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Well I guess the crux is the difference between what one considers 'major differences'. It's true that a 25k and a 75k car will bring one or multiple persons from point A to point B. A $500 clunker will do that, too. 25k will get you (sticking to new cars for the sake of the discussion, but the same dynamics hold for used) a Camaro, a Dodge Grand Caravan or a Ford Escape. 75k gets you a BMW X5 or a Porche Cayenne Hybrid. The room in those cars, the level of comfort, the quality of the drive is of a different level than in the first 3. Is it 'worth' it? Of course that depends on your frame of reference. For somebody with a commute of an hour, or somebody who regularly goes out to ski or on longer road trips to visit family, it's a real difference. Back when I was a student, or even when I just had my first job, I looked at cars in that price range and thought that people would have to be nuts to spend that much on a car. Now that I'm in my mid 30's with a family, the BMW X3 I drive doesn't seem like such an extravagance it once did. If I had 2 million I too would semi-retire, but the X5 or Cayenne would be out of my price range - the yield on 2 million doesn't make it fiscally responsive to buy a car of that price range. But somebody who retires with 10 million could. And they could dine in much nicer restaurants much more often (for those into that), and do a bunch of other things that would be a real difference from those with 2 million. Which brings me to the second point - what's the difference between having 1 million or 10? Well quite a lot. 1 million will let you 'retire' if you're content with a lower-middle class lifestyle and do some paid work you enjoy every now and then. 10 million lets you retire comfortably and lets you go on holidays abroad a few weeks or months a year. It still 'only' (yes yes, first world problems) affords you a house in a nice but not upper class neighborhood, and you won't be jetsetting first class around the world with it. Is that 'necessary'? Of course not, billions of people would literally give their right leg for just a fraction of these amounts. Yet most people in my (Western European, mid career professionals) social circles don't consider it 'wealthy' or would be content with such a lifestyle for the rest of their lives, without any prospect of advancement. Maybe there is a similar case for the difference between 10 and 100 mil, or 100 and a billion, I don't know - I don't have that much money, most likely never will, and I don't hang around with anyone like that either. But I can imagine that the people with the 50 feet boats in the marina (the 100 million crowd) have a different lifestyle from those with boats that can go from Miami to Monaco (the 1 billion crowd). |
I agree there is a large bump from a 500$ Junker that's likely to break down and say a 25k used 2013 Acura TL with 15k miles. However, the gap from a 25k 3 year old used car in great condition and a 35k new car of the same model is not that great. And the gap between a 35k car and a 70k or 250k car is again there but not that huge. The 25k is long past the point of not breaking down on the side of the road; it's got heated power seats, heated power side mirrors, auto dimming rear view mirror etc.
Don't get me wrong the next bump is real and say automated cruse control is useful. But, it's less useful than you might think and you can expect that to be part of the basic 25k package before too long.
As to retirement I am saying early retirement on ~5 million where driving a 25k car is a completly reasonable choice is where dimmining returns start to hit hard.