The Cost of Owning Older Cars
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Over the past weekend, I found another reason not to own a car … or 2 cars in our case.
We are making monthly payments on 2 vehicles right now.
Our oldest is a family van that we are very close to paying off … only 9 more months. This vehicle was financed at 75 months for 1.56%.
The other loan is my car which won’t be payed off for several more years … but fortunately is financed at 0%.
Overall … our transportation situation could be much worse. We could be leasing cars, financing luxury vehicles, or paying much higher interest rates.
But on the other hand … our transportation costs could be much better. We could have purchased used cars in the first place … or better yet have no cars at all.
Let’s take a quick peak at what we currently pay per year in transportation costs.
Our Annual Transportation Spending
Earlier this year, I posted an article about the cost of owning a car.
We calculated all the expenses related to car ownership for our 2 vehicles in 2017. These figures included our monthly loan payments, insurance, gas, maintenance, and registration fees.
In total, we spent $12,604 combined on both our vehicles that year.
That averages out to about $1,050 per month to pay for our 2 vehicles.
Paying $1,050 per month on our cars is only $30 less than our monthly mortgage payment!
So if you think about it … we are basically making 2 mortgage payments every month – one for our house and the other for our cars.
The Cost of Owner Older Cars
There is no doubt that once we pay off these auto loans, our overall transportation costs will go down.
For example, looking at our 2017 numbers … if we had our van paid off … our annual transportation expenses would have been $7,500. That is a $5,000+ decrease!
But what these numbers don’t tell is the extra costs it takes to keep an older (“paid off”) vehicle maintained.
This past weekend … we experienced first hand the costs of owning and maintaining an older vehicle.
Keeping a 70,000 Mile Vehicle Maintained
Call it bad luck or maybe just fate … but as soon as our van passed 70,000 miles … it seemed like things just started breaking down.
After hearing our van make some funky sounds going over bumps the past couple of weeks … I realized we probably had an issue.
Turns out our van desperately needed new shocks and struts. Plus our tires were starting to go bald and we needed to get a new set of 4 replaced.
Since I’m not very mechanical (although I wish I was) … we had all the worked serviced at a local auto shop.
Total bill was just under $2,000 … so we will round it up.
Recent Van Maintenance = $2,000
Oh yeah … and I didn’t even mention the new battery we bought for the van a month earlier for another $200.
So in the past month, we spent around $2,200 on car maintenance.
Buy New vs. Used
It seems like a lot of people in the personal finance community prefer to buy used cars instead of new.
I certainly can see the cost benefits … at least initially.
But I can also tell you that owning a used car (at least in my experience) is not cheap either.
For example, our $2,200 maintenance bill for our van is the equivalent of making a $183 monthly car payment this year.
That is certainly cheaper than our $328 monthly payment we are making now.
But is that the only maintenance we will have this year? We may be good for another month … or a year … or possibly 5 years?
We really don’t know.
But what I can say is that the cost of an aging vehicle seems to accelerate exponentially as the car puts more and more miles on.
Which brings me to our first experience in dealing with the costs of an aging vehicle.
The Unknown Expenses of Owning an Older Car
For years I prided myself on driving a car with over 100,000 miles on it that was over 10 years old.
I had a Saturn SL1 that got decent gas mileage, which I drove for close to 16 years … until the maintenance costs became too much.
The good news is that the vehicle was paid off in about 6 years … so we enjoyed around 10 years of no car payments.
The bad news was that as each year passed and the miles increased … the maintenance costs really started to take off.
In the last 2 to 3 years that we owned the car … our annual expenses rose to $2,000 to $3,000 to keep it running.
At that point … the car was costing us up to $250 per month to maintain. This doesn’t include any gas or routine maintenance like oil changes.
Ultimately we made the choice to donate the car and buy a new car that got better gas mileage, was safer, and much more reliable.
The monthly payment on that car is $245.
So in this case … we are paying about the same per month for a much newer car compared to the cost of keeping an old car running.
Used Cars are Still Cheaper
I’m not here today to argue that buying a new car is cheaper.
Buying a quality used car is still a much better financial choice than buying new.
No doubt about that.
But what I want to point out is that owning an older car could still cost you a considerable amount of money. My Saturn was costing us close to $3,000 per year just to keep it running.
Granted it was 15+ years old at that point … but there is a point when the costs are no longer worth it.
Just in the past month, we spent $2,200 on our 6 year old van with 70,000 miles on it. We don’t know what could need replacing next month or next year.
Owning a car (or 2) is likely going to be one of the biggest financial decisions in your life.
Excluding recent maintenance expenses … we are paying the equivalent of a second mortgage to own our 2 cars.
And in the next couple of years, we will be adding a driver to the household as our oldest son will be getting his drivers license.
If we had to do it all over again … my wife and I would have better planned out the vehicles we owned and how they fit into our lifestyle.
What is your opinion?
Own a new car for the convenience, reliability, and safety?
Or own a used car that doesn’t cost as much but could run up big maintenance costs?
Or better yet … design your life to not own a car at all?