190 comments

Car Strategies to Cut your Costs in Four (or more)

Look at this amazing picture I covertly took on a walk through my neighborhood just this past weekend. It reminded me that it’s time to talk about cars again, because I love them, and because almost everyone is wasting way, way too much money on their cars. The average person’s car transportation costs ALONE ($8,000 or so per person per year) are enough to make the difference between desperate debt and comfortable riches over a number of years. This overspending is common because it’s a confusing field if you don’t come up with a good Car Strategy. So here we go.

Rule #1: You NEVER, EVER borrow money to buy a car.
Ouch, that might piss some people off, since something like 73 percent of new cars in the US are financed. But if you look at that 73 percent of buyers, you’ll see that they are usually underwater on a lot of loans, quite nervous about losing their jobs, and have a net worth of close to zero. And if you look at the average self-made millionaire, you’ll find they do not buy new cars at all and they never buy on credit. Call me old-fashioned, but I think it’s unwise to even spend all of your money on a car, let alone more than all of your money by getting a loan! If you’re starting out and desperately need your first car, save up a few paychecks, scrape together $2000, and you have a decent late ’90s compact car (from Craigslist of course) that will keep you on the road for several years. Since you won’t have a car loan, you’ll easily accumulate the $8-10k needed to get some really nice 3-years-new wheels when you’re more established, a cycle you can repeat every 10 years or so. Just for reference, even as someone with a wife, a small child, no debts and enough money to not work, I STILL consider my 2005 Scion Xa which is worth less than $7000 right now to be on the newer and fancier side of what we need.

Rule #2: Buy a car that does whatever you will use it for MOST.
If you are a US Forest Service contractor who lives in a cabin in the woods, and all of your driving is done on dirt roads with slopes greater than 20 degrees, you can have that Toyota Tacoma with raised suspension and dirt tires. If the slopes are only moderately steep and rocky, wise up and use the more efficient Subaru Forester. If you live in a city with the luxury of actual pavement, SUVs and trucks should not even be on your radar screen. And there is NO valid personal use for a new full-size pickup of any sort*.  If you are a farmer and need to carry a lot of soggy manure and hay, you may use a 1991 full-size as long as you never take it off the farm. Use a car. Your car should be optimized to carry your ass and occasionally your family around, while burning the minimum possible amount of gas. You don’t need 7-passenger capacity “for those times your kids have friends over” because that doesn’t happen often enough to justify the gas-wasting you’d be doing the other 99% of the time you drive that vehicle. Remember that all your friends have cars too, so there is almost always a spare seat that will get the passengers where they need to go. You don’t need to be the one paying for it.

Rule #3: Cars are for inter-city travel, not for quick trips to the store
Many of my neighbors provide me with all-day amusement by coming and going from their driveways 5 times per day with their cars. What the fuck are they all doing? What is so time sensitive about errands #1-#4 that they could not be consolidated into errand #5 or the main trip to or from work? When I feel an urge to use my own car, I get a little excited and start scribbling a list called “Car Trip” on a piece of scrap paper. I imagine all the things I can get done with the car and after a day or two of soul-searching and trying to figure out if the trip can be postponed further, I finally step out to the garage and guiltily fire up the tiny car.

Rule #4: Cars are not for picking up your teenage kids from the high school 1 mile away
My neighbors actually do this. Our kids have not yet evolved away the ability to walk on their own legs – let’s try to preserve this ability in our species by using it. As a bonus, you’ll be able to afford to spend more time with them.

Rule #5: If you have to own two cars, pick them to cover all your needs efficiently.
When I walk through the neighborhood, all around me I see families with two SUVs, A pickup truck and an SUV, two large sedans, and various other ridiculous combinations in the driveway. Are these people deliberately trying to keep themselves in debt forever, or are they just totally clueless? It is unlikely that both people in a couple need to simultaneously scale rocky mountain roads with 7 passengers on board each. So at least one car should be an efficient commuter – a used 2004-2009 Toyota Prius available for under $10,000 is a good choice. The person who drives the most can use this one. If the second person can carpool with the first, or is close enough to work to bike or have very minimal driving, the second car can be a larger wagon (Volkswagen Jetta or Subaru Legacy perhaps, or even an older minivan). Then you get the best of both worlds – massive capacity on roadtrips and minimal gas-burning on workdays. 

Rule #6: You don’t “look funny” driving a small car. This is all in your head.  But you DO look funny ponying up your car payment every month.
As a newcomer to the United States, I only recently encountered the idea that some people think it is not manly for a Big Man or stylish for a Fancy Woman to be seen in certain types of cars. Some people refer fearfully to the idea of Prius ownership as “driving around in a suppository”. When newspaper articles announce new car models, the inevitable stream of grammatically-challenged reader comments is mostly about how the car looks.

Fuck off with your concerns about style! Cars are all awesome machines and even the crappiest one has been designed and built by great artists, engineers, and workers. Your job is to pick the one that enhances your life the most, and unless you are already financially independent, you’ll get a lot more enhancement from getting some cash in your ‘stash than you will from having 20″ wheels and 3 rows of leather seating.

Rule #7: Cars don’t cost you money per month, they cost you money per mile.
Because folks are financing their cars and not thinking about the long term, most people assume that once a car is in your driveway, you might as well use it with abandon. Totally wrong! When the car sits in your driveway, or even better, your locked garage, it is staying largely intact. As soon as you start using it, you are burning gas, oil, tires, wearing out each of its approximately 20,000 components, increasing your risk of a crash, and connecting a large-diameter Shop Vac hose to your Money Mustache, ripping out precious strands right from their follicles.

