Still Driving Our Brand New Car After 11 Years
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Long before I had my driver’s license, my Dad instilled an important financial concept into my head that I still abide by today. A car is nothing more than a tool to get from point A to point B. A car isn’t meant for prestige or to help score babes, although they’re often marketed that way.
Cars transport us to places particularly well, especially in the suburbs. He also firmly believed that the family car should be washed by its youngest drivers without being asked to.
His views on cars are some of his many memorable life lessons that I still instinctively follow, like pay off your credit card each month, and don’t pee into the wind. He drove a white Dodge Omni during my childhood, then a red Pontiac Sunbird (“the sports car”) which became the first car I ever drove.
Both crapped out around 70,000 miles and he hasn’t bought an American car since (nor have I). You won’t find any car companies in my stock portfolio.
It Could Have Been A Brilliant Career
After my 14 month backpacking trip, I lived at my parent’s house in need of a job. My used Mazda sat in their driveway while I was gone. I should have sold it before the trip because it was worthless when I returned.
A traveler friend was coming to visit and we were planning to drive cross-country and into Canada. My bank account was empty. I spent my last two dollars on a plate of 7-11 nachos. But I needed a car.
Instead of buying a beater, I wanted a new car. Why? Because even though I was broke, I had the long-term in mind. I wanted minimal operating expenses over the life of the car, and I needed something reliable for the road trip. The used Mazda always stressed me out because things frequently went wrong with it.
A Consumer Reports magazine pointed me to the least expensive, highest quality car I could afford; the Toyota Echo. The no-frills base model would cost me right around $12,000 with enough haggling.
Down the street at my local dealership, I told the novice car salesperson my story – just traveled, going on a road trip before finding a real job, needed a base model Echo because it’s highly rated and reliable. They had one such car in stock, a silver, 4-door, automatic transmission; last year’s model. He said they needed to sell it fast (as usual).
Having spent the past year bargaining hard for every purchase I made while traveling, I was eager to play the game. After a test drive, a manager came to the table and offered the car at $254 per month. He put out his hand to shake on the deal.
I said, “What’s the price?”
“$254 per month,” he responded.
“Yeah, but how’d you get to that number?” I asked.
“Oh, well we just put all the numbers into a formula and this is the payment,” he said.
Handing over my printed amortization table, I responded, “Yes, I know the formula. What are the input numbers?”
I walked out of the dealership.
They called back the next day. I went back two or three more times, each visit asking for a lower price. They’d bend a little, then I’d walk out. Since I was dealing with a newer salesman, he didn’t know how to close a deal yet. They kept giving me more discounts so I kept asking!
Late one evening I was back and ready to close the deal. The main sales guy and two senior managers sat me down. It had been a long day. It was a Saturday, their finance guy had quit mid-day, and the managers were picking up the slack. I had been a pain in the ass for about a week now.
“Listen, we’re losing money on this car. I know you don’t believe that. But the longer it sits here, the more it costs us on the lot.”
He explained a little about how car dealerships operate, how they borrow for inventory, and spaces on the lot cost them money. This cheap little base model Echo wasn’t a high margin vehicle in first place, so it was overdue to be sold.
“What’s it going to take to get you into this car,” one manager finally said.
I gave them my best number, a couple hundred dollars lower. This was my mudflaps.
My Dad once told me that when negotiating for a car, ask them to throw in the mudflaps as your last tactic. They cost less than $200, and they’ll always say yes on it. I don’t even know if cars still have mudflaps, but I wanted that last $200 off.
They took the deal and we shook hands on it, right around $11,800.
The sales managers all knew my story; traveled overseas, now broke, unemployed and living with my parents. I bargained firmly and I knew the numbers and “the formula” backward and forward. Then the manager said something that nearly altered the course of my entire life.
“We want you to work for us. Can you start tomorrow?”
