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Many people in the United States feel like that they need a brand new car. I have heard the reasons before and these reasons deal a lot with the cost of owning an older car. Statements like, "An older car will cost too much in monthly expenses," and "I don't want that car to dollar me to death." The mindset is that the costs of an older car will be more than buying a brand new car. The issue is that most people take out a loan to buy that brand new car. Therefore, these people have traded a false sense of security for a bunch of debt payments.
In July, I wrote two articles on on car loans and car leases. These articles focussed on how detrimental both of these things can be for your finances. I also linked an article from edmunds.com, which showed how fast a new car depreciates every year. So, I will continue to dismiss this huge myth that a new car is a necessity. It is not a necessity and to do this, I will continue to show our monthly expenses on our cars and compare these expenses to the average cost of a car payment in America today. We will use the data from Edmunds.com that states that the average car payment in the United States is $479 and compare it to our monthly expenses associated with our car for repairs.
In my article last year, our data showed that we spent $99 per month on my car for repairs and $13 per month on my wife's car. That's right, our repair expenses total were less than half the national average in a car payment. So based on the data from 2014, my wife and I have saved lot's of money by owning our cars and taking care of our own expenses. I will continue to show that owning an 10-year old used car is better than paying monthly payments on a brand new car. As a reminder, I own a 2005 Pontiac Grand Prix and my wife drives a 2011 Toyota Venza. The data from our auto repair expenses is listed below:
Once again, my car was more expensive, but was less expensive than last year. This year, I only had one major repair for a leaking caliper. Differently, my wife's car was more expensive per month this year, because her car finally needed to replace some items. As you will notice, the cost of a paid for used car was much less expansive than taking out a loan for a brand new car. Let's look a chart detailing the cost associated with buying two brand new cars on a loan.
By looking at the data of the cost of the average car loan and comparing them to our car repair expenses. Over the course of two years, we would have spent $11,496 on 1 car loan. Comparing that to the cost of my car repair expenses of $2,143.70 over the course of two years. That means that we saved $9,352.30 over the course of two years by owning my own car. The same math can be applied to my wife's car, where the savings is greater at $11,002. So as a family, we have be able to save $20,354.30 over the course of two years, because we have not fallen into the myth that we need a new car.
I think people get scared of owning a used car, because they are afraid that the car will always be in the shop. My car has been in the shop very little and it is 10 years old. Another thing that people are afraid of is paying the repair bill. This year, the leaking caliper cost us $850, but we had the money saved to be able to pay that expense. How were we able to do this? By saving up the money that we saved from not having a monthly car payment. With the average car payment being $479, you could easily save up $2000 in just over four months for any expenses that can happen with your car.
My article in July showed that it made more sense to own a used car and pay for your own expenses, but the data is even more overwhelming this time. We were able to save a lot of money by not having a car loan. There is a myth out there that a used car has a greater chance of breaking down. That is just people being scared. Our data over two years has proven that there is a lot of money to be saved by avoiding car debt and owning your own cars.