File this away under financial organizing. One of our cars needed $1,000 of repairs over the Christmas holiday. Bad timing? Crisis? Nope. Let me bore you with a little math.
This 14 year old was $20,000 when we bought it new. We paid it off in 4 years and have had no bank payments on it for 10 years. We’ve had to put tires, belts, brakes, shocks, a muffler, batteries, CV joints, and even a new engine in it (the same year we moved). This year the gaskets were going, so that’s where the big bill came from.
But the car still looks great, has leather interior, has two airbags, and rides fine. It’s used for a very short daily commute, so it should hold up forever if we keep taking care of it. We thought about getting a new car when this latest repair bill came up, but here’s how that would break down:
|Annual costs||Current Car||New Car|
|car payments||$0||$4,572 or more|
|insurance costs||existing||additional $400|
We’re saving about $3,972 each year, even if we do have an occasional big repair bill. By the time we do get ready to trade this car in, it will be worth a couple thousand on trade in, and we will have saved enough to pay cash for the next car. As a bonus, we will have avoided the $2,400 in interest that we would have likely paid to finance the car for 60 months at 4.125% interest.
I realize that you might be reading this and hate your car. You might feel like you deserve a new car. You might feel like these numbers look good on paper but don’t hold up in real life (I assure you they do). You might feel like nobody but nobody does without a car payment. You might feel like you are too buried in debt to ever be able to get ahead and buy a car with cash. You might feel like a lease is a much better option (I assure you, it’s not). You might feel like it’s not worth it to pay off a car because by that time, they have big repair bills and it’s better to pay for a car payment at that point….Wait, that’s where we started.
I hope you are reading this while you are young. I hope that you have just a little bit of good luck to help you afford a nice car. And I hope this gives you a new lease on your ideas about cars and financial organizing.