WOW! How to save $250K over a lifetime!

[swampwiz]

Liz Pulliam Weston: Make your car last longer, even a lifetime - MSN Money

owning cars for 10 years instead of five could save the typical person more than $250,000 over a lifetime.

Figuring a discount value of 1/2 (but multiplying for 2 for a couple), this alone could mean a FIRE value of $250K.

And add in the savings of having a Las Vegas type of wedding rather than kind promoted by the typical Marital Industrial Complex, living in a good exurban school district (to avoid private school tuition) and only saving up enough for Little Johnny to go to State U rather than the best little private places that are recommended by the typical pompous high school counselor (like mine, who couldn't believe that with my perfect 36 on the Math ACT and 32 composite that I shouldn't be shooting for MIT or an Ivy League place), a couple could easily hit the critical mass target without giving up much other pleasures in life (relatively speaking.)

 

[CuppaJoe]

I absolutely believe that. I sold my car in 1980 and retired in 2008. Minimal transportion expenses were a cornerstone of my planning. Because I could function in the city without a car I was able to save enough to continue living in an expensive city.

 

[Urchina]

This is one of the things I figured out (though didn't extrapolate over multiple years) early on. I had this utterly reliable but rather run-down looking Volvo for years, and when I was working and got a raise my co-workers would always say "so, you gonna get a new car now, right?" I always said "No, I'll keep driving this one, thanks." Finally someone asked me why I was driving my old, dented, still-running car, and I said "Because every month I drive it, it saves me $400+ dollars." It was paid for and insurance was unbelievably cheap (had legally mandated minimum insurance on it). No car payment, and we only spent about $1000/year on gas and maintenance for it. Compared to a new car, with a $300 monthly payment and much higher insurance, it was a no-brainer.

I always wondered why more folks didn't figure it out.

 

[plex]

I understand why some people like spending a lot of money regularly, but what I have never been able to fully grasp is why most people spend lots of money regularly, their whole lives. Only a tiny percentage had more than pocket change to spend for the first 21 years of their lives, what the heck happens during the 10-15 years immediately after that? Sure, some people like to live on the edge, but how can it be most people?

 

[RunningBum]

I think we had a thread a year or two ago where someone pointed out a better strategy of buying a 3 year old car and replacing it every 3 years. It saves money, and while you don't get the latest and greatest, you also aren't 10 years out of date either, and you start getting more repair costs in years 7-10.

Or you can do what I've done with my Miata--bought used, and have had it for over 10 years now. To be fair, it's not a daily driver so the miles are low.

 

[Walt34]

Except for the two old clunkers I had in high school and college I've kept cars for at least ten years. The first decent one was a 1970 Plymouth Duster that I bought from my mother after Dad died in 1973 and I kept that until 1985, replacing it with a new 1985 Chevy pickup truck that I kept for 18 years. My "retirement present to me" was a new, special order 2003 GMC 4WD pickup that I intend to keep until parts availability becomes a problem. And I bought a new end-of-season 2008 Suzuki C90T motorcycle that I use for everything when weather and load permits. It gets ~45 mpg.

There's just something that strikes me as "wrong" about driving a 2.5 ton truck to pick up a prescription or go to the library so I use the bike for that stuff.

 

[Dawg52]

I think we had a thread a year or two ago where someone pointed out a better strategy of buying a 3 year old car and replacing it every 3 years. It saves money, and while you don't get the latest and greatest, you also aren't 10 years out of date either, and you start getting more repair costs in years 7-10.

Or you can do what I've done with my Miata--bought used, and have had it for over 10 years now. To be fair, it's not a daily driver so the miles are low.

When I was young, I knew I was messing up by buying new and too often but retirement was the last thing on my mind. I finally got it and I do buy at least a 2 year old vehicle and hold on to it for as long as I feel it is reliable.

My parents always hung on to cars for a long time. Not sure why it took me so long to figure it out. My mom has a 1990 Olds Delta 88 that still runs great. I drive it to the golf course a couple of days a week just to keep it running.

