How much does your car really cost?

Posted: March 20, 2012 in Uncategorized

Recently I was debating on whether or not I should sell my car. It is 5 years old, but I put some money into it recently and the bluebook value is not to high. So I started crunching some numbers to see if I would keep my car, buy a used car with a payment, or buy a new car. Keep in mind, right now I am in my senior year of college, so I would not buy a new car now, but in 6-9 months (if I find a job…ha) I will probably be able to.

I purchased my Mazda Protégé 5 that was 5 years old for $10,500 5 years ago in Aug, so we will say it is 60 months old (I know it’s not there yet, but were pretending). Since I had the car, it has had a few issues, so I have spent around $3500 on repairs. This is actually a lot, I was having a hard time finding a problem, and so a few parts that did not need to be replaced were and it should have been a little lower than this. Overall I have paid around $14,000 in almost 60 months, but keep in mind that when I am not fixing something there is absolutely no payment.

If I had bought the car with a car payment, I would have spent around $12,200 before repairs that re not covered by a warranty, so had the car been financed the cost would have been around $15,700 over 60 months.

The bluebook is $5000, so I lost $9,000 in value over the last 5 years, but if I had financed I would have lost almost $12,000. I drove around the average of 15,000 miles per year, and the car is still running strong, with a few repairs here and there. I should be able to keep the car for another 4-8 years and I will probably spend around $2-3000 more before it is not worth it to repair. Worst-case scenario I end up spending another $3000 and it lasts me another 4 years. So that would be a total of $17,000 for a car that lasts 9 years and is completely worthless except for scrap metal.

The average (if worst case scenario plays out) for 9 years of car would be $157 a month.
If it lasts me 12 years (which it might considering I was smart and bought a car that usually lasts a long time) it will cost me at the most $118 a month.

Suppose you buy a NEW car for $30000 and drive it for 5 years. When you go to sell the car, it will be worth around $13,000, because they depreciate so fast.

If a new car is financed for 30,000 over 72 months with a low (4%) interest rate, the car will cost you around $34,000 total.

After 60 months it will have cost you $30,000. So lest say you sell the car for $13,000 in 5 years, you will owe $4000 still to the bank, so you really spent roughly $21,000 for the car after interest and taxes, ext.

So I spent 17,000 for a car (including repairs) that will last from 9-12 years, where as someone who buys a new car spends around $21,000 for a nicer car they will drive for 5 years and then probably sell to buy another new car.

Also, I have so far spent $14,000 for 5 years, which is still $7000 less than one would lose on a new car in 5 years.

So here is a quick breakdown

5 year old car bought in cash $10,500 last 9-12 years with around $7000 in repairs averaging between $160-$115 a month.

A brand new car ($30,000) that gets traded in after 5 years (after all who wants an old car right) costs around $450-500 a month!!! Unless it’s getting 100 MPG, I do not think I will recoup my money in any way!

Many people say they like new cars or slightly used cars with payments because they like the idea that they can go to the shop and not pay a dime to get a repair, but as you can see, you are paying for that repair whether you get it or not, and you are paying much more than the repair would normally cost with a new or slightly used car.

Also, keep in mind that when a new car is purchased, and a loan is taken out, you have to get the best type of insurance, which costs more money than the no-fault insurance I have on my used car. I pay $200 a year for coverage, I know many people who pay $200 a month on their cars! That’s another $2200 a year in savings if you have a high premium. Over the course of 5 years that is $11,000 saved when you go with no-fault. So what if you get in a horrible accident and you have to pay like $4000 for a repair, well, you saved $11,000, so you still make out like a bandit! The only way this backfires is if your car gets totaled, which can happen, but usually does not.

My advice to someone who is looking to buy a car would be to buy a car with cash without the warranty they will try to sell you for $2500. If I had bought the warranty for my car then I would have just spent an extra $2500 for nothing, because the first two years, nothing happened to the car, and something horrible would have had to happen to reach the $250 warranty!

Also, buy a car under its bluebook value (which can be done) that is a reliable model no more than 6 years old if you can afford it. Even if you buy a 12-year-old car for $500, if it last you a year, it costs $50 a month!

Spend wisely people ☺

Dan Fogarty.

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Comments
  1. bryan says:

    well said. thanks for the info man!

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