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?
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!