Ok so the title is probably a bit dramatic. I actually knew this day would come, but I was hoping to delay it as long as possible.
It’s time to replace my car. I’ve been on borrowed time for a while now. My car is 14 years old and has 250,000 miles, plus years of wear and tear from long commutes to work. The car and I (I call her Lexi), have had a long and complicated history.
Why I Drive a 14-year old car even though I can afford a new one
I first purchased the car, used, back in 2007. It was one of my first “big girl” purchases and at the time I had a $500 car note. That may not sound like a lot by today’s standards.
Unfortunately, a $500 car payment is all too common these days. But 10 years ago it was a big deal. I really couldn’t afford the car at the time as evidenced by a lack of money for a down payment.
I didn’t even own a home, but I was spending $500 a month on a depreciating asset, a status symbol.
Today, I’m wiser and will make better choices. The good news is that the car was great quality and served me well these past 10 years. I think I got my money’s worth.
But this past weekend, I got in the car, turned the key, and nothing happened. The car was towed to the auto repair shop and a few hours later the mechanic called with the bad news. If I fixed everything that was wrong with the car, it would cost me $4,500.
The car is only worth about $2,000 so I was definitely not interested in a repair bill twice the price of the car value. So I told the mechanic to do just enough to get the car back on the road. Six hundred dollars later…. I have a new starter, and hopefully, a little time to figure out the ‘new (used) car’ situation. But it got me thinking.
Cars may not seem like a big deal but they are. They fall into the category of ‘the big three’ (Housing, Transportation, and Food). We tend to spend the bulk of our money on these 3 things. If we can begin to make wiser choices in these 3 areas we can free up more money to pay off debt, save, and invest.
A few tips to keep transportation costs down.
1. Keep transportation to no more than 10-15% of your monthly take-home pay. This should include the car payment (if you have one), insurance, and gasoline.
2. Don’t be wooed by new and shiny. Car companies employ a tactic called planned obsolescence to encourage us to upgrade our vehicles frequently. Basically they make minor vanity improvements to the body each year to encourage us to buy the newest version. So that we experience FOMO (fear of missing out). The two or three-year-old model will usually work just as well and be significantly more affordable.
3. Remember that cars are depreciating assets. The car will drop in value as soon as you drive it off of the car lot. So instead of purchasing new, buy used. Take the additional cash flow and use it towards a financial decision that will improve the number that truly reflects financial wellness, net worth.
I no longer care about what I drive. As long as the car gets me from point A to point B reliably, I’m happy. In fact, when I see a shiny, new car at a red light I find myself wondering how much the other driver’s car payment is.
What’s the point of having a shiny, new ride if it’s parked outside of the job 40+ hours per week so that you can ‘afford’ to pay for it?
Me? I’ll take the old, paid-off car so that I can lower my expenses and spend less time working and more time traveling.
Are your transportation costs a drain on your resources?
I could easily afford a $200,000 Italian sports car and could pay cash for it but my current daily driver I bought earlier this year is a 2008 that had 160,000 miles on it. It runs like new and should last a few years. Plus it looks like new. If you shop wisely you can get a great car for under $10,000. Great post!
Nice! Thanks! I’m looking at a used Lexus for about $15,000 with very low mileage.
Thanks for writing this very helpful one that reminds folks to really slash the bulk of their motoring cost, by being sensible with their choice of vehicle. Buying a highly reliable make like Lexus would mean high reliability and savings from its lower maintenance costs.
Recently my spouse got lucky at an auction and landed an economical and reliable 2007 sedan with just 22,000 miles on its odometer. For $3,100.
Many people can put their money to far better uses than overspending on their set of wheels 🙂
Wow! That’s an awesome find. Vehicle expenses can be such a drain on resources, but the right purchase can make a world of difference. The money saved can be used towards assets that will appreciate in value.
This is in general great advice! The only caveat is safety. Most people would pay anything to have their health back. It’s worth spending enough money to get a car that greatly reduces your chance of being severely injured or killed in an accident. A good statistic to look at is death rates by vehicle published by the IIHS. An older, larger car with side airbags is not only less expensive, but is likely to be safer than a newer small economy car with perhaps even more safety equipment. If you wear your seatbelt and drive a larger car, you have given yourself the best chance to walk away from an accident. To me, keeping my loved ones safe and being able to continue working, to continue taking on diy projects, or even to keep breathing – that’s priceless.
Thanks! Great point about safety. Most modern cars all have these features as standard options.