Here’s what happens when you use your cars sparingly: they last forever. Guess how much I have spent over the past ten years in repairs and maintenance other than oil changes (which I do myself, partly to save a few bucks, but mostly because it is fun and manly)? Guess how many sets of tires I have worn through? How many speeding tickets or accidents?

Zero.

It’s not because I am an amazing car whiz. It’s because I only drive when it’s actually necessary. For me, that adds up to about 4,000-6,000 miles per year for a family of three. After 10 years, you’ve pretty much worn out a single set of tires and nothing at all has even broken on your reliable used car.

It’s a harsh series of lessons, and admittedly there’s some repetition up there, but it is really fun to rant about this stuff. And sometimes ranting is necessary because car spending is the first and foremost thing standing between the struggling masses and Mustachian Freedom and Riches. That means YOU!

Are you still thinking it’s OK to borrow money for cars? If so, let’s hear some comments and I can present alternatives that will leave you much richer.
* Footnote on the full-size pickup truck issue: As a part-time professional carpenter who occasionally builds custom houses, I find that an older large minivan kicks the ass of a full-size pickup for cargo capacity, while costing less, handling better, and burning much less gas. Also, it does double-duty for carrying a lot of people, unlike pickups. But I would still never use this van for single-person transport. Look into it!

  • ZachB June 6, 2014, 2:33 pm

    I got stuck with a car I bought(08′ Ford Tauras X) which gets barely 15 mpg, and I don’t need a car with 6 seats. I want to get a small cheap car, but I don’t know the best way o get out of this one. I still owe around $6000 on it, and its only worth $13000. I don’t know the first thing about selling cars, but should i take it to a dealer, and trade it in for a used car, or sell it on CL and see if someone will give me $5000 and take over payments?

    Reply
    • Mr. Money Mustache June 7, 2014, 7:32 pm

      I’d go to hardcore frugal mode first and eliminate the tyranny of the car loan. Starting with a good bike as your primary transportation will accelerate this process. Then with the title in hand, sell it on Craigslist, then later get a car you can afford with cash ($1-5k perhaps), and begin to prosper.

      Reply
  • Mani June 21, 2014, 5:35 pm

    Looking at the picture on top of this page I think rule #7 “Cars don’t cost you money per month, they cost you money per mile” is missing something for those who have an alternative. On that parking space the owner could grow vegetables or grapes or even teach their kids how to ride a bike… So that rule should probably say “Cars cost you a lot of money per month but they cost you even more when you drive around”. Or in more frugal terms “Owning a car is an expensive luxury that should be avoided if possible. If it cannot be avoided driving it around should be considered a very special occasion.” This sounds terribly fundamentalist but it is only very over-the-top. Because in my city (central europe) having a car is really not necessary due to abundant public transport and a car-sharing cooperative that provides me with 8 different vehicles within 1 minute walk/bike ride from my home. So l’m not particularly badass at all and only 50 percent of all households actually own a car. It’s quite a surprise that not more people have worked out that the real luxury is not having to deal with the issues of owning, maintaining and storing a car but still being able to use one if needed (actually quite rarely). I believe the Zip car system in the US is run as a commercial company which is nothing bad at all but they seem to operate only in specific areas. Wouldn’t a small car sharing cooperative also work in your neighbourhood? That would be maximum moustache!

    Reply
  • Salvador August 19, 2014, 4:38 pm

    I don’t totally agree with the debt thing regarding cars.

    I’m portuguese and live in Europe, and here of course I pay cash. Heck, my first car was a 800 dollar VW Polo wagon that was around 12 years old.

    Lucky for me (even though I didn’t care if it were otherwise) people actually liked the look and style of the car. It had that “Californian” stylishh surfer dude type in it. It was about to enter the Hall of Fame of classics! ahah

    Currently I have no car, this after using the public transportation system for about 1-2 years, which if you have been to Europe you know it’s damn darn freaking good. Anyhow, being on a very hilly city I thought I had to get my own transportation especially because I was vomiting up 50 bucks a month for my transportation pass – which I consider cheap for what it offers.

    Well I bought then a 125cc Honda motorcycle, which cost me 2000 dollars and has a gas mileage of …. drum roll please … 1.7 liters per 100 km … which in American Language would mean 133 MPG !!!

    Gas is expensive here at around 8.5 USD per gallon so this is great for me! Since I’ve been making around 200-300 miles a month, it’s pretty much the same owning the bike or taking the public tranportation with the first one being much much more flexible.

    Maintenance and insurance is a non issue (I paid 50 bucks for a full year of insurance and oil cost me 5 dollars in a supermarket to change it myself) so all in all I have a monthly ownership expense of around 25-30 dollars which is cheaper and way more flexible than public transportation.

    Anyhow I divert… here we don’t have the ridiculous low price of money as in US, where I’ve seen auto loans for 0.8%!!

    In these cases, if I were to buy a used car in the US of course I’d go for a loan! For a 1-2% loan on a car, if it costs 5000 dollars, it’s something I can defer tjhe payment down the road, where it doesn’t cost me much in interest and use that money (or should I say soldiers) to make me much more during the life of the auto-loan.

    Reply
  • FIZZ September 9, 2014, 9:21 am

    Hello MMM,
    I’m about to get an oversea assignment soon for about 2 years. I am currently paying $200/ month for my car (crazy I know, considering l earn $2000 after tax). In the effort of becoming a mustache, I’m trying to figure out if I should seIl or keep the car for the next 2 years, which by then world have been paid off. It’s a sensible 1.3 auto ( a Myvi Perodua, a national brand). It’s currently got a mileage of 65,000 and I bought it in 2010. I’m afraid if I sell it off, I would be tempted to get a better car ( a Vios maybe?), but $ 200 for 24 months = $ 4800. Although in my county (SEA) a second hand car would still cost a lot… Appreciate your advice. Thanks!

