Why My Car is Going to Make Me Rich
20th April 2006
I drive a dented Honda. Rust has taken to the main dent (I put it there) and the paint is starting to wear away from exposure to the sun. I’m pretty sure it resents my SUV, which we baby by keeping it in the garage. It’s a bit of an eyesore, especially compared to the new SUVs and BMWs and the like around the neighborhood. I can only imagine what the neighbors think.
And here’s why it’s going to make me rich.
- Insurance - A newer car means a more expensive car. I’ve known people who bought a big SUV and then were in for quite a shock when they got the insurance bill.
- Gasoline - Often (but not always) a newer car means more gas, especially if you buy a SUV or the like. My car is pretty economical, so I’d have to buy a hybrid or something to use less gas.
- Taxes - Here’s the killer. Where I live, the annual tag fee includes a tax based on the value of the vehicle. One guy I knew complained about his $600 registration fees. I thought about it for a second and realized that it was only $300 for BOTH my cars. He told me he had a brand new German sports car. I could only shake my head.
- Maintenance - This cuts both ways. My car is hanging in there, and I’m able to do some of the repairs myself. That helps, because it’s a little older (fewer computers) and I’m not nearly as afraid to mess something up if I “break” it while working on it. My SUV actually cost me more to maintain so far over the past 12 months than my Honda has.
- Safety - O.K. this one may actually work in favor of a newer car. My car is pretty safe - at least for one of its size. But when I do get a newer car, I’m going to look for solid safety features.
Why does all this matter to you? It’s just something to consider for those of you who are thinking of dumping the junker. There are more costs to a new car than often meets the eye, and they can bump up your burn rate quickly. I know a couple of people who ended up with more than they bargained for with new cars, so I’m sticking with mine. But as they say in the auto industry - your mileage may vary. Do what’s best in your situation.
All I know is that I project that I can save $6,000 for every year I can hold onto that dented Honda, so I think it’s a smart money move. It will help me meet my financial goals for this year. And in four years - the time I think it will hold out - I’ll have a cool 24 grand that I’ve used to pay off debt, put into Roth IRAs for both myself and my spouse, or earned interest on to buy my next car.
-or-
April 20th, 2006 at 2:06 pm
You lay out a nice argument for your Honda. I have a newer (paid off) car but my plan is similar to yours…drive it till it goes to automotive heaven. Insurance and gas are cheap and I don’t have a payment.
April 20th, 2006 at 2:57 pm
My dad gave me the sound advice when I was a kid to never buy a new car and to keep it ’til it quits running (with proper maintenance, of course). The only car he ever bought new was a Toyota van, and he’s kept that thing running and looking almost-new for 21 years now. I have siblings who aren’t that old!
April 22nd, 2006 at 3:29 am
In the book, “Rich Dad, Poor Dad” (I think?) one piece of advice I really took to heart was to, ‘drive whatever car your pride can cope with’. The need buy stuff just to bolster your insecurities can get expensive. I have utterly no pride when it comes to cars, which is why my old rust heap still graces the roads.
Besides all the dents and rust patches scare the hell out of al the shiny new car drivers, traffic just parts in front of me wherever I go…
:0)
Financial Reflections replies: Well, I must not have much pride!
I do notice that I am far less afraid of getting a “door ding” or having someon scrape my older car. I never thought about it that way, but it’s one less thing to worry about.
May 16th, 2006 at 4:52 am
Festival of Frugality #23…
Welcome to the 23rd edition of the Festival of Frugality. I want to thank everyone who took the time to enter. I managed to squeeze almost everyone in (I was really puzzled by one submission - so left that out). While trying to figure out how to orga…..
May 18th, 2006 at 8:38 am
[…] However, I’m not that impressed with stuff (if you take a look at my car, you’ll agree), and I think most people aren’t impressed with their stuff, either - at least not in the long term. Which might be why people keep buying stuff - they need to renew that short-term buzz. […]
May 18th, 2006 at 4:26 pm
100% in agreement! Driving a rust bucket is one of the easiest ways to wealth. I drive a 1998 Nissan Sentra and hope to drive it for a long time to come.
I have reduced my insurance to liability only (my insurance is less than 1/2 my friends), my property taxes are next to nothing, I owe nothing on the car and the depreciation on the car is little at this point. I love it!
June 1st, 2006 at 9:11 am
[…] Right now, there aren’t many HD channels out there. I honestly expected a lot more, because you will pay more to get an HDTV dish or cable. I’m still on analog cable. This is one of those situations where you spend for a device and then spend more for the additional costs associated with it. That spend/spend scenario is why I haven’t gotten a new car. Of course, my HTDV friend is very smart with money (loaded) so he can afford the setup. […]
June 8th, 2006 at 2:19 am
Best route is buy a great vehicle a few years old (3-5) pay cash for it. I am amazed how people will pay 15% interest on a object (their vehicle) that is gonna be worth-less and less and less all the time. People are paying for something that is going down in value. It makes no sense. Pay interest on something that will make money or go up in value (like a house, business, education).