Much to the chagrin, I’m sure, of a segment of my audience, I’ve written a lot of blog posts about cars. There are probably two reasons for this. Number one? I love cars.
I’m a car guy, though not in the way most people think of when they refer to someone as a ‘car guy’. My mechanical skills are limited to topping up fluids, changing tires, and practicing YouTube diagnostics.
I just love cars. More specifically, I love driving. In fact, ever since I purchased my first car, a silver 1982 Volvo, 21 years ago, I’ve logged more miles driving than I care to admit.
I’ve owned a manual transmission (on 3 different cars) since 1999, for the sole reason that it’s the closest I can get to a pure driving experience. Never mind that stick shifts are better on gas, cheaper to buy, and to maintain.
It doesn’t matter if I’m driving a Corolla, or an Elantra, and not a Porsche. Whether it’s the daily commute, or a 24-hour road trip, driving is one of those things that, for me, never gets old.
Car Buying Philosophy
In addition to my passion for driving, I write about cars because this is a personal finance website, and when it comes to personal finances, the sheer cost of transportation is high on the list for most individuals and families. In fact, it’s right there with housing and groceries
Because of this, when I think of anything that may help people keep their vehicle costs down, such as my $1500 rule for car buying, I tend to share them in a blog post.
My objective with this post is not to get into my entire philosophy of car buying. In fact, anyone familiar with this blog will know that I am pretty dead set against buying cars new. That’s not because I haven’t done so myself, in fact, much of this conviction comes from my own experience with buying new cars.
The simple fact is that a brand new vehicle suffers far too much depreciation the moment it leaves the car lot to have any chance of becoming a better value than buying used.
My personal preference is to buy a 6-8 year old vehicle with cash, that has an excellent track record for reliability. Doing plenty of research is key. I’ve repeated this formula a couple of times now, with great success.
That’s because, in this age range (6-8 yrs), it’s very easy to buy what was once a $30,000 car, for well under $10,000, and expect it to last for several more years. It’s going to look and feel very much like a brand new car, have at least 50% of life left in it, for around 20-25% of the original cost. Let someone else shoulder all of that depreciation.
That’s the strategy, in a nutshell.
Twin Cities
Recently, however, my own logic was challenged. In late July, we were planning a road trip to Minneapolis. Nothing major, about 1000 miles roundtrip. But our beloved minivan, a 2005 Toyota Sienna, is now 15 years old with almost 300,000 miles on the odometer. And while it’s completed several road trips over the years without any issue, there comes a point when you start to get a bit nervous about taking an older, high mileage vehicle on a long journey.
So even though our van was running fine, I began to think of how expensive and terribly inconvenient it would be if the transmission were to blow in the middle of our drive. Which got me to thinking about our travel plans for NEXT summer (2020), when we plan to embark on a 4000+ mile road trip.
While to some degree, my fear of the van breaking down was not rational, when you own an older vehicle, reliability is something you need to consider. In the case of our trip to the Twin Cities, I felt like perhaps our van was reaching a point where it was too old to trust on a long trip.
It was the same reasoning so many people use to justify breaking the bank on a brand new car. The belief that it’s the only reliable option, especially for those long trips.
A Better Solution
“Maybe they have a point.”, I thought, and I started to wonder whether it was time to upgrade our long in the tooth, yet perfectly functional Sienna, for a newer model. I tossed the idea around for a few days, until I came up with a better solution. One that would provide the peace of mind I was looking for (for our trip), at a far lower cost than buying a new van.
I decided to rent.
I know. Sounds like a no-brainer. But for $150, we were able to rent a 2019 Jeep Cherokee for 3 days, for our trip to Minneapolis. It came fully loaded, was perfectly comfortable, a nice way to do a road trip. It even had navigation built in, which made getting around the Twin Cities a breeze.
I’ve rented cars before, but never as a replacement for my own vehicle. At first, the idea seemed a bit frivolous. After all, our van would likely have been up for the trip. At the same time, I felt like my peace of mind was worth $150.
Final Thoughts
When it comes to car buying, people come up with a lot of excuses to justify buying new. “It was the warranty I was after”, “Zero % financing? I’d be crazy to pass up free money!” or “I plan to take a lot of long trips, so I need something new, that’s going to be reliable…”.
My decision to spend a small amount of money ($150) to rent a car, made it easier to defer a far greater expense (replacing my vehicle). In fact, these are the types of choices that make a huge difference in the long run. Not only is driving an older vehicle (vs. buying new) a perfectly viable option, it will move you that much closer towards financial freedom.
All it takes sometimes, is a little creativity.