    Reply
    • Mr. Money Mustache September 9, 2014, 4:26 pm

      SELL!! That is a massive amount to pay for an idle car. And when you get back you can get a much older car instead of something so fancy – double win.

      Reply
  • Anne September 11, 2014, 11:42 am

    Hi MMM, I know this post is quite dated but wondered if you had any thoughts on Swap-A-Lease type arrangements wherein you assume someone’s lease, therefore avoiding any down payments, and typically benefit with a lower than average monthly payment because whomever you assumed the lease from plunked down more than required at signing. My situation is that I swapped a lease for a 2012 mini cooper with more miles left on it than I can use before it’s due back, gets~32 mpg highway (my only real driving is a 20 minute highway drive to work). I realize this isn’t the same as buying a cheaper car outright but thought it was a pretty stealthy way to handle having a nice, fuel efficient vehicle. My plan is to do the same, find someone who has overpaid their lease and is dying to get rid of it, when my current lease is up. Would appreciate any commentary. Thanks!

    Reply
    • Mr. Money Mustache September 11, 2014, 5:27 pm

      Hi Anne, sounds better than being the original lease sufferer, but not as good as just buying a less fancy/expensive car. For example, add up your payments ($200? $300?) plus collision insurance and a portion of your registration costs over 3 years. You probably are at $10,000 or higher.

      Meanwhile, I bought a 2005 Scion in 2008 for about $9k. I have now had it 6 years, it is still worth over $6,000, averages over 40 MPG, and maintenance has been $0 other than a few oil changes. So this car has cost me about $500 per year, while your smaller cooper is burning $3000-$4000/year. A 600-800% difference!

      Reply
  • Richard Nelson October 11, 2014, 6:25 pm

    This is really an eye opening blog. My thinking is all wrong . My nearly three year old chevy silverado will soon be out of warrantee. I keep thinking geez the new 2014s sticker prices are over 40k but its time for a new truck . I just use it for short jaunts to the mall and work etc.I’ve driven full size chevy trucks for over 15 years and have rarely ever put anything in the truck bed .

    Reply
    • Mr. Money Mustache October 12, 2014, 2:50 pm

      Keep reading, Richard! I hope to hear from you later, reporting you have switched to a 2001 Ford Ranger 2WD manual for your hauling tasks, and a BIKE for the rest of the in-town errands :-)

      Reply
  • BF January 6, 2015, 5:02 pm

    MMM,

    What’s your response on if you have enough money to pay for a car in full, yet finance it for a short period of time (Say one year) in order to build up credit for a younger individual who plans on needing credit for entrepreneurship opportunities/etc. later in life?

    Regards,
    Mr. Finance Degree who loves your articles.

    Reply
    • Mr. Money Mustache January 8, 2015, 2:42 pm

      It is probably more trouble than it is worth – or the car is more expensive than you should really be buying. A good car purchase is just skimming Craigslist and picking up something great using the spare change in your bank account. You can build credit just by having a credit card or two.

      Reply
  • M. January 11, 2015, 4:03 pm

    MMM,

    I work in the construction trades and recently began traveling for work.. I have the opportunity to work near home, but by being willing and able to travel to take different jobs, I am able to double my income (and keep work exciting). I am 26 and will earn around 200k this year. I have always owned inexpensive used cars in the past but recently purchased a brand new truck to pull my travel trailer that I live in. After not being able to find a used truck that I felt was a good value, I ended up taking a loan at 3.5% to pay for the new truck and I plan to have it paid off in about 6 months. I am financially stable otherwise and see the truck as an investment to earn more (at least that’s what I tell myself). I agree with your article and I’m curious to hear your opinion on my particular situation. Thanks!

    Reply
  • Ben February 26, 2015, 10:51 am

    New to your site, and I am hooked already (homepage on both my laptops – one work one at home; both 4 years old). On the car topic, I appreciate your posts the most because it has saved me from being swept by the current that is the normal mentality of car buying.

    I am an avid car enthusiast myself; chiefly big v8’s driven by the rear wheels and have mechanically controlled 5 or 6 speed shifters. If they bear names like SS, or GT500… the better.

    There is a long list of cars on my want (sometimes it feels like ‘needs’) list, and every time I look one up on the internet or see one drive past, new reasons to justify attaining them NOW creep up. Examples of said justifications are: “I’m young, with no kids, and no debt, so this is the best time if any to get a 600 horsepower supercharged Mustang”, “If you get hit by a bus and die tomorrow, you wouldn’t have had the opportunity to have _____ (insert vehicles here)”…

    Recently, a good friend of mine leased a new Challenger SRT 392 ($60K price tag) by trading in his 2006 BMW with extremely low mileage for a value of $20,000 (stickered for $60K new in 2006). Awesome car; 8 spd, bangs gears harder than a D list celebrity, and has a G force meter!). Instantly, the gears (pun intended) started turning in my head and out came the craigslist searches. 2008 GT500 for only $30K, practically new 2013 track pack GT for $32K… In chime the voices of “well if you could get $15K for your STS, that GT would only be about $17K which you could do if you shift things around”…

    Which brings me to this post. A great reminder that even when things are going well, and you have cash in the bank and no debts, that doesn’t mean in the near future, life could hit, and that new car purchase (using the example above, the $32K GT will probably be worth $25K next year) could quickly put you in the red.

