An Introduction to Opportunity Costs: What is the Real Cost of a New Car?
Buying a new car might feel like a smart upgrade—but what if it quietly costs you over half a million dollars in future wealth? That’s the essence of opportunity cost, and it’s one of the most overlooked concepts in personal finance.
After working hard at Cardinal, it’s natural to feel like we’ve earned the reward of a new car. And while we all know cars are expensive, what’s less obvious is the hidden cost—the wealth we might be giving up without realizing it.
Let’s walk through a real-world example.
The Average New Car Loan in 2025
According to Experian’s recent report:
- Average new car price: $50,080
- Average loan term: 68.87 months (~5.75 years)
- Average interest rate: 6.80%
- Average monthly payment: $894
Over the life of the loan, that adds up to:
- Total payments: $894 × 68.87 months ≈ $61,620
- Total interest paid: Roughly $11,540
So far, that’s straightforward. But what if a 30-year-old chose to invest that $894/month instead?
The Opportunity Cost of That Car
Let’s assume:
- The $894/month is invested in a diversified portfolio earning 8% annually
- The investor continues this for the same 5.75 years, then lets it grow untouched until age 65
Here’s what happens:
- After 5.75 years of contributions, the account would hold ≈ $78,800
- By age 65, that grows to ≈ $788,000 (assuming 8% annual growth)
That’s a $788,000 opportunity cost—just from redirecting car payments into investments.
A Visual Metaphor: The $788,000 Garage
Picture a garage not filled with a car, but with $788,00 in future possibilities—early retirement, college tuition, vacations, a second home. That’s the true cost of a new car loan when viewed through the lens of opportunity.
Final Thought
Opportunity cost isn’t just theoretical—it’s the silent force shaping your financial future. Every dollar spent today is a dollar that could be working for you tomorrow. The goal isn’t to avoid spending, but instead to spend with intention.
When you understand opportunity cost, every financial decision becomes a chance to align your spending with your future goals.
Take care and, as always, stay the course.
Colburn Wealth Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.