jeep website and got a monthly payment of $971 or a difference of $611 per month. Add to that, the extra $170 per month for the fuel to run it and you have $781 per month EXTRA to drive the Jeep.
After that, I used a spreadsheet that I created to calculate how to save using tax-sheltered savings (in Canada that is an RRSP). Over 10 years, the difference (just the difference between the vehicles) will result in a savings of $149,000 if invested in an RRSP at a 10% return.
Doing the same calculation with a BMW X5, there is a payment of $1413 monthly plus the gas difference of at least $170 there is a monthly difference of $1,223 or $14,676 a year. Going back to my RRSP saving model shows me a 10year saving of $231,000 to drive my nice new Honda instead of the X5. Sure the BMW is nice, but so will my Honda and $231,000 too!