After noticing, month after month, that I include the value of my 2004 Honda Civic in my monthly net worth updates, a reader wrote in to Consumerism Commentary to ask why I haven’t given into my desires and purchased something newer or more exciting. I’ve had a bit of a storied past with cars, but in my current, more responsible era of my life I’ve been sailing through without any car problems, and saving money in the process.
I had been driving a Honda Civic I purchased used, but after receiving the car back from a relative, it never operated the same. In 2004, I accepted a teaching position and I needed a reliable car to drive to the school every day. The old Civic, at 160,000 miles, just wasn’t as reliable as I needed it to be. Since my necessity to avoid breaking down was my new first priority, I decided to sell the old Civic and buy a new one. As the 2005 models were arriving, I purchased a brand new Civic.
Banking Deal: Earn 1.00% APY on an FDIC-insured savings account at Barclays.
Typical financial advice at the time was to always buy a used car. With Civics, which were said to operate great beyond 200,000 miles if cared for well, there was just a small price difference between a slightly used car and a brand new car was. For the extra one or two years of worry-free driving at the beginning of ownership, the extra money seemed to be worthwhile to me. I bought a 2004 Honda Civic around the time the 2005 models were arriving, so I was already getting a slight discount on the new car. I took out a loan (outside the financial industry) at an interest rate of 2% to finance the purchase.
The car in this photograph is not my car.
Rather than trading in the old Civic, I sold it on Craigslist, and got more cash than I expected. I paid the loan off quickly. Since paying the loan off, I’ve had very little car-related expenses. I have the dealership perform regular maintenance and oil changes, and besides tolls, fuel, and the occasional car wash, that’s all the money I put into my car. I could probably save more money by choosing a mechanic other than the dealership, but I’ve had problems with that approach in the past with other cars. Going to the dealership gives me peace of mind, and I’ve never had any problems with their work.
Although I was a fan of driving when I was younger and always jumped on every opportunity to drive on road trips, years of commuting have spoiled my joy. I do enjoy driving fun cars, but I see that more as an occasional luxury than a lifestyle choice. A recent study shows that the enjoyment drivers get out of driving fun or luxury cars doesn’t last more than a few weeks, so when you buy a BMW or Ferrari, the euphoric feeling you might get from driving doesn’t last long. If I want to enjoy driving, I can always rent a nicer car. This should help me better appreciate the fun.
Buying a new car like I did doesn’t pay off if you have the desire for a new car every few years. I have no need to impress clients, so leasing a car doesn’t make any sense. Also, I don’t have a garage, so leaving a nicer car out in the open in asking for trouble. I live in a crime-free area, so it’s not that much of a concern, but I’d prefer knowing that something of great value could be locked away. I’m not going to park a Ferrari in my open parking lot, and I’m certainly not going to take it to Queens to visit my girlfriend and leave it parked on the street.
- By not having a $300 per month car payment since July 2007 has saved me $14,400.
- By not choosing a gas-guzzling vehicle, I’ve probably saved another $9,000 since buying the Honda Civic new in June 2004.
- I’ve probably saved another $3,000 to $4,000 by buying a car that requires hardly any maintenance.
- I’ve saved at least $16,000 and possibly much more by choosing not to buy another new car until this Civic dies. Now that I’m not commuting to an office every day, this car could last for many years.
At some point, my needs might change. Maybe I’ll have a family and need a bigger vehicle for transporting my hypothetical children and their friends. I can’t predict my needs or desires in the future, but for now, I’m not buying a new car, and I’m enjoying the savings both by spending money on other things I enjoy and by thinking about and investing in my future.
Would you replace your current car if you had cash available? Should I put a small part of my future aside to spend extravagantly on a nice car and have some fun?
Interesting. This article drew a lot of criticism from Consumerist readers who say that a car from model year 2004 isn’t old enough. The criticism missed the point of the article, which is that continuing to drive the same car saves money over buying a new car. There’s no competition to see who can drive the oldest car. As I pointed out in the article, at a time when reliability was the foremost concern, buying a ten year old (or older) used car, without a strong indication of how well it could run and for how long, would have been a significant mistake. Plus, the mileage is a better indication of operational “age” than model year.