    Long winded comment, I apologize… Cars are awesome but they’re a bitch.

    Reply
    • Mr. Money Mustache February 26, 2015, 4:30 pm

      Stay Strong, Ben! Don’t fall into the trap of idolizing these mechanical sofas as if they were anything other than a lazy man’s candy.

      If you want True Speed, put a G-force meter on a good, fast bike and then build up YOUR OWN LEGS to deliver maximum acceleration and speed.

      There is no true acceleration in life, except that which a man creates with his own bulging quadriceps. You can quote me on that.

      Reply
      • Ben March 3, 2015, 3:49 pm

        haha your comment comes timely on legs day (still a work in progress)… What are your thoughts on paying cash for a vehicle. I have never owned a new car all my life, and have always bought private party, pre-owned and traded up (sold my previous vehicle and bought a bit higher up the “chain”).

        My justification is that a.) I own it out right so no payments b.) no interest c.) the vehicles I have purchased have usually depreciated 60-70% of their new MSRP sticker so they won’t depreciate much more to the time it’s on the chopping block.

        Is there a rule of thumb that you have, or would recommend as a % or $ value of cash on hand that would be allowable to spend on the next vehicle. % of say, funds in chequing account with all debts paid down (credit cards on auto pay, no mortgage etc.)??

        Reply
  • Michelle March 5, 2015, 8:32 pm

    Sigh. I’m not sure how commenting on here works. I submitted a comment maybe a week or so ago. It said that it was waiting for approval (or whatever the actual words are). And it hasn’t shown up, plus I’ve seen other new comments show up. Don’t know what I did to mess it up =(

    Reply
    • Michelle March 5, 2015, 8:33 pm

      And this time it automatically showed up. I don’t know what happened, but the comment was too long for me to recreate at this point :-/

      Reply
  • Karla March 27, 2015, 9:30 am

    Hey MMM! =) I ´m a New reading your blog, and after read a few random articles I´m taking the long road, trying to handle the Maximum mustache (I have to admit that I will be afraid of riding my bike on winter!! )
    I read about you as “the guy retired by 30” in a mexican bussines maganize a few years ago, but I find your blog by accident two or three days ago.
    I want to ask you if you have your articles available in Spanish in some place? … ´cause even when a lot of information does not apply for people who is living in the third world, a LOT of your articles apply for everywhere in the world (mostly those about the emotions who leading us to have lifestyles that we CAN NOT pay for it) And I would love to share it whit some people who does not speak/read english (i´m sure you already notice english it´s not my first language)

    THIS ARTICLE IN PARTICULAR!! SHOULD BE MANDATORY TO READ FOR EVERYONE WHO WANTS TO BUY A CAR. I´m living in NYC for almost 2 years now, and I just CANT understeand why the people have cars only to let them parked ALL the f. day!! we have 24 hours subway and bus service, bike roads, and walkable distance to almost everything. Also, do you recomend a website or book about financial terms/products with really well and large explanations about how them work?.
    As a new adult inmigrant I know financial term/services on my country but not in this, in order to take advantage of them I need to understeand it well … rigth?

    Thank you so much for your time and good advice!

    Reply
    • Sylvester Black December 28, 2015, 1:32 pm

      Yes we are strange. Many of us have nice cars that are parked 95% of the time. Thanks for making me rethink some things.

      Reply
  • Mini Mustache in Training April 7, 2015, 10:37 am

    I’ve scoured you’re blog for a few weeks now including your comments section and can’t find a definitive answer to my situation. I currently drive a 2005 Ford F-150 about 35 minutes total commute time daily (working on shortening that, but there aren’t many engineering firms close by).

    My problem is that I want to purchase a more fuel efficient commuter vehicle for daily use. I have always liked the Vibe, Matrix and Prius, since they appear on many recommended used car lists. I was all set to stack $4-5k to make the purchase, then thought it might be better to finance the purchase (interest rates on used auto from my credit union is about 2.25% on a mustachian new 2008-09) and take all available cash and apply it towards credit card debt (ref. Your Credit Card Debt is an Emergency!) Those interest rates range from 8-23% and total almost $50k plus student loans. Before your mustache curls up and zaps me, these were accumulated over the course of getting married, 4 home purchases (2 rentals and 1 future flip) and sending my wife back to nursing school. Also, I’d make sure to avoid the pitfall of spending more because I’m financing. No prepayment penalties or up charge for newer vehicle registration in my state. I guess the insurance premium may be slightly higher, but not much due to type vehicle I’d be adding full coverage to. She drives a 2010 GMC Terrain base, bought new (I know…my mini mustache curls just writing that). Slight bump for good gas mileage and replacing hers with a used Subaru, we’re hopefully in a position to pay cash for in about a year or 2, while she bikes to a local hospital after she has some experience and can transfer.

    I know that’s all a lot, but I hope you are able to offer insight. I want to make sure my next moves are clearly more calculated than my earlier ones have been (before reading your blog).

    Reply
    • Mini-Mustache April 10, 2015, 9:04 am

      Adding a little more info,

      The plan would be to take the $5000 saved plus the $3-4000.00 made from selling the Pickup truck and consider them as a windfall to pay off the highest interest credit card $8500 @ 22%. Then add the payment that was going to that plus the about $200 per month saved between the gas savings and used Vibe note minus the truck note to pay off all debt in order of highest interest rate.

      It seems to make sense to me but I worry I may be missing something.

      Thanks Again

      Reply
  • Chad April 11, 2015, 1:06 pm

    Hello MMM,
    You have helped us out plenty…Thank you!

