Tuesday, April 24, 2007

A Car Is Just A Car - Reason # 123781237 Why America Is Hopelessly In Debt

I drive a 1994 Toyota Tercel.

I purchased this Caddilac of vehicles 4 years for the princely sum of $2,300 (in cash, naturally).

It has A/C, automatic, heat, power steering and a rear defroster. About the only thing it lacks that I "need" is cruise control, which would be helpful on my (rare) long drives.

I make a comfortable six-figure income, and no, I'm not a Voluntary Simplicity advocate (well, not yet anyway)...

...BUT, I don't understand paying more than necessary for a depreciating asset.

Had I bought a "normal" new Toyota for $18,000, I would have paid an extra $10,000+ over the past 4 years (see below). And that's being generous, since insurance, taxes, etc. are much higher on newer vehicles.

True, it would have been more comfortable. But how much comfort does one need? Is a Corolla really that inferior to a Camry, and a Camry to an Avalon, much less a Lexus or Mercedes?

When I hear folks who make $40K a year complaining about $300 a month car payments, I have to fight every urge I have to grab them and walk them out to my car, still worth about $1,800 after 4 years of depreciation and costing me about $350 to insure. A year.

Comparison

I paid a grand total of $1,500 last year for my Tercel, as follows:

Depreciation $150
Gasoline $450 (yes, I only drive about 5,000 miles a year)
Insurance $350
Maintenance $250
Repair $250
Taxes $ 50


Think about what you spend on your car: Depreciation + Insurance + Taxes + Maintenance + Repairs + Gasoline.

My calculation is that folks with a $300 per month car payment spend about $600 a month total for their car:

Payment $300
Gasoline $100
Insurance $ 70
Maintenance $ 25
Repair $ 25
Taxes $ 50
Total $570 per month or $6,840 per year


$6,840 "Normal" car cost
$2,400 Cost to drive a Tercel/Corolla for 12,000 miles per year

$4,440 Net savings every year


Your car may be eating you alive.

1 comment:

Susan said...

You're absolutely right! My husband and I think the same way you do. What's the sense in spending lots of moolah for a depreciating asset? Is it ego? So you have someplace to hang your "Bob's Benz" vanity plate?
-S