Singapore is well known as one of the most expensive places in the world to own and drive a car. At the time of this writing, a brand new family car like a Toyota Corolla 1.8L would have set you back by S$165,000. To put into proper perspective, the minimum price of a brand new BMW 7 series cost nearly $400,000! Can you imagine how much an exotic sports car like a Ferrari would have cost you?
Even with such exorbitant prices, many exotic cars such as Bentley, Ferrari, Lamborghini, Maserati, Porsche and the more common ones like Audi, BMW, Lexus and Mercedes-Benz are plying Singapore roads daily. While many believe the car you drive reflects the level of success you have achieved, the reality is far from the truth.
Can the type of car a person drive represent his or her level of success? Think about it, millions of people around the world are driving more glamorous cars than Warren Buffett. Warren Buffett, currently the world’s third richest man with a net worth of US$44 billion, was driving a 2001 Lincoln Town Car (worth about US$11,000) with a license plate that reads “Thrifty” before it was auctioned on eBay. The profit from the sale of his Lincoln was then donated to a nonprofit organization. Warren Buffett now drives a 2006 Cadillac DTS worth about US$12,000. Clearly, the car that one drives is not a reliable indicator of one’s financial success. In fact, Thomas Stanley's (author of The Millionaire Next Door) survey of self-made millionaires in the United States of America reveals that the most popular make of car among the wealthy is not a Rolls Royce or BMW but a Toyota.
Frankly, I won’t think twice about spending millions of dollars buying properties or other assets that could generate good investment returns, but I just couldn’t allow myself to spend lavishly on an exotic car that won't generate any income for me.
Though I can now afford to drive any car that I desire, I chose to buy a used, reasonably priced Mercedes-Benz E200 recently (with the blessing of my dear wife of course). The car was my reward for the investment decisions made that added another 7-digit figure to our net worth. I’ve been driving down-to-earth Japanese sedans for most part of my life and this was my first foray into driving a more luxurious continental car (I won’t classify the Baby-Benz that I owned several years ago under the luxury sedan category). While my E-Class Mercedes-Benz is certainly not the most glamorous of cars by any standard, it’s nevertheless fully paid and well-maintained. I was in the Mercedes-Benz Service Centre to service my car one day when I overheard this guy complaining to the service advisor about the high cost of maintenance of his Mercedes-Benz. The service advisor highlighted to him that the brake pads of his car are quite worn-out and need replacement which would cost about $600. He complained loudly that it’s too expensive and rejected the advice to have the old brake pads replaced. What? Can’t afford to replace the brake pads but still choose to drive a Benz? And deliberately choose to expose himself and others to accident risks due to worn-out brake pads? This man has simply gotten his priorities all wrong!
Honestly, I’m not against anyone enjoying the finer things in life. If you could afford the luxuries comfortably, by all means buy and enjoy them. But blowing your budget or borrowing in excess just to acquire luxury items could well destroy your financial future! Don’t fall into the debt trap that results from perpetually keeping up with the Joneses. The reality is that the Joneses are broke! It's always wise to live well below your means.
Hence, don't rush out to purchase your dream car or any big ticket item on a tight budget. Do so only when you can well afford it. Always remind yourself that BEING rich is far better than LOOKING rich!