    My wife and I are in a bit of a situation with cars…we just got hit and totalled our 2008 Honda Fit which my wife bought brand new. We share a car between the 2 of us, bike or walk just about always and only use the car on the highway…we do however put on about twice as many kilometres as the average Canadian – about 25 000 km a year. Our families live far away (which includes grandparents – that we drive to see a significant amount) as well as we drive often to places to camp and hike.

    Perhaps we should adjust our values a bit so that we would drive less…but say we don’t – Is it crazy or stupid for us buy a brand new Honda Fit (with cash) taking into consideration the kilometers we put on and the fact that we live in Saskatchewan where the number of used vehicles is considerably slimmer pickings and thus a bit tougher to find a car with few kilometres owned by wealthy, older couple that did the scheduled maintenance?

    Thanks again,
    Chad

    Reply
  • Tonya April 16, 2015, 9:25 am

    You say “NEVER EVER” finance a car – that all caps looks pretty serious! My husband and I just bought a new Subaru, financed and I think financing was the right choice. (Yes, the new car is not mustachian approved, but I think it was an overcompensation from our current, not-so-reliable car).
    We have more than enough cash from our ‘stash to cover the full cost of the car, but the dealer was offering 0.9% financing. The discount for paying cash was only $500 (for other manufacturers it was sometimes in the thousands). So we made some spreadsheets, argued over who’s math was right, and decided that financing would put us ahead. Assuming the remaining balance of the car stays in our investments earning 5%, after two years we would be ahead $1000.
    If you can get over the fact that we’re buying a new car, does this create an exception to your “NEVER, EVER” rule?

    Reply
  • sai May 2, 2015, 4:58 pm

    Last I read, liability insurance provided by zipcar is $300k, so just watch out if that kind of liability insurance is not enough for you.

    Reply
  • JW May 7, 2015, 6:07 pm

    I agree whole heartedly – cars are generally a money pit anyways. But on a slightly different note – what if you inherited a nice car? The car was originally, when it was new, more or less a 60K sports car. It’s in excellent shape, but is only realistically worth about 20K now on the market. Don’t drive it much, only on weekends really and to run it a bit, but still sell it? Balanced with the fact that its still amazing to drive and I’m quite the car nut – and probably hard to find one in same condition…

    Reply
  • Mark L November 23, 2015, 8:17 pm

    Another great article. I currently drive a 2005 accord that I got with 106 km on it. I got it used but did take a loan from my parents. Luckily they do not charge me much interest and I will have it payed off next year. I plan on updating and getting something more gas efficient after I am debt free and can buy in cash. My car is a v4 so is pretty decent on cash. Has been a good car so far, but I can have something even cheaper. I also plan to regularily bike ride in the spring when it is lighter :D

    Reply
  • Sylvester Black December 28, 2015, 1:30 pm

    So embarrassing. Our neighbors laughed at how much they saw our cars going up and down the alley as we ran errands and shuttled children. Old habits die hard but having a new Walgreens 1.5 blocks away helps. Having grtown children helps. We are not so keen on riding bikes to the grocery store given heavy traffic but we can at least walk the 1 mile to the store occasionally and drive trips with multiple vs single errands. Looking forward to 10 years of gains from 2 less trips per week.

    Reply
  • Northwind Dad February 22, 2016, 6:42 am

    MMM, good luck hauling a trailer with two or three draft horses using a mini van. Once in a while big strong diesel trucks have a purpose.
    Please overlook the obvious implied extravagance of owning two or three draft horses.

    Reply
  • Allyson March 17, 2016, 4:36 pm

    I know this article is very old but I am brand new to the site..
    I financed a 2013 Honda CRV a little over a year ago.. I now realize this wasn’t smart considering I’m a single chick who lives in a relatively urban area. I still owe $16,000 on it.. How would I go about trading it in for something smaller and cheaper if I still owe money on it?
    Sorry if this is a stupid question :) First car i’ve ever bought and not very knowledgeable on this subject..

    Thank you.

    Reply
  • Pete March 24, 2016, 12:37 pm

    Completely Agree! The amount people waste on cars is insane. I inherited a nice truck from my father as he bought a new one (he’s a wealthy farmer and it gives him jollies to buy brand new vehicles with cash every few years.) I drove it for 4 more and traded it in for a Brand new car. It was only brand new because I bought the at the time brand new 2011 Chevy Cruz ECO manual 5 speed. This was the intro year for the model so used wasn’t an option unfortunately. I still have it 5 years late and plan to keep it at least 10 more. I wanted something that gets awesome gas mileage (average 40 in town and about 50 on the interstates) for a non-hybrid. I only agreed to the new model for the MPG and the manual (I always wanted one). The civic was my other choice but at 20mpg more on the interstate (which I used to drive daily) it couldn’t be beat. That car has basically paid for itself in cheaper gas.

    Reply
  • Mike July 7, 2016, 10:15 am

    I started reading a few weeks ago and haven’t stopped since! My wife and I both work ~15 miles from our home and I’ve come to realize what a drag on our savings the cars are! I leased a 2013 Volkswagen Jetta when I was in college which was a foolish purchase but sounded like a good idea at the time. I have put almost 80,000 miles on the car in the three years that i’ve had it but the lease was for 50,000 miles. I’m not sure if you have much experience with car leases but my lease ends next month and I can either return the car, pay a $.20/mile overage charge ($6,000) and walk away or I can pay the residual amount $11,600 at which point I will own the car. KBB says that I could get ~$9,200 for it in a private sale but then i’m $2,400 out of pocket with nothing to show for it. If my car can make it to 200,000 miles without any major maintenance issues I’ve calculated my marginal cost for the next 120,000 miles to be $.22/mile. All of this to say that my question was going to be “What should I do?” but based upon the Ultra-Mustachian driver figure of $.17/mile from “The True Cost of Commuting” I’d say I should just pay the residual and drive it until it dies. Thank you for being so thought provoking and if you see this and have better ideas I’d be happy to hear them!

