After she got divorced in 2021, Sora Lee bought a brand new Tesla Model 3 for just over $70,000. But she now wishes she had spent the money differently.
“I just really wanted a Tesla because it’s something my ex wouldn’t let me [have], and I regret buying that full price,” the 34-year-old tells CNBC Make It. “Huge mistake.”
Lee currently makes $400,000 a year as the global head of product marketing at TikTok and has invested her way to an $843,000 net worth. But that number may have been higher if she didn’t buy the Tesla.
It wasn’t necessarily that she couldn’t afford the car or the approximate $1,000 a month she puts toward the loan. She was working for Meta at the time and earning over $200,000 a year.
But in retrospect, she says buying a shiny new car wasn’t a very smart investment. As of June 2024, she still owes around $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 would have thought about it a little bit more because now that I’m paying for it and looking at my monthly statements more closely, a thousand [dollars] a month is a big deal,” she says. “If I had put that into something else, I would have been making more money in terms of my investment return.”
Unfortunately, Lee had to learn the hard way what many money experts preach: Buying a new car is generally a bad financial decision. In fact, it might be the “single worst financial decision millennials will make,” money expert and self-made millionaire David Bach previously told CNBC Make It.
That’s because, as Lee now knows, cars are a depreciating asset. Generally speaking, they lose value over time and you’ll rarely recoup your purchase costs if and when 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 specifically, may depreciate even faster. Electric vehicles lose their value at an average rate of 49% in the first five years, compared with about 39% for all vehicles, a 2023 study by iSeeCars found. Teslas are among some of the worst at retaining their value, with Model 3s losing an average 43% of their value in five years.
“I like the car, but I would have bought it used,” Lee says.
Andrew Evers and Lisa Setyon | CNBC Make It
Aside from the financial implications, Lee also now recognizes she has had a complicated relationship with money stemming from her father who often placed “value on people based on where they live or what kind of cars they drove,” she says.
She wants to help her 5-year-old son, Jackson, have a better relationship with money. Though he may not understand the concept of depreciating assets yet, she’s trying to show him that an expensive car isn’t the most important thing in life, and it might not even mean someone is doing well financially.
“Just because someone has a nice car doesn’t mean that they’re wealthy,” she says she tells him.
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Barbara Terrio is a seasoned business journalist, delving into the world of finance, startups, and entrepreneurship. With a knack for demystifying complex economic trends, she helps readers navigate the business landscape. Outside of her reporting, Barbara is an advocate for financial literacy and enjoys mentoring aspiring entrepreneurs.
