Are you tired of having a car payment? Drive a beater. That’s what one of The Village Family Service Center’s financial counselors, Morgan Almer, does. He has saved thousands of dollars over the years. Right now Almer drives a tan, 1998 Buick LeSabre, and it’s going on 275,000 miles.
“If you have a $30,000 car and something minor goes wrong, like the window doesn’t go down, you feel like you have to get it fixed. You can’t have an expensive car with a broken window. But when my window quits working, I don’t care,” says Almer.
The same way he doesn’t care that the air conditioning doesn’t work and there’s a dent in the driver-side door. He keeps up on the regular maintenance and only worries about repairs necessary for safety and to keep the car running. And if the Buick needs a repair that’ll cost him more than $1,000, he’ll sell it for scrap and find another car.
A Depreciating Asset
Unlike a home, a car is not an investment—it is a depreciating asset. Stacey Johnson, producer of Money Talks News, says a new car is guaranteed to lose thousands of dollars before you even get it home. For example, according to Kelley Blue Book, a 2013 Ford Fusion will lose $7,845 of its value in the first year.
2013 Ford Fusion
Source: Kelley Blue Book
If you finance the full amount, the value of the car will decrease much more quickly than the loan—which means, for a time, you will owe more on the car than it’s worth. And it’s no fun to be stuck with a vehicle because you can’t afford to pay the difference between what you owe and what you can sell it for.
If you hold onto the car long enough, you’ll eventually reach a point where you owe less than the car is worth. But Almer says you’re better off letting someone else carry the financial burden caused by the first few years of rapid depreciation.
The Reliability Argument
Almer says reliability is the biggest argument he gets for why people think they need to drive a newer car. Most people think they need a reliable car to get them back and forth to work, school, and to the grocery store. He believes this argument is flawed. In the 15 years he has driven a beater, he has never been stranded on the side of a road. He’s had to make repairs, but has been able to catch a ride with a friend when his car has been in the shop.
If you’re not comfortable with the reliability of a beater—say you have to get your kids to school and yourself to work, and you can’t afford to be stranded without a car—financial experts still recommend you buy a used car versus new.
The other argument Almer hears is that a used car will “nickel and dime” you—again he doesn’t buy it. “You can do a lot of repairs for what could be a $300 or $400 monthly car payment,” he said.
According to a June 2010 Kiplinger article, unless you have to replace the engine, an old car is almost always cheaper to own than a new one. Many of us think that once a car passes 100,000 miles, it’s just a matter of time before we end up with a huge repair bill, but this isn’t the case with cars today. Tyson Hugie, author of the blog, Drive to Five, which chronicles his car’s journey to 500,000 miles, says his first car didn’t even have a sixth digit because cars weren’t expected to run that long. “Modern engineering has produced vehicles that are easily surpassing the first 100,000 miles without even needing major scheduled maintenance. People need to get out of the idea that a car at 100K is a ticking time bomb.”
The key to keeping your costs down is regular maintenance. “Change your oil. Change your filters. Change your antifreeze—that’s how people get cars to last 200,000 miles,” says Lauren J. Fix, a consumer auto expert quoted in an article on Bankrate.com.
When it starts costing you more to maintain your car than a car payment (or if safety is an issue—for instance, the frame is cracked), get rid of it and find something else.
Tammy Noteboom recently bought a new vehicle, and after doing the research for this article, plans to drive it until the wheels fall off!
Filed Under: Money & Consumer
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