    Reply
  • John Y. July 9, 2016, 10:44 pm

    MMM, absolutely love your blog! It has inspired me to do all kinds of stuff like cut my own dog’s hair (save $200/yr), repair my own clothes washer (wife’s bobby pin stuck in water pump), keep using my 7 year old PC instead of buying a new one just because it’s “old”, and keep using our old microwave even though the buttons do not work except for a few including the button that “adds 30 seconds” which is all we need 95% of the time (delay a $300 purchase)!

    However, sometimes I do just absolutely, stupid stuff and fall of the rails, despite my very wise wife’s intuition that maybe a financial decision is not so good. :-) Like this January when – to make a very long story short – I financed the purchase of a 2010 Honda Odyssey for the family that cost us $18,000. Now 6 months later (after 5 months of regret – “Shit! What *was* I thinking!!!”) I finally decided to just hit the eject button. The new used van is being sold at a slight loss but not too bad. Our 6-member family will shift back to using the old 2002 Honda Odyssey which is super reliable because the first owner and I, the second owner, take really good care of our vehicles. Sure, the power doors no longer work and are now manual doors, it doesn’t have Bluetooth or satellite radio which costs unnecessary money anyway, but we own it and it runs great!!! For the second car which I need to get to work and coordinate the various activities of 4 kids and 2 parents, I purchased a fantastic 10-year old Toyota Prius with a brand new battery pack installed by the local dealer. Instead of owing nearly $18,000, I now owe just $4,000 which will be paid off in 4 months. Not quite ideal, since I am still using the home equity line of credit which I normally use for the occasional house flip (again, inspired by MMM – to the tune of a $17,000 profit so far this year – yeah!), but hey, I feel much better about this than paying off a van over 5 years which would suck up $4,000 a year.

    The other cool thing I learned was that if I buy a vehicle in Minnesota where we live that is 10 years old or older and costs less than $3000, I pay a flat sales tax rate of $10 instead of 6.5% of the purchase price. I just missed that cut off unfortunately, but this is now my new criteria for saving even more money. All future cars will be 10 years old and less than $3000 or as absolutely close to that as possible. Also, at 10 years of age, the annual vehicle registration fee in Minnesota drops down to a fixed flat rate of $35. Another reason to by old, but clean, very reliable cars. This was stuff I was not aware of earlier and has really changed how I search for and evaluate cars now.

    Wish me luck with the Prius! Seems to run great. Hope it lasts a long time yet. I’m encouraged by the stories of people getting hundreds and hundreds of thousands of miles out of their Prius vehicles.

    Reply
  • Loma July 19, 2016, 11:12 pm

    I just found you!–Very informative site thus far! I’ve a sort of conundrum ongoing. My mom died in March of this year. I was her sole caregiver for over 3yrs. I have, currently her 1997 grand marquis and my 2001 Chevy s10 truck. My economic situation is a wee bit precarious..and the household right now, well I’m processing per se, it’s almost as if I moving in anew, as I re-enter life without her(it was she and I under one roof since 2000, when my whole world went awry with my dad’s death from kidney failure, my separation&divorce and my returning to my hometown after close to 20yrs away.
    I am going to attempt keeping both vehicles. My circa 60’s ranch home had no garage, but does have an extended double carport. I plan on keeping comprehensive on both, plus liability and uninsured motorist on one vehicle at a time, while suspending everything but comprehensive on the other. I would alternate every two months. And I would start the engine weekly of whichever one is in suspended insurance mode. I even have access to a lengthy driveway so I would probably run it up and down the driveway once weekly. One catch 22 is that if I switch out the “suspended” vehicle too soon I get penalized by my insurance company(Allstate) so that would mean the savings would go out the window, so to speak. I was, umm, grandfathered in on her rate late last year, i phoned my agent today and was informed that 6 months insurance for the car is 124.00, whereas 6 months for my truck is 128,00. My reasoning for attempting to keep both? I know that both have been kept up, both are street legal and I know the history of both. Per Murphy’s Law, I feel, that between drivers that text and drivers playing Pokemon Go, if I am down to one car and there’s an accident and I wind up w/o a vehicle, l end up buying used. That doesn’t bother me, I prefer it. But I wouldn’t want to wind up buying (possibly…..) someone else’s problem(s). Also—there is the sentimentality alongside the common sense. I’m still dealing with the loss of her. So, please, would you do me the honor of imparting a few words of wisdom? I’d be much obliged. I realized I am blessed in many respects, but still I’m facing much(re entering job field….my teaching certification expired while I was taking care of her…and before she fell ill (frontal temporal lobe dementia alongside of ischemic and congestive heart failure) and I’m dealing and trying to overcome being slightly overwhelmed.

    Reply
  • Will August 28, 2016, 5:15 pm

    I must confess, MMM, you make me feel very virtuous about driving my little Honda Civic 2004 here in 2016, still with great mileage and with 217K miles on it…if only I didn’t have to confess further that sadly I’m driving it about 43 miles to work every day. Gulp. But now I feel guilty. Every. Single. Day. And at least it stays parked when I get home and the bike is used for everything in town. Thanks for the great blog.

