Occasionally I wander off script and into the weeds. This is one of those days…
Automotive industry pitchmen and those who have just dropped big scratch on a new car insist, “An old car will cost you money!” Reality check: New cars are almost always more expensive to own than old ones. A lot more! Let me, a man who has owned far too many cars, make my case by sharing the financial results of my many automotive indiscretions…
Total Ownership Cost (purchase + repairs – sale price)
New (2 years old or less): 5 cars. Loss: $48,000 (avg loss: $9,600 per car)
Old (more than 10 years old): 6 Cars. Loss: $9500 (avg loss: $1580 per car)
Ancient (more than 20 years old): 13 cars. Loss: $1400 (avg loss: $110 per car)
Notice that every additional decade of age cut the cost to own by approximately a factor of 10.
Conclusion: Driving a beater will save you money!
Car buying advice for those on a budget
1) Don’t buy a car you can’t afford. If you can’t pay cash you can’t afford it!
2) Don’t throw away money on depreciation. If you buy a car that is anywhere close to new the depreciation will cost you piles of money.
3) Buy a car that is uncool. If you buy a car that is or ever was a status symbol you will pay too much.
4) Buy a car that was dependable when it was new. An undependable car is always undependable (like Rover or anything made in Europe with that cool engineering). Buy cars made in the right continents…i.e. any continent not named “Europe.” This will save you PILES of money for each part that will continue to break. If all you want is dependability then buy Japanese. However, the cost of Japanese cars on the used car market is relatively high because of their reputation for dependability. If you want cheap and dependable:
5) Look for old American iron that was well cared for. I have driven several hundred thousand miles on old American cars without a major breakdown.
Buy a well maintained, fully depreciated car (10 years or older), that no one wants (like a 4 door), and you won’t get hurt financially. If the 1980 Cutlass that you paid $1200 for dies after 2 years of $50 bucks a month worth of repairs who cares! You are only out $2000. If you had bought a new Toyota Matrix (like I did) you would have spent close to $300 per month in payments, watched your car insurance double, paid 10X the $20 per year for tags on a Rambler from the ‘60’s and lost another $5000 in depreciation. Over the first 2 years of owning a Toyota Matrix it cost more than four times what the Rambler cost per mile to drive! Finally,
6) Don’t buy a car from someone who has to make a profit on it (like a car dealer). Oh yeah, and every mistake I have made buying cars was from making the decision too quickly, so…
7) Wait until tomorrow to buy that car you really want. Take a day to think about it. Take it to a mechanic and have them make a grocery list of things that are wrong (so you can negotiate and deduct them from the price). Go home and check online at kbb.com and edmunds.com for the cars value. Mostly, don’t rush and make an expensive decision on emotion. If you do it will cost you. You will buy something way too expensive (like the really nifty VW Passat I once bought) or miss something big (like a rusted out floor pan) or buy something just plain bad (like the’62 Ranchwagon I bought on a whim).
Or you could just do what my cousin did: after spending years driving new European status cars he found a really nice underpriced older Lexus 4 door. He paid $6000 for it. He has driven it for 5 years, made no repairs other than brakes and a battery, and is still in it for less than it’s worth. Now all you have to do is find a clean $6000 Lexus. Good luck with that.
But even if you are still reading, I’ll bet you a tenspot you won’t follow my advice. You will rationalize buying a shiny sporty new thing on the grounds that you will save money on repairs and the improved gas efficiency. You will go out and find a car you can’t afford. You will buy it from a car dealer who will make a fatty of a commission on you, and then even more when you finance this status symbol. Then you will pay thousands more in tax. All so that you can start paying the expensive annual tags and monthly insurance premium increases….but you have all that spare money sitting around, so you can afford the $10 bucks you now owe me.