Houses, cars and groceries take up the majority of American’s budgets.
Today I’ll recount how I’ve managed to pay very little for transportation over the years, relative to my budget and provide some guidelines on what to look for in a vehicle. Buying used cars can make you rich.
Table of Contents
High School
Growing up in Idaho, I took drivers ed at the mature age of 14. I got my permit and learned to drive my dad’s 1985 Toyota pick up. It was an amazing truck off road, and had a wooden bed. I have fond memories of it.
I was only allowed to drive during the day with an adult (by state law), but my parents were too excited at the prospect of me running errands for them that this rule was ignored.
Unfortunately I got it a little too deep in the mud one day and filled up the cases with muck. It’s sat idle in the backyard of my old house ever since. One day my Dad or I will drop a new engine in it.
Toyota #2
After my parents split, and the ’85 died, my mom helped me get a 1991 Toyota Pick up for around $2,700. I’m not sure if my mom paid for all or part of it though. It had 210,000 miles or so. I drove that the rest of high school and had three fender benders, but the marks are indistinguishable from preexisting blemishes.
Having an older car is nice because another dent or scratch doesn’t really affect the overall look of the car. When you have a newer car, a single scratch really sticks out. Accidents happen every day, it’s really just a matter of time.
This truck had some real personality. It went 0-60 in about 53 seconds (without revving past 3,500 rpm). The bigger off road tires threw the speedometer off about 5 mph. Around 40 MPH the truck would start vibrating, and it would build to be pretty violent, but it would stop around 65 MPH. I never felt comfortable going more than 75 MPH.
When I would drive up Malad pass I’d try to get up to 80 MPH before the incline and by the top I’d be going 35-40 revved out in 3rd gear. It had amazing torque but couldn’t maintain speed going uphill.
In High School I put 2 twelve inch speakers in the tiny backseat. My friend and I literally wired the speakers to piggy back off the power going through some other random wire.
One day, my first semester of college, the radio wigged out completely, playing static and not responding to anything. It was really loud, and was going to drain my battery. I needed my truck the next day, and it was around 10pm at night. I decided the best course of action was the cut the wires to the speakers. Goodbye radio. I had previously lost the antenna and replaced it with a clothes hanger.
I drove this pick up for the last part of high school and into college. It was also pretty great off road. I sold it to my dad at some point in college and he let us drive it around in Utah for a bit (more on that later). We left this truck at my Grandpa’s place in Utah, where it still runs great and has 256k miles or so.
Total Cost of Ownership for 4 years: mostly gas and insurance – probably around 6,000 for gas, spark plugs, oil changes, and about $4000 in insurance over the years.
Toyota #3 & 4
Before my Junior year of college, I had a lot of success selling pest control door to door for two summers. Not only did this cover all my 4 year degree, but it also allowed me to purchase a nicer reliable car.
I strongly considered buying a 2012 or 13 Tacoma at a dealership after driving one around, it would have cost about $18k or more. Luckily, my Dad and aunt talked me out of it, and taught me the value of letting others take the depreciation hit and driving inexpensive used cars. Still, I wasn’t sure how long the ’91 Toyota would last and wanted a more reliable car.
A classmate of mine mentioned his roommate was selling a 2009 Toyota Corolla, and I jumped on it. I bought it for just over 10k, it only had 70,000 miles or so.
Unfortunately the next year, it got totaled in a no fault accident on a rainy highway in Denver. Geico paid me out over 11k for it and I replaced it with a 2010 Corolla that was certified used with 30,000 miles. This would be my car for the next several years. It cost about $14,500. I regret not getting one for cheaper, but I needed to get out to my summer job quick.
Chevy #1
When my wife and I got married, she was driving a 2008 Chevy Impala. Her Dad is a salesmen and his company provides him a car to do his job. At a certain point they allow the salesmen to buy the car from the company below book value. That’s the car my wife was driving when we got married. She had been making the payments on it since high school.