    Reply
    • Mr. Money Mustache August 31, 2016, 1:54 pm

      Hey Will, your commute might be a good candidate for a 2013’ish Nissan Leaf, which you can find on Craigslist these days for under $9k. If not now, whenever you need to replace that Civic. Your fuel cost drops to nearly zero, as well as noise and pollution.

      But moving closer to work or getting a job closer to home is obviously a much more efficient solution if possible.

      Reply
  • Lexa October 23, 2016, 1:58 pm

    What is your advice for someone who already has a car loan? My payments are well within my budget and I always pay in extra towards my principle. Unfortunately my partner and I have both been unemployed for the past several months. He’s got a well paying job now, I’m still looking. Should our focus be on paying this debt off ASAP, or should we split extra income into savings and paying off this debt?

    Reply
    • Laura Jevtich October 29, 2016, 7:40 pm

      I would suggest paying it off. I would have to think that they interest on savings is not that much and the interest on the loan is more. So if you have a 5% interest on a car loan and a 0.75% interest on savings, it makes more sense (and dollars) to pay down the loan rather than boosting savings.

      Reply
  • Laura Jevtich October 29, 2016, 7:36 pm

    Hi MMM.
    We have a F450 Ford truck which we use to tow our 5th Wheel Toyhauler RV. It is a 1999 diesel which we got after trading in our 2005 F350 and getting $2K cash BACK from the dealer. We started with a very fancy truck that was good for our truck camper and utility trailer but when it came to a larger RV, we needed more truck. I realize that your info is good for people that commute everyday, but we do not.

    We are Financially Independent too, and choose to work 5 months of the year and have off 7 months of the year. Last year we may have put ~ 6K miles on the truck, this year it will be more because we are visiting family on the east coast and wintering in Florida. But normally we do not go anywhere with the truck unless we are hauling our house too. Our other vehicle is a Ural sidecar motorcycle that can seat the both of us and gets great mileage.

    We are always amazed by the folks that feel they have to have an SUV ! When I had my Saturn – I went on some pretty rough roads without a problem. Unless the ruts were so high that I could not go there, I went pretty much anywhere. I think that is the case when you are out west, but east coast people seem to feel they need the SUVs and Trucks even though they really don’t – they don’t see the same ruts.

    Love your Blog!

    Reply
  • Rich December 11, 2016, 10:26 am

    Thanks for this article! Years after it was published, reading it saved me from getting a loan to buy an expensive 2014 Subaru Outback through Carvana and instead buying a 2002 Subaru Outback for cash on Craigslist and learning some skills to repair the front bumper and headlight. Every time I drive it (which is not often since I bike commute), I’m proud of how awesome and reliable it is, and how little it costs me ($25/month for insurance). My sister has a 2013 or 2014 Subaru Outback that I drive occasionally when she needs a pickup from the airport, and there’s no perceivable difference in my quality of life when driving one car or the other. Not having a $350/month car payment plus more expensive insurance DOES perceivably increase my quality of life. Thanks for this article as a reminder not to make stupid financial decisions about cars!

    Reply
  • FrugalKid December 22, 2016, 4:35 pm

    Enjoying your blog. My dad recommended it to me. Here’s my question about never financing a car. What if you can get a 0% loan?

    Here’s my story. Graduated a year early from college in 2009 when it was really hard to get a job. My parents helped pay for my private education and I was left with $20K in student loans, and I still owe them ~$100K (though they’ve never asked for it, I feel I obligated to get this $ back to them someday). So after college I was only able to get a $12/H part-time job – moved home rent-free under the premise that I would put my meager income towards paying off the loans. One of the 4 loans was interest free so I made minimum payments on that one and finally finished paying it off this year. The other loans were as follows:
    #1: $4.5K @ 6.8%
    #2: $7.5K @ 6.0%
    #3: $4K @ 5.0%

    I paid them off in this order, and did so in 18 months instead of the 10 or 20 years that the repayment plan was for. Then in 2011 I got accepted to medical school and the car I had been borrowing was not going to be available for me to take to medical school – due to age and safety issues my dad said it just wasn’t a good idea and he said, “It’s time for you to get your own car.” So he found what he said was a good deal on a car that could get me and all of my belongings from southern California to the Bay Area safely, and continue to help me through subsequent moves to San Diego and driving to rotations all over California thereafter. And here’s where I expect you’ll cringe. The car he found was a brand new RAV4 base model with a purchase price of ~$22.7K after taxes and a recent graduate discount, and I financed the whole thing with a 0% loan which I paid off over 5 years making minimum payments. Is that crazy? I don’t know. I feel like even though I was paying $378.78/month, the last $378.78 payment was worth less than $378.78 was worth on the day I bought the car because of inflation, right? Mind you, I had less than $5K in the bank and owed money to my dad for all of the med school applications he’d paid for with his credit card (more than $1K), and I was paying $1K/month on my undergraduate loans, and I had to pay $2K for my acceptance deposit at the medical school. So, cash flow was a big issue for me. There was just no way I could pay for a car at the time, unless somebody was going to sell me a an old junker for $500, and in my dad’s mind and my husband’s, that just wasn’t an option. I still watch my money closely and know where every dollar is going before my paycheck comes (tomorrow is payday).

