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?