I hope you had an opportunity to visit the North American International Auto Show this month. I thought it was spectacular and I tip my hat to all of the auto firms that exhibited, especially our beloved three, General Motors, Ford and Chrysler.
The products coming out of Detroit continue to be incredible and I think
the rest of the world will soon discover and appreciate the quality and
innovation coming out of Motown.
Naturally, a large part of the car buying process is determining what’s
affordable. If money were no object, many of us would probably be
driving Ferraris or Rolls Royces.
That’s why, as a financial advisor, I have to go through sort of a tug
of war between encouraging people to save and invest or spend
judiciously. That’s an especially tough call when a big-ticket item such
as a new car is involved.
Of course, it’s important for families to have dependable
transportation. It’s very difficult to be a reliable and responsible
employee without one. So, in that respect, the purchase of a good
vehicle is extremely important.
As a financial adviser, when advising on any big-ticket item like an
automobile, I always recommend that families should be able to own what
they purchase. You’ve probably heard the expression “house poor.” Well,
the same principle can apply to cars. That’s why I often tell clients
that more horsepower is great, but make certain you can afford to feed
all the horses.
The auto show is a wonderful way to begin the New Year and perhaps do
some research for your next new car purchase. To help put into focus
what is affordable, I’d like to remind everyone that Uncle Sam is taking
a larger bite out of your paychecks in 2014.
If you’re one of the 10 million Americans that earn in excess of
$100,000, you’re going to have less disposable income because your
Social Security tax is increasing. For 2014, the wage base jumps 2.9
percent, from $113,700 to $117,000. You might say that’s “only” about a
$200 increase, but the total employee tax is now $7,254. And don’t
forget, your employer matches that number.
For those married couples fortunate enough to earn more than $250,000,
there is an additional Medicare surtax of just under 1 percent. Many of
you will find this out when you file your 2013 tax return. The increase
actually went it to effect last year, but it was under the radar, so I
think many will be a bit surprised when they file their tax return.
There are several new taxes or tax increases attached to the Affordable
Care Act as well, including a tax on medical devices costing more that
The Auto Show certainly offers a number of outstanding choices from
which to select a new car. But, as with any investment, you need to do
your due diligence. In this ever-changing world, it’s important that you
know what you can afford, especially after taxes.
It costs money to own a car or truck. In addition to maintenance,
there’s insurance and the cost of filling the gas tank. It adds up.
Going to the auto show is fun and exciting, but before you make your
purchase, make certain you have a good grasp of reality.