    Anyways, since I bought the car, I graduated medical school with nearly $300K debt, married my husband just before graduation and started my residency where my pay is $41K/year. My husband and I started dating back in college, so my debt was not a surprise, and actually, unlike many of my peers, I didn’t max out my student loans. The first year I returned $10K to the lender because I realized I just didn’t need to borrow so much. In subsequent years I borrowed closer to $60K when the max allowed was closer to $70-90K. And the interest rates are terrible. The first few years the rates were 6.8% and 7.9%. I graduated with 9 loans, and next month we will be paying off the last one. We will have paid them off in 20 months instead of 10-25 years, and we are not taking any advantage of any of the government’s loan forgiveness programs, which many of my peers who are currently in deferment, plan to do. So how did we do it? Well, I was quite proud of my achievement with my undergraduate loan repayment, to be honest. The method was to make minimum payments on all loans except the one with the highest interest rate, and we would put all extra funds toward that particular loan until it was paid off, and then extra funds would go toward the next highest interest rate loan, and so on. Now I have to share that my husband’s post-college job opportunities were much brighter than mine, and he was able to save a lot of money and make investments. We weighed the amount we could pay off with our income and made sure that whatever we did, we were not going to take out so much from investments that we would be unable to contribute to our Roth IRAs. So the investments really helped, and we have every intention of putting money back in the investments regularly, starting after the loans are paid off and we contribute to our Roth IRAs for 2016. I’m very fortunate that my husband has been so supportive and like-minded when it comes to paying down the debt and saving too.

    I’d like to hear your thoughts on the 0% interest loan on my car. I will also mention that my husband had a 1992 Camry which was great, but he sold it just before he moved to downtown Seattle, about 2 years before I joined him up there. So we are still a one-car couple, and we do great because husband works from home, and my work-site changes nearly every month.

    On a side note, I never had a credit card until I started medical school, and 2 years later I got a second one when I joined Costco. I have never had a late payment or carried a balance. Then after I was 6 months into my residency I learned about credit card churning; now I am by no means a churner, but I did accumulate quite a few cards since then, and reaped a lot of rewards in the form of the signup bonuses. And still, no late payments or balances.

    Reply
    • Mr. Money Mustache December 25, 2016, 11:45 am

      Hi Frugal Kid – the quick answer is that a brand-new $23,000 RAV4 is a very expensive choice, which means a bad one for someone with a negative net-worth.
      Instead, I would have recommended a $5,000 or so Toyota Matrix, Honda Fit, Scion xB, or similar, which would have saved you $20k over these years, burning less fuel and still offering great reliability.

      Sounds like you’ll get through it easily now though, once your doctor salary ramps up, and you can pass on wiser car habits to your own kids :-)

      Reply
  • Aaron January 9, 2017, 5:55 am

    Hi, Mr MMM

    Aaron from South Africa here. I’m almost certain South Africans are just as obsessed with cars as Americans. I made a couple of mistakes myself financing cars every 2 years… Now I have a small Hyundai – perfect for the city, light on gas. But I financed it with a residual value (balloon payment) of about $3000. It cost me around $11 000 for the vehicle.

    What would you advise in this scenario?

    PS. We have no decent public transport and our roads are infamously dangerous for cyclists…

    Reply
    • Aaron January 9, 2017, 5:58 am

      PPS. Our interest rates are sky-high! Currently 10.5% on my loan!

      Reply
    • Joe March 20, 2017, 10:08 am

      Just visited Dubai. Cannot believe what a car culture that place is. In my mind, I thought that the US, with it’s good financial standing, could afford to embrace cleaner technologies (electric / hybrid cars, alternate transportation like bikes, etc.). But those guys over there drive a lot and there’s a lot of money over there. I do suppose that a good percentage of the wealth is owned by a relatively few people though. What occurs to me is that everybody has to be as responsible as they can, but the truth is that air pollution issues are much more prevalent in developing countries.

      Reply
  • Brad March 15, 2017, 4:02 pm

    How about car insurance? I would assume state minimums. Is there any personal liability that I should worry about?

    Reply
  • Jerry Cagle March 18, 2017, 7:37 pm

    I bought a brand new Nissan xTerra 17 years ago, and I am still driving it. It has a scosh over 120k on the odometer (what’s that – like, 7k/year?), but I have had some pretty large outlays for repairs in the past few years, e.g. a recent $2000 for suspension work, et al. How do you determine when it’s time to move on? I tell my kids (who make fun of me for driving such an outdated beast) that my goal is to be buried in it (I’m 64, so, hopefully, no time soon).

    Reply
    • Mr. Money Mustache March 19, 2017, 8:19 pm

      Hey Jerry, I think the time to replace a vehicle is “any time it’s getting less than 40MPG for you”

      Think about it – you’ve run 120,000 miles at about 22 MPG, costing you about $14,000 in gasoline so far.

      A Prius, which holds just as many people and almost as much stuff, would have used less than half that amount over these years. And, they break less often. So when you’re ready, pick up an older (2006-2011) Prius off of Craigslist and keep on driving!

      Reply
      • dandarc March 20, 2017, 10:39 am

        I’d personally recommend a 2010+. It gets a bit more MPG, and is somewhat easier to service, at least if you’re following the manual. We’ve only had to do tires, oil changes, wipers, and headlights. The 2009 prius service manual says you’re supposed to remove the front bumper to change the head lights. 2010 doesn’t need that – you can easily reach the cables / bulbs without removing anything.

        Prius is an awesome car though – if you’re going to replace, it is a very good option.

        Reply
  • Dan M May 3, 2017, 4:26 pm

    We strategically broke Rule #1. Because interest rates are so low, we financed the purchase of a used car we easily could have bought outright with a 3-year, 1.5% interest rate loan. The reason we did this was to increase our credit scores, which have drifted down simply because we never take out loans on anything! And the only reason the scores matter is that we’ll probably purchase our first house in the next few years.

    Reply

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