When we got married, there was still a loan on the car. I looked up the book value of the car and offered to buy it from them at that price, but in their generosity to the newlyweds, they sold it to us for the balance of the loan, or about $4k.
The Chevy (in my objective observation) handled much more clumsily than the Corolla. It turned wide, so wide I couldn’t do a U-turn on a normal street like I could in a Corolla.
We drove it for a while, but then moved within 2 miles of my office. I would bike, we didn’t need a second car at that point, so we sold it for a modest profit. This is when we got Toyota #2 back to act as our back up vehicle, in the rare occasion we did need a second vehicle.
Because we only owned it a short while and sold for a profit, the total cost of ownership was net positive.
Toyota #4
With our family expanding, we wanted to get a van, and we considered the Honda Odyssey and the Toyota Sienna. We visited some dealerships and found some good options, but they all needed work and we were getting lots of pressure. Finally we found a decent deal farther south, test drove it and made our decision.
After hours at the dealer we finally left with our 2007 Sienna. It cost just under $10k with a 2 year warranty. It had 117k miles and is now around 145k, and we’ve been very happy with it.
Chevy #2
In Fall 2018, we relocated for a new job. Prior to moving we sold the Corolla to a friend at the last minute. I drove the moving van, while my Dad drove the Sienna. Towing the Corolla would have forced us to drive way slower, with added risk, complexity, and fuel/towing costs. I believe it sold for about $3700.
The apartment we moved into was right behind a grocery store, so we didn’t really need a second vehicle at the time. I could work one day per week at home, and my wife could use the car that day to run errands. Other than that, we could walk over for groceries every couple of days.
The plan was to buy a Prius or similar for around 5k in the next few months.
I mentioned one day in a Facebook group for people in our congregation that I was looking for a new vehicle. I got a lead on one pretty quick.
Turns out there was an older lady who could no longer drive. A family friend was helping her get rid of some property, and was selling her 2003 Chevy Blazer. It had sat for about 3 years, so it needed a little work, and I picked it up for $600 counting registration.
This reminds me of the ChooseFI Episode where they talk about how “the alley will provide” for patient people. When you need something, try to look around for a month or two instead of immediately going out and buying it. We’ve saved tens of thousands of dollars simply by avoiding impulse buying and delaying gratifications.
You can buy a lot of gas with the extra $4,400 in our car budget. So far, it’s been really reliable, the only major thing is getting a radiator flush once a year. Oh, and we replaced all the brakes and one brake rotor. It’s a fun little vehicle.
FrugalStu Vs Other People
So what’s the point?
Right out of college I worked in tech support for a large software company. They had just opened up a new location and hired a bunch of people, including several recent college graduates. With all of us getting our big boy jobs, I watched several of my peers buy fancy new cars.
One coworker in particular shared that he had a $500 a month payment. I asked how long he would keep the car, and he said about 4-6 years. Naturally, I asked how long the loan was, and the response was 7 years. This means he will still be paying when he trades in, and may roll his existing debt onto another new car later.
The funny thing is that he lived 1 mile from the office and could walk there in 12 minutes, bike there in 4, or even roller blade there in 8.
Car Payments Add Up Over Time
If you simply invested $500 a month into the stock market for 40 years, you would very likely become a millionaire. There are so many American’s out there driving million dollar cars it makes me sick.
I talked to someone one day that couldn’t afford an apartment or a home but they drove a 2014 Ford Focus and they were paying $250 a month on it. The conversation went to finance and he mentioned he was in a tight spot. I pointed to my Chevy Blazer and told him I got it for $600. That’s what he needs, he doesn’t need a 10k car with a payment.
If you can’t pay for a car in cash, you cannot afford it.
If you have a payment, get rid of it and drive that car until it dies.
When that car dies, but a replacement that is at least 3-5 years old and drive that car till it dies.
If you want to have a shot at being a millionaire, avoid auto loans at all costs.
Resources: Use NADA and Kelly Blue Book and Consumer Reports to figure out used car value and reliability.
0 Comments