Badge of Honor
Contrary to a lot of personal finance advice, I think it’s okay to buy a brand new car, even if you’re young and broke. The key is to buy a base model that is inexpensive, cheap to operate and covers only your minimum needs. Don’t pay up for leather, Bluetooth, chrome wheels, 4WD, power windows or anything else. Pay cash if you can. Then keep it for ten years.
The absolute bottom models do the job just fine, and are many thousands of dollars cheaper than the upgraded trims, especially when cars get bigger.
Watch enough football commercials on TV and you’ll start to believe that a car or truck is an American entitlement. Everyone must have a brand new car to live the dream. You’ve earned it. Buy a vehicle and it becomes a representation of a better you. Spare no monthly payment. Impress your friends etc.
On the other hand, read enough personal finance blogs and you’ll believe that a brand new car will crush your financial dreams the moment you drive it out of the dealership. New cars are the death of early retirement. Instead, buy the cheapest beater you can find.
Wear the 200k + mile odometer reading like a badge of honor. Better yet, move somewhere you can walk everywhere. This will improve your life and help the environment too.
All forms of media tend to think in black and white. Everything is either this or that, there’s no in between. Extremes are what attract viewership. You gotta pick one or the other and fight for what you believe in. Right?
By thinking that way, the middle ground is often forgotten. In my view, it’s okay to buy a nice used car, or an inexpensive new car that fits your lifestyle and budget. If you make the right decision buying a car, you can drive the thing for the next ten years worry-free. Buy unwisely and your budget is shot.
Today’s Changing Fleet
The Echo lasted me nine solid years. Gas mileage was excellent. It needed zero major repairs in that time.
My payment was just $221 with low interest, but I paid off the loan three years early once I started working again. It gave me seven years of payment-free driving.
With 109,000 miles, I put it up for sale a few years ago. The Toyota Echo had been discontinued, but a fan base remained. It sold for $4,200. We used the proceeds to up-size into a crossover to accommodate parenting in the suburbs.
Below are some basic numbers that show buying this new car wasn’t so bad after all.
- Purchase price (2002) + some interest – $12,500
- Sale price (2011) – $4,200
- Difference – $8,300
- Price per year – $691
Gas and maintenance were about as cheap as they come for any car. I never worried about anything going wrong with the Echo. I kept up the basic oil changes every 5,000 miles, replaced brakes, wheel bearings, tires, a few belts and that was it.
Today I’m driving our base model Honda Civic. Mrs. RBD bought it brand new in 2004. It’s a lot like the Echo in that it’s always been reliable and there’s nothing fancy inside. It gets me from point A to point B. With less than 100,000 miles, we’ll be putting it on the market soon and expect the resale value to be stronger than the Echo.
With the arrival of our new baby daughter, we’ve become a family of five, meaning it’s time to up-size again. Keeping the long-term in mind, we’re probably getting a minivan.
About five years ago Mrs. RBD and I were living in a one bedroom apartment in walking distance to the metro train, buses, a couple grocery stores, restaurants, lots of parks and bike trails. We could commute to work using the public services, and we could skip over the store to pick up whatever was for dinner.
But we wanted kids, a yard, a driveway, sidewalks and a community pool. The moment we bought a house with those things, we became more dependent on cars. The minivan became an inevitability.
We can still walk places, like our friends houses, a park, the pool and the library. But life is different, though we’re quite happy with the decision.
I don’t love the fact that we’re getting a minivan, but the suburban lifestyle is the one we signed up for. A minivan is the most practical car for the next ten years, so that’s what we’re getting. Although this time we are considering a used one.
So I’m not against buying a used car. In fact, many times it is smarter for a lot of people. Just don’t feel guilty buying a brand new car, especially if you are a good budgeter, planner and spreadsheet enthusiast. If you do buy new, buy smart. Don’t load up on bonus features.
Buy the minimum car to suit your long-term needs. Buy for functionality, buy only highly rated cars, and don’t buy for looks, extreme convenience (i.e. 18 cup-holders) or to impress anyone. That’s not what a car is for.
