Cheap Wheels of Fortune
You may feel pressure to buy a shiny new car, but an old, cheap model will likely serve you just as well – and save you lots of money!
Most of us feel pressure to buy a new car. Call it keeping up with the Joneses. Or maybe we think we’ll look more successful in a sleek ride. However, these reasons are a little crazy. In fact, it’s just your imagination in the fast lane.
Most of the people around you don’t drive new cars. In fact, the average car on the road is 11.5-years-old, according to a 2015 IHS survey. On top of that, many of these older cars are actually owned by millionaires! It’s true. Millionaires don’t always drive expensive cars. A great book which details the spending habits of the wealthy is The Millionaire Next Door by Thomas Stanley & William Danko. It’s an eye-opening read.
What is a cheap car?
First, let’s create a definition of “cheap.” I actually don’t remember the first time I drove – I was that young. I’ve sold cars, bought cars, and torn engines apart. To me, a cheap car is anything less than $5,000.
That $5,000 does not include fuel, maintenance, repairs, taxes, or registration, but it does include years and years of smooth driving!
If you already have a cheap car, then congrats! You rock! You probably have money in your pocket! If you don’t have a cheap car, I suggest you sell it, buy a cheap car, and pocket the difference.
According to Eric Ibara of Kelley Blue Book, used cars sell best if their new models are still selling well. If new Honda Civics are doing well, for instance, the used ones will retain their value.
Also according to Kelley Blue Book, cars exemplifying long-term value have the best resale. In 2015, Subaru and Lexus held their value the best of all the auto brands. In 2014 and 2013, Toyota and Lexus won back to back. According to Edmunds.com, a vehicle that retains over 50 percent of its new car value after five years has a good resale value.
Reignite the Passion
Perhaps your current car was your first car. You may be out of college and feel silly driving around in your high school car. Maybe the car runs well but it’s ugly, or perhaps it runs poorly but could improve with some TLC. Maybe, it’s all the above. Whatever the reason, here’s what needs to be done:
According to Edmunds.com, on average, a new car loses 11 percent of its value the moment it leaves the showroom floor. It continues to depreciate 15 to 25 percent each year for the first five years.
After year five, depreciation slows. Buying a car that’s more than five years old is usually a pretty good plan, even if it costs a little more to maintain. Maintenance costs between years five and year 10 shouldn’t be much different. And note, the new car price usually correlates with maintenance costs. The higher the MSRP, the higher the maintenance costs.
Before trying to get a used car to look brand new again, perform all maintenance. Do the bigger jobs first, and then progressively move to the smaller jobs. This way, if you run into any serious issues, you can stop right there and reassess if the car is worth fixing. You don’t want to wash a car with a blown engine, do you? Maintenance saves money in the long run, even if you have to pay someone else to do it.
Ever heard of penny wise, pound foolish? That saying was probably created by someone who forgot to perform scheduled maintenance.
Aim For Showroom Condition
Remove all the junk from the car – baseball bats, golf balls, sweaters, your last iPhone, your spare contact case, a rock you found while camping four years ago… Clean the entire car yourself, or even have it professionally detailed. This may cost a little money, but it’s sure cheaper than a new car loan.
Once the car is spotless, put back only what you need.
A clean, decluttered car may not actually run better, but it sure feels like it does.
Skipping this step would do you and your car a disservice.
Consider Modifying the Car
You know what kills me? It’s when people buy a brand-new car just for a small feature: an auxiliary jack, a GPS unit, heated seats – you name it. All of this stuff can be retrofitted to your current car.
One cool thing that some people do is put an entire iPad on their dash! Then your car can look like a Tesla. Watch this video to see how it’s done.