Ways to Save Money: Owning Old Cars

As I write this, I am riding down the road in a brand new mini-van. “Wait a minute!” you say. “This is supposed to be an article about owning old cars!” you exclaim. “How can she be riding in a brand new mini-van and yet be telling me I need to buy an old car?” you cry.

No worries, y’all. We do own old cars, and we ONLY own old cars. And I intend to prove that owning old cars is one of the best ways to save money – lots of money. But if you read on, you will see that we have found a way to have our cake and eat it, too.

My husband and I have made a conscious decision never to purchase a brand new car. This is because new cars lose a lot of value as soon as you drive them off the lot. I cannot see the wisdom in spending tens of thousands of dollars for a new car, when if you got into a car wreck on the way home from purchasing it, you would not get all your money back. In the first year alone, a car can lose 15-20% of its value. I do not have that kind of money to throw away.

We also no longer believe in buying late model used cars. We have done this once in our marriage – it was our first car purchase together, after we had been married about two years. We bought a 1990 Toyota Camry for $11,000. Seven years later we sold it for $5000. That means that car cost us at least $857 for every year we owned it, not counting the interest we paid on the loan. Yes, it was a great running car. Yes, it looked and smelled nice. But our car payment was $250 per month (this was in the days of car loans at 13%, people. Makes me cringe just thinking about it), because we could not afford to pay cash for that car. (And every month we were reminded we could not pay cash, when we had to write out the check for the payment…) But even if we had paid cash, that’s still a lot of money to pay for something to get me from point A to point B. And don’t forget the insurance, which is higher on newer cars, and even more so if you’ve taken out a loan to purchase the car.

So for the last 15 years or so we have made a practice of buying OLD cars that are still in good condition. Yes, they can be found, with time and patience. Our last three purchases have been a 1994 Chevy Suburban for $4000 (in 2010 when we bought it, it had only 94K miles); a 1989 Cadillac Seville for $600 (a little higher on the mileage, but the interior and exterior are in GREAT condition), and a 1995 Ford F150 for $1000. All of these we were able to pay cash for. We still own and use all three. There are no checks to write each month; the registration, insurance, and personal property taxes are very low due to their age; parts are easy to come by and are cheap; they are easy to fix, so labor costs are not exorbitant – there is no doubt that this is possibly the least expensive way to own a vehicle. (See my post on What to Look for When Buying a Used Car for information on how to determine if a car is a good deal or not.)

Of course, most people’s main concern about owning an old car is that it might break down. And ours have, sometimes at not convenient moments. But the amount of money I spend on a repair is usually less than one car payment would be in today’s reality. Certainly less than two or three. So for 9-10 months out of the year I still come out ahead. I do have a policy with AAA that covers towing over long distances. I get my money’s worth out of it. But guess what? Even new cars break down sometimes — or get in wrecks. Buying a new car just for peace of mind about breakdowns is spending a LOT of money for security about something that may still happen. And just because a car is old does not mean it WILL break down. But if it does, it’s really not that big a deal, if you have prepared yourself for that possibility.

Another reason people give for buying newer cars is they want better gas mileage than an older car can give them. In many cases, though, this is not true. I know for a fact that my 25-year-old Caddy gets better gas mileage than a friend’s 2-year-old SUV. But, just for argument’s sake, suppose you are getting better mileage from your newer car. Does the savings in gas usage outweigh the added expense of the higher price of the car, the interest on the loan, and the increased insurance and registration costs of the newer car? I did the math one time to see if we should purchase a newer car to replace our Suburban, which gets 15 mpg. If the newer car gets 25mpg, and if gas is 3.50 per gallon, I would have to drive that car 107,000 miles before the gas savings “pays for” each $10,000 increment of the price of the newer car. (For instance, if the newer car costs $20,000, I would have to drive it for 214,000 miles in order to break even. See calculations below.) All of a sudden that higher gas mileage doesn’t seem like such a big savings, does it?

Ways to Save Money Rental — Some of the bells and whistles of our current rental.

The last big argument people give against old cars is “what about long trips?” They figure it makes sense to buy a newer car because it will be more reliable and pleasant when taking a road trip. And I understand; we have had our share of long trips that have gone awry due to a car breakdown. So in recent years we have started a new practice: when we go on a long trip, we rent a car. This, y’all, is the best of both worlds. We have no car payment, but we can drive a brand new car a few times a year. Except for rare instances, the money we shell out for a rental is much less than even one month of a car payment. And there are no worries about breakdowns – not that they can’t happen, but if one does, it’s not our problem! And we get to try out all the bells and whistles that are on a new car, without the new car price. :-) When you think about it, unless you’re going on a long trip more than a few times a year, it doesn’t make sense to use that as your excuse to buy a newer car.

For my part, I feel like owning old cars is actually LESS worrisome than owning newer ones. I don’t mind as much letting the kids drive them, lol. I have no worries about trying to come up with the money for the payment. And if the car dies or gets in a wreck, I haven’t lost a lot of money. For our family, it’s a win-win.

Calculations: If gas is $3.50 per gallon, and the Suburban gets 15mpg, then it costs the Suburban $35 to go 150 miles. The newer car, getting 25mpg, costs $21 to go 150 miles. This is a savings of $14. In order to save $10,000, the newer car would have to travel $10,000/$14 = 714.29 trips of 150 miles each. 714.29 x 150 = 107,143 miles.

Have you ever purchased an old car? Why or why not? Tell me about your own experiences in the comments! :-)