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As we begin 2019, I like to take a look back every year at our expenses that deal with cars. Last year, I even contemplated selling my car, because I had just finished paying a huge repair bill. However after looking at the numbers, I was happy to keep my car around another year.
I have been in the process of completing a 5-year study, where I compare car repair expenses with the average monthly car payment in America today. For the past 4 years, we were better off to keep our old cars and avoid that dreaded car payment.
You can take a look back at the articles in this series:
Is it Time for Us to Start Looking for a Newer Car? - January 22, 2018
Three Reasons We Keep Our Old Cars - February 16, 2017
You Need a New Car, The Myth - January 30, 2016
As you can tell from last years article, I was really contemplating looking for new cars. It felt like 2018 was the year of car repairs in the Summit of Coin household. It doesn’t feel like that this year. I am even excited to reach TEN years of car ownership this summer! My goal has always been ten years before we start looking for another car.
So, how did 2018 treat us in the car expense category? Not too bad. My wife’s car was much better off and didn’t experience any major repairs, however, my car once again needed some work.
2011 Toyota Venza (152,212 miles)
4 Oil Changes
1 Repair (can’t remember what happened)
2005 Pontiac Grand Prix (156,858 miles)
3 Oil Changes
Replaced all 4 tires (the one I replaced in 2017 had a nail in an unfixable spot)
Hub bearing was loose or shifting and needed to be replaced
Computer system problems, where the car was not communicating to other systems in the car.
Below is a breakdown of our auto expenses that were repaired in 2018 compared with owning two brand new cars. I used the 2015 estimate for average car payment in America, because I assumed that the person with the car loan, kept their car and didn’t trade it in. If someone would have traded-in their car and purchased a new one on a loan, the average car payment in 2019 is $523 a month. With a 5 year loan, you could be looking at $31,380 spent just on car payments.
Just like the 4 years prior to this one, owning your own car is still cheaper than buying a car on a loan. By owning our two cars and paying any repairs that might be needed, we saved over $39,000 in 5 years and $7,020.26 just this year.
I’ll take a $7,000 savings over the poor chaps that decide to finance the purchase of a new car. It is just one way we can avoid living paycheck to paycheck and save boatloads of money. Despite my optimism and my joy with the savings when compared to the unfortunate people that have car payments, I look at my cars expenses over the last three years and wonder, “Is my car really the best option?”
Over the last three years my car needed the following repair costs:
That’s over $11,000 on repairs and minor maintenance. That’s $11,000 dollars that could’ve bought another car. That $11,000 dollars that tells me my car is prone to need repairs. I am wondering, “Could I own a better car that would not cause me as many repairs?”
There has to be a car out there that doesn’t require $3,000 worth of repairs every year. Look at my wife’s car, we have about the same miles and she has less issues with needing repairs. Who knows, my car may not need many repairs this year, but it is something to think about. Last year, we thought about it. This year, I am thinking about it once again.
Reasons to Move up in Car:
We have 2 kids and the backseat in a Grand Prix is small
Repair expenses of the Grand Prix continue to rise
Reasons to Keep the Grand Prix
Will not take out a loan to buy a car
Savings is not where it needs to be to purchase a car with cash (We could look at this number)
My backseat can still hold two car seats
We use my wife's car for all family travel
My goal is to own my car for ten years (this summer will be ten years)
Last year, I contemplated a newer car, but never really gave it a second thought. This year, I might really want to consider moving up in car. Our savings is closer to what we would need this year, however, not where I want it to be. How much do we have to spend? We have the following money available to us:
New Car Savings Account: $3,053.81
Trade-In Value: $1,500
Non-Taxable Investment Account: $4,705.63
Total Cash Available: $9,209.44
Therefore, we have approximately $9,000 available for the purchase of a new car. Not really enough in my book and I really don’t want to dig into my investment account, but it is something that may need to happen, if the time arises this summer.
We could also dig into our Roth IRAs, if needed. A Roth IRA is money designed for retirement, but you can access any money in a Roth IRA that was invested without any penalties. This is because the money was invested on taxable income. We have around $20,000 of Roth IRA money available to us if we so choose.
Knowing that’s an option, I still probably wouldn’t go that route as I think it is important to invest long term and keep your investments in the market. However, it is an option, if we have an emergency.
Just like with any important decision, we aren’t going to rush out and purchase a new car until we have taken some time to think about the decision (call it the 72 hour rule). However, we are happy that continuing to own our cars is saving money every month.
Car payments are the lifestyle of the middle class. The best way to achieve financial success is to avoid car payments. Own lightly used cars allows us to inch one month closer to financial freedom each and every month! It is a must, if you plan on getting out of the paycheck to paycheck cycle.
Sure, a new car would be great. Sure, it may be beneficial to find a car that doesn’t require so much maintenance. Sure, we continue to talk and contemplate a purchase, but as great as all of that sounds. The sound of saving $7,000 dollars also sounds pretty nice. That’s why we avoided purchasing a new car last year, because of the savings!