Growing up, we had old cars because we didn’t have much money. I would jealously eyeball my neighbor’s shiny Buicks and Chevys thinking “Someday I’ll be rich and will have a new car like those!”
I bought my first car when I was 25 years old. It was a Datsun hatchback. It had no radio, manual locks & windows and a tiny 4 cylinder engine. But it also had less than 20,000 miles on the odometer and cost me $1200. I loved it.
It was a great deal, which I paid for using a cash advance on my credit card (not recommended). This car was immediately nicknamed “The SteveMobile” by my kids. It was my go to car for commuting to work, shuttling Zack to baseball, grocery shopping and errands.
I drove that car for the next 4 years and then sold it with a newspaper ad for $1500. It was undoubtedly the best car purchase I ever made.
After the SteveMobile, my wife and I made a number of car purchase mistakes that cost us money.
- We bought a mid-level 4 door Civic for my wife. This was actually a decent purchase. But it came with 5 years of $300 monthly payments. A used Civic would have been fine. Buying new cost us an extra $10K.
- When I sold the SteveMobile, I bought a brand new a Civic Hatchback for me. It was a good car, but I had just traded a perfectly decent vehicle that I was paying $0/month for a new vehicle that cost $300/month for 5 years! This was A $15K mistake.
- Before the cars were paid off, I decided it was time for a new car. I was making better money as a Sales Manager and felt we deserved an upgrade. We looked at a Jeep Grand Cherokee, a Toyota Camry and a Honda Accord. Both Civics were perfectly fine and nearly paid off- this was an ego driven decision.
- We leased the Accord because I couldn’t afford the $550/month payment to buy it. Buying a cheaper car was simply unacceptable. So we leased the Accord for $350/month for 4 years. I figured that by the time the lease was up, I’d be rich and would be buying something better. That was wishful thinking, instead I ended up making payments for 8 years! (See #6 below).
- I gave my hatchback to my mother, I kept Ellen’s Civic and we rolled the remaining payments for the hatchback into the Accord Lease. Honda was happy to charge me double interest for this.
- 4 Years later, we got another loan to buy the Accord. In total we paid $350 a month for 8 years for the Accord! (Paid a total of $34K for a $25K car).
- I drove the Civic payment free for 4 years. Then, in a fit on anger, after replacing the timing belt and then having the water pump fail, I bought a Scion Xb. (Traded the $0/month, now repaired Civic for 5 more years of $350 payments.)
It’s no wonder I had money problems! Every time I was in a decent position to drive a vehicle indefinitely at no cost, I traded it in for years of payments.
We made some good car decisions too
- Shortly after paying off the Civic, we moved to Florida. In the first month here, the Civic was hit at least 10 times when the perpetrator didn’t stop or leave a note. I couldn’t believe it! It had dings, dents and scratches all over. But since the car was 6 years old and we were stretched beyond our means, I didn’t even bother getting cosmetic bodywork repairs done. Lesson learned: People will hit your car and drive away. Expect it and accept it.
- We kept the Accord after finally paying it off. It’s now 19 years old and runs like a champ. The paint is peeling and it’s got decades worth of dings and dents but we haven’t had a car payment on it in 10 years. Lesson learned: No car payment is better than any car payment!
- The Scion was a good purchase. I wanted something that would hold lots of mulch, furniture, dogs and people. It was the cheapest import available that met my specs. It’s now 14 years old and has also been paid off for 10 years. Lesson learned: Buy less car than you can “afford”. Then keep it forever.
Today we drive the Scion and the Accord. Both have been paid off for a decade. Book value on them is about $3K each.
- Insurance is halved because we only carry liability.
- Dings and dents are ignored.
- They get washed at least once a year – if they really need it.
- They both drive great!
- Repairs are minimal, but expected. Brakes, Shocks, Tires, Timing Belts, etc.
Every dollar I didn’t put into car payments during the past 10 years went into debt pay down, savings or investments.
Do the math, that’s conservatively $96K ($800/month x 120 months) not including the additional savings from auto insurance.
When one of these dies, we’ll become a 1 car family. If I absolutely had to buy a car today, I’d buy a low mileage used Toyota, Scion, Nissan or Honda where someone else has already eaten the depreciation loss. My plan though, is to keep these cars for another 20 years.
When there are car thefts in the neighborhood, it’s never my car. When someone has to pay thousands to repair a chip in their fender, it’s never me.
Today, my friends. coworkers, and neighbors all drive newer cars. They have BMW, Mercedes and Lexus SUVs.
If we are carpooling, I’ll let them drive so I can bask in the luxuriousness.
Their backup cameras, lane detectors and bluetooth systems are pretty cool. And their cars are beautiful to look at.
I just don’t know how they can afford them.