 

[Birdie Num Nums]

My first car, a used 1972 Mazda, I got in college in 1979. (I briefly had a nice black and white 1953 Ford in high school.) Some drunk driver ran into it as it sat parked in front of my house in 1981 and totaled it. My next car was a 1976 Toyota Corolla that had 27,000 miles that I bought in 1982. I drove that into the ground for the next 16 years, until I bought my one and only brand-new car--a 1998 Saturn SW2, which I have been driving for the past 12 years and 66,000 miles. With ER starting today, I expect my annual mileage to go way down, perhaps to about 5,000/year. The point is that I also believe I have saved lots of money by not buying new every few years.

Contrary to many others, I don't see anything unfavorable about buying a new car, if you're gonna hang onto to it for at least seven to ten years. I know that as soon as you drive off the new car lot it depreciates considerably, but I think it evens out, financially, after about seven years. I must say that the feeling of a new car was very nice, as I never had one before--except for new GSA cars my employer got about every three years or so. This Saturn has been a very dependable car these past 12 years, at its 33 MPG is a bonus.

 

[rescueme]

I always wondered why more folks didn't figure it out.

Vanity costs...

 

[ziggy29]

There are sometimes still good deals in the "1-2 year old car" category compared to buying new, but this strategy has largely become a victim of its own new-found popularity. Now that this "secret" has gone mainstream, the depreciation of many new vehicles isn't as immediately steep as it used to be because of an increased demand for "almost new." To some degree it depends on make and model as well.

 

[IndependentlyPoor]

I absolutely believe that. I sold my car in 1980 and retired in 2008. Minimal transportion expenses were a cornerstone of my planning. Because I could function in the city without a car I was able to save enough to continue living in an expensive city.

Sadly, few U.S. cities (and almost no towns - the old stores have closed and the Walmart is "out on the loop") are walkable enough to do without a car. However, we discovered that we could do just fine with only one car after retirement. Losing that expense helps pay for us living in trendy and expensive downtown Austin, where almost everything is within walking distance. We only use our car to visit friends in the 'burbs.

 

[grumpy]

I continue to find great values in 3 to 5 year old "certified" used cars. In 1995 I bought a 1992 certified Toyota Camry, 6 cyl., leather, top of the line. It came with a 3 year, 100,000 original mile bumper to bumper warranty. It had 47,000 miles on it and I paid around $16,500 cash for it. I drove it until 2002 and sold it privately for $4000. I then bought for cash a certified 1997 Lexus with 41,000 miles on it. It carried the same type of warranty. I paid $20,000 cash. I drove it until 2010 and sold it with 131,000 miles for $4400. I just bought a 2007 certified Lexus with 45,000 miles (same warranty) for $24,000 cash. These certified cars are fully reconditioned (new battery, new tires, new brakes, etc.) and are detailed so well that they look and drive like brand new cars. None of them ever required major repairs and the certified warranty gave me the peace of mind that I wasn't buying somebody's lemon.

I have never made a car payment in my life and have always had nice, dependable cars. I know that this strategy help me reach FIRE at 55.

 

[samclem]

There are sometimes still good deals in the "1-2 year old car" category compared to buying new, but this strategy has largely become a victim of its own new-found popularity. Now that this "secret" has gone mainstream, the depreciation of many new vehicles isn't as immediately steep as it used to be because of an increased demand for "almost new." To some degree it depends on make and model as well.

Yep, I think the Japanese brands often depreciate so little that you might as well buy new if you are going to hold onto it for 10 years. I think the Korean makes still depreciate a lot in their first few years, and their quality has come up a lot.

Now that I drive far less, the attraction of a new car is even lower. I drove about 4K miles last year, so I sat in the car for less than 100 hours. If I had a $300/month car payment, that would work out to $36 per hour for each hour I was in the car. There are very few vehicles that provide a "fun factor" worth $36 per hour, and most of them have wings.

 

[Hamlet]

This matches my experience. When I was car shopping it quickly came down to a choice between buying a new Honda or Toyota, or a 2-year old Kia.

