Dave Ramsey quotes that the average car payment in America is $484, and if invested (from the age of 25 to 65 at 12% interest,) over the life of owning cars, you would have $5.6M in retirement. “HOPE YOU LIKE YOUR CAR!” (as Dave always says after he provides this statistic.)
This statistic amazes me. I think, “Who in the world would assume a $400+ car note?” I know I never would. Heck, this is more than our mortgage payment (on a 15 year mortgage!)
I think about the cars I’ve purchased in my lifetime; three of them to be exact.
Car #1 – 1979 Ford LTD
This was my first car from my parents. The vehicle was older than I was, but it got me from A to B. I used to call it my pimp-mobile. This car was LOADED with power everything, leather seats and was a low-rider. It had less than 50,000 miles on it, but it was a tanker. It was also a gas guzzler, but I remember the first fill-up. My mom said she’d pay for the first fill-up, but after that, it was my responsibility. That was when gas was $0.99/gallon back in 1997.
Car #2 – 1991 Chevy Cavalier RS
2 door, fuel efficient (ANYTHING is more fuel efficient than the LTD,) candy-apply red and sporty. I loved this car; however, it was a downgrade. I had to crank the windows myself, and it didn’t even have rear defrost. I paid $3,500 for this vehicle the first week in college with the help of my mom’s signature. I paid the car off within a year and a half. The payments were in the low $100 range. I drove the car about 2 years after it was paid off, and then I got into a car accident. I used the money I got from insurance ($1200 which was the value of the car) and saved it to put down on a NEW car when I graduated from college in a few months.
Car #3 – 2002 Mazda Protégé
I purchased this car brand new within months of graduating and just a week after I got my first job out of college. I was making $27,500 and had a letter from my employer (I am still employed with said employer) and I bought a $16,000 vehicle. What was I thinking?!? With $4,000 down from money from graduation and the money from the accident, the loan was $12,000 over 5 years at 0% interest. This was a nice, sporty, jet black vehicle with all the bells and whistles. I racked up over 85,000 miles on this vehicle with 3 ½ years. The vehicle, though had no mechanical problems, had a lot of issues with the brakes and tires. The tires on this vehicle were high-performance tires which did AWFUL in the snow and were uber expensive! It felt like I needed new tires every year on this vehicle (at $500/set!) and I was getting new brakes & rotars every year (another several hundred dollars.) I was just sick of the car within 3 ½ years. Which leads me to…
Car#4 – Bianca! 2007 Toyota Yaris
I still owed money on my Protégé, but I was not under water. The dealership agreed to pay off the Protégé, and I bought Bianca brand new in August 2006. She was one of three Yaris’ on the lot that the dealership got in just weeks before. Todd and I agreed that I was going to get a car that was fuel efficient, inexpensive, and reliable. I didn’t need 4 doors (after all, I had a 4-door with my Protégé and no one ever rode in the back!) I really did not like the way Bianca looked. I test drove Bianca and a 4-door Yaris. I then told the Salesman that we would have to talk it over.
Todd and I went to dinner and weighed the pros and cons. It would have been $1500 more to get the 4-door, and it was plane Jane. Todd reminded me that we wanted the cheapest, most fuel efficient and reliable, and Bianca was it. So we went back to the lot after dinner, and I fell in love with Bianca. I called the dealership the next day to buy the vehicle. It was less than $12,000. The payments were $215/month for 48 months. Of course, it was paid off well before then.
My point is, I cannot imagine spending $400+ for a car loan. I know my step-father has a $650+/month lease payment on his Toyota Highlander. My mom had a $500/month lease payment on her 2-seater sports car that she drove 4 months out of the year! On TOP of the $200/month car she drove in the winter! My father’s Acura TL is $450/month. Before that, he owed on his Toyota Tundra. My father does not agree with leasing (as he calls it, “renting” a vehicle, they buy them with payments…which to me, is just as bad.)
My father and his wife ALWAYS owe on a vehicle. My dad takes immaculate care of his vehicles, and they rarely have mechanical problems. That is probably also because they get new ones every 5 years. My dad got his new truck. After they were done paying off the truck, they got his wife a new Acura. In a few more years, it will be time for my dad to get a new truck.
I would much rather have $5.6M in the bank for retirement than owe ANYTHING on a vehicle. Even if that means we keep our vehicles until the wheels fall off (which is what I’d like to do with Bianca.) I look FORWARD to seeing her hit 250,000 miles, and even possibly 500,000 miles!
Luckily, I have a husband who enjoys looking and researching vehicles, but does not see it necessary to get a new one every 3-5 years. He absolutely loves his Kia Rondo (I still think it looks like a mini-van. And I don’t like mini-vans.) We both are content with what we have and want nothing more. I think that’s what’s important. I don’t WANT to keep up with the Joneses. I don’t even LIKE the Joneses! But then again, I’m WEIRD.