After getting divorced in 2021, Sora Lee bought a new Tesla Model 3 for just over $70,000, but now she wishes she had spent the money differently.
“I really wanted a Tesla because it’s something my ex wouldn’t let me have, and I regret buying it full price,” the 34-year-old tells CNBC Make It. “A big mistake.”
Lee currently earns $400,000 a year as TikTok’s global head of product marketing and has invested to reach a net worth of $843,000. But that figure could have been higher had she not bought the Tesla.
It wasn’t necessarily that he couldn’t afford the car or the $1,000 or so a month he puts toward the loan. At the time, he was working for Meta and making more than $200,000 a year.
But in retrospect, he says buying a shiny new car wasn’t a very smart investment. As of June 2024, you still owe about $36,000 on the car, more than it’s worth, according to an Edmunds estimate.
“I like the car, but I would have bought it used or thought about it a little more because now that I’m paying it off and I look at my monthly statements more closely, a thousand dollars a month is a lot of money,” he says. “If I had invested that money in something else, I would have made more money in terms of return on investment.”
Unfortunately, Lee had to learn the hard way what many financial experts preach: buying a new car is, in general, a bad financial decision. In fact, it might be the “worst financial decision millennials make,” financial expert and self-made millionaire David Bach previously told CNBC Make It.
This is because, as Lee already knows, cars are depreciating assets. Generally speaking, they lose value over time and you will rarely recover your purchase costs if you want to resell them. Most new cars lose about 20% of their retail value in the first year of ownership, according to Kelley Blue Book.
Electric cars, and Teslas in particular, can depreciate even faster. EVs lose their value at an average rate of 49% in the first five years, compared with 39% for all vehicles, according to a 2023 study by iSeeCars. Teslas are among the worst at holding their value, with the Model 3 losing an average of 43% of its value over five years.
“I like the car, but I would have bought it used,” Lee says.
Andrew Evers and Lisa Setyon | CNBC Make It
In addition to the financial implications, Lee now also acknowledges that he’s had a complicated relationship with money because of his father, who often “valued people based on where they lived or what kind of cars they drove,” he says.
She wants to help her 5-year-old son, Jackson, have a better relationship with money. While he may not yet understand the concept of asset depreciation, she is trying to show him that an expensive car is not the most important thing in life, and that it may not even mean someone is doing well financially.
“Just because someone has a nice car doesn’t mean they’re rich,” he tells her.
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