The huge depreciation of the Kia got me to buy it.

I'm just hoping that that quality has improved as much as they claim

Time will tell.

Yep, I think the Japanese brands often depreciate so little that you might as well buy new if you are going to hold onto it for 10 years. I think the Korean makes still depreciate a lot in their first few years, and their quality has come up a lot.

 

[IndependentlyPoor]

I know how to save $200K immediately. Just don't buy one of these:
Behind the Wheel - 2010 Aston Martin Rapide - A Sedan So Beautiful That It Hurts - Review - NYTimes.com

 

[Lazarus]

Bought a new 2008 Ford F150 for $15K when the gas was $4.00 a gallon and they were setting on the lot unsold. Bought a used Ford Focus 15,000 miles for $11K.

$26K for the pair.

 

[easysurfer]

I think we had a thread a year or two ago where someone pointed out a better strategy of buying a 3 year old car and replacing it every 3 years. It saves money, and while you don't get the latest and greatest, you also aren't 10 years out of date either, and you start getting more repair costs in years 7-10.

Or you can do what I've done with my Miata--bought used, and have had it for over 10 years now. To be fair, it's not a daily driver so the miles are low.

I heard about the 3 year rule too. That said, my car is about 15 years old. Didn't drive it much when I used to w*rk as I commuted mostly by train. Now I drive it more.

Next time, I'll probably buy used.

 

[LOL!]

But I don't need to save $250K over a lifetime.

One can work on the savings side, but it is often easier to work on the earning side.

 

[ziggy29]

But I don't need to save $250K over a lifetime.

One can work on the savings side, but it is often easier to work on the earning side.

True, but the reality is that it's both, and the more we see means testing and higher taxes on incomes, the more effective "cost avoidance" becomes compared to higher earnings.

An extra dollar earned may net out to 60 cents after taxes. An extra dollar not spent nets out to a dollar. And if taxes and means testing of government programs increase, that difference will only widen, most likely. As a result of this I suspect financial planning in the future will focus more and more on the "cost avoidance" side of the ledger rather than strictly making more and investing more.

 

[ESRwannabe]

I'm coming up on year six for my car, which I bought new, in cash. I will definitely be keeping my car at least four more years. Besides making my cars last at least ten years I will also always pay cash for them and save a few thousand by not getting a loan.

 

[walkinwood]

Marital Industrial Complex

Nice turn of the phrase.

 

[Texas Proud]

It is a bit funny... but I have done both... Let's see..

1 Used - Galaxy 500
2 Used - Montego
3 New - GLC
4 New - Cougar
5 Used - Firebird
6 New - Monte Carlo
7 New - TL
8 Used - Explorer
9 New - Elantra


Every car had over 90K miles when I got rid of them... even if I only owned it for a year or so... I try to keep for 100K... but usually something came up that made it worthwhile to change (like the cash for clunkers)...

it also is funny that I still own 1/3 of all the cars I ever bought... two of them are 6 to 7 years old, but I plan on keeping at least another 5 to 10 on both of them... (the wife might have something to say about that... but by then the kids will start to drive and she might see things differently)....


OK... took a look at the list and decided to see how much I had spent... a total of $114K wow...

 

[Livefree]

bought my 01 Honda Accord new for $15,600 and still going strong..only has 75k miles on it..and the only thing I've had to do besides oil changes was a wheel bearing replacement.

 

[Urchina]

I know how to save $200K immediately. Just don't buy one of these:
Behind the Wheel - 2010 Aston Martin Rapide - A Sedan So Beautiful That It Hurts - Review - NYTimes.com

That was a low blow. Now I have even more on my "covet list." I was making such good progress weeding it out, too!

 

[Urchina]

An extra dollar earned may net out to 60 cents after taxes. An extra dollar not spent nets out to a dollar.

Ziggy, I know this, but thanks for stating it so eloquently. I'm putting this on a notecard next to my financial goals 3x5 cards on my bureau, to remind me every day that what I don't spend is important! Thanks!