Good point. To be honest, I never rented a car yet. I am equally skeptical towards them as in the case of used cars. Don’t get me wrong, I never owned a new car either. Actually, I never owned a car, ever. My wife does 🙂 Our previous one was seven years old when my wife got it and twenty years old when we sold it. Our current one was seven years old with 82k miles on the odometer when we bought it two and half years ago. I am not totally positive that this one will turn twenty under our ownership but we will see. Once this should be replaced I honestly consider buying a new one because of a couple of reasons. First, I am not the expert who can examine if a car is in good state and don’t have some hidden failures. Second, in our country the imported cars are the crappiest of the foreign offering and if someone locally try to sell something it almost sure that the reason is that it has some problems. In a not so rich country folks does not change their cars because they like variety. Third, if I would buy something new I would drive it to the ground so I don’t care about depreciation. Considering all this I think it makes sense. Still I would really like to stick with the 1k/year cost principle. Buying a 15k car and drive it for 15 years counts as that in my books which I think is not an unrealistic scenario.
I’m so glad you brought these points up, HCF. In different parts of the world, car ownership is an entirely different experience. I was visiting my family in Bermuda a few months ago, and we got into a discussion about cars. Because they’re on a tiny island, everything needs to be imported. As a result, the price of a new car is ridiculously expensive, and there is NO used car market. So, your only option is to buy new. At the same time, because new cars are so pricey, people hold on to them forever. We’re very fortunate here in North America, where high quality used cars are readily available, at a fraction of the cost of buying new. That said, you still have to do your research.
I totally agree! Our cars are older and it’s easier to rent for a long road trip but still keep our great running older cars. Great article!
There’s always someone who captures the essence of my 1000+ word post in one or two sentences. : ) Love it, and thanks for the wonderful comment!
Excellent article which shows how we can save significant money when we rely on our common sense and observational logic of things. In the American consumer based economy we will always be oversold and injecting doubt and fear into the buyer’s mind are time honored and oft used tools to obtain the buyer’s dollars. I run my own business and will almost always rent a car when working with my clients rather than driving my own car. Even at .58 cents per mile IRS allowance, driving my car when working with my clients is not worth it. They will gladly pay the lower cost for renting and the insurance for decent rental insurance as my car avoids all the unnecessary wear and tear.
That’s a very interesting point, about opting to rent even though you have the option of claiming the mileage as a small business expense. Regarding insurance, where we live, our public auto insurer has a wonderful car rental insurance policy. It’s so good in fact, that I purchase it even though I have auto rental/collision coverage through my credit card. Essentially, if the rental breaks down, or is in an accident, they guarantee you a replacement within a few hours, and you’re on your way. They deal with the rental car company directly, so it’s complete peace of mind. There’s an initial fee of around $20, then it’s $2/day after that. The longer you rent, the better the value.
Smart move, MMM. I think that deferring big expenses is one of the most stealth money moves we have at our disposal but also the hardest. It’s hard not to feel like you are making progress when you get a looming expense “over with.” Psychologically, it’s hard for me not to succumb to this thinking. On another note, living without a driveway and in a congested city, I don’t get any pleasure from driving and if my company did not pay most of my car expenses (instead of a higher salary, which I’d much prefer), I would get rid of it and just rent a car when I need one.
It’s so true, isn’t it. The whole idea of upgrading something, or covering an expense, and feeling like you’re further ahead. I’ve definitely fallen into that trap on a number of occasions. I can take it too far the opposite direction, as well. Most recently, a few months ago, I replaced our washer and dryer. (I’m sure I wrote about that somewhere). : ) Anyways, I had been deferring that expense for so long, that I actually had our old washer duct taped together for some time, just trying to squeeze more life out of it. It wasn’t until we got the new set, which washed and dried the clothes SO much faster, (and quieter), that I realized how ridiculous I was for delaying the expense. I actually apologized to my wife for how much more work she had been doing, having to deal with the old, crappy equipment. A lesson learned. : )
I’m fixing to start buying work trucks with rebuilt titles just to work out of. The shear cost is unreal just to farm out of. I’m only 39 years old, but unlike a lot of people my age there is no way I’m going to throw that much money away just to impress fools at the stoplight. I’ll also keep on driving my 1/2 ton pickups, so that I can save as much as I can. A lot of people don’t factor in the actual cost to drive per mile. It cost $0.58 to drive per mile, and that really adds up, especially on a newer high dollar vehicle that is going to drop like a rock in depreciation. I really enjoy the articles.
You’ll save tens of thousands over the years with that approach. Good point about the operating costs as well, it all adds up. Thanks for reading, Ryan!