My friend recently sold her 1992 Volvo that she’s owned since 1996.
I’ve had countless conversations with people trying to balance their financial life, and when the conversation turns to their transportation expenses, excuses pop up faster than a Ferrari. The most common excuse: “I don’t want to deal with the high maintenance cost of a used car.” I sketch out the math for them, I explain that if they set aside half of their current car payment for maintenance, all but the most serious of problems would be paid for, and I tell them how much I’ve saved by my car choices. Still, it’s a rare instance I convince someone that they can reach their goals by ratcheting back their transportation costs.
It’s under this context that when my friend, also a financial professional and frugal by nature, told me she kept a maintenance cost spreadsheet on her 1992 Volvo that I got excited. I knew that someday I was going to have a treasure trove of data to share with clients and readers. Well, this year is the year. In her spreadsheet calculations, after 22 years of ownership, the math no longer penciled out on getting the Volvo fixed. She’s moved on to a Prius.
I set about researching the historical average expenditures by U.S. households on transportation and calculating how much she saved by bucking the American norm of getting a new (or new to you) car every 6-7 years. The grand total she saved over the 22 years she owned her Volvo? $46,728.
She’s likely saved a lot more, perhaps $10,000 to $15,000, on insurance costs and registration. Most people, when considering the cost of buying a new car, only look at the monthly payment. They don’t take into consideration all the other factors that they’ll be paying for: interest, higher insurance, higher registration, warranties, and for those leasing, the “turn-in fee.” The largest “expense,” though, is depreciation. A new car loses 20% of its value in the first year, and 15% each of the next nine years.
American’s love their cars. I get that. Personally, I don’t care about cars, so it’s easy for me to choose to spend less on transportation so that I can meet other goals. And if you’re meeting all of your financials goals, then how much you spend on a car doesn’t really matter. But if you’re struggling, living paycheck to paycheck, not funding your retirement, or having constant financial emergencies, perhaps it’s time for you to take the Volvo approach.
If you'd like to learn more about spending money, and saving money, Stacey's book is available on Amazon and at thefinancegym.com, and videos available at You Tube.