I didn’t take the Toyota dealership job. My friend was coming to visit and we had a two month cross-country road trip ahead of us. Still in battle mode, I think I insulted one of the sales guys for the tactics they used and said that was the reason I wouldn’t work for them.
But that dealership was hugely successful. Maybe it could have been a brilliant career. Certainly things might have turned out differently for me. Maybe I wouldn’t have moved to DC and continued my career in IT. Maybe I wouldn’t have met Mrs. RBD, started a family, and need to buy a bigger car.
Craig is a former IT professional who left his 20-year career to be a full-time personal finance blogger. He lives in Northern Virginia with his wife and three children. A DIY investor since 1995, he started Retire Before Dad in 2013 as a creative outlet to share his stock and real estate income portfolios. Craig earned a Finance degree from Michigan State University. Read more HERE.
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Fun post 🙂 although my partner and I would like to ditch our cars altogether, at the end of the day we are more dependent on them than we would like. We like within 20 minutes walking distance of work, the gym, hospital, groceries, and a lot of other things. But we also don’t have a house or driveway or backyard, etc. Somewhere down the line, when we get more stable jobs, our goals/wants may change and we may want more suburbia than we have now as we start our family together.
I drive a hand me down 1995 white Nissan sentra. It’s an antique, but it does the job! I agree that you don’t need to have ‘the latest’ in auto if your goal is to get stuff done. But often, that’s not the only goal…
I do like hearing stories of old cars that are still going strong. I prefer something newer than 12 years or so because I don’t have time to deal with break downs, or time without a car. My wife also has three kids to haul around. Need something ultra reliable.
Don’t move to suburbia until you are 110% ready. City living is cool too. I moved out of the city about 10 years ago and still miss many aspects of it. People do it with kids, but schools adds a new dimension.
Good point. One thing I remember when I was signing the paperwork for that car, a woman next to me was buying a four runner. She was more broke than I was. She was buying a $40k car had a bad job and tons of debt. The finance guy told me this. But they still sold her the car! She had no business buying that thing. Even worse, she was doing it behind her husband’s back.
I don’t know what the cheapest new cars are now. The Yaris replaced the Echo. Maybe I’ll check those prices.
Thanks for the comments. I think I was just stubborn at the time, not really a good negotiator!
That’s great numbers on the echo. My car was recently totaled, so I have to get a new to me used car. Good article that puts car buying in a different light based on financial responsibility.
Bummer about you totaled car. I’ve thankfully never been through that kind of ordeal. Responsible people can do just fine with a new car. It’s the irresponsible people that cause problems.
Sounds like you broke those sale people when buying the Toyota Echo, 🙂 Always good to have done your homework before a major purchase and not be afraid to walk walk if the deal isn’t right.
I did a ton of homework on that Echo buy. My frame of mind was quite different too. I was a cheap skate! I definitely enjoyed the bargaining at the time. Now I’m too busy to deal with it. I’m considering the Costco buying plan to help simplify the process.
I bought a Honda Civic Coupe. Used from a private owner. I love my car, great gas mileage. I paid $13K for it. It does have upgrades. Now I think back and I didn’t really need the sunroof, gps navigation system, or leather seats. Oh well, first car. I’m keeping my car for a while. I plan to have it at least 5 more years. I will by 30 by then. Hopefully, even longer!
Yea I don’t think I would ever use a sunroof either. GPS is a phone thing now! Now that you own it, might as well run it into the ground 🙂
My family’s first ‘new’ car was a Chevy Astrovan, back in the late ’80’s. Hubby always had a company car, and that helped keep the family cars in low-mileage condition. Although we got 10 years from it and with yearly carpet shampooing, you could eat off the floor of that vehicle, we decided to never buy new again. Our previous used cars had done well for us. Plus, with that van we learned the valuable lesson of ‘add ons’ – no, not the leather, stereo (back then…); rather it was this fee and that fee, the extra insurance in case the breadwinner-of-the-house died while we were making payments, etc. Boy, did we learn!
Our last vehicle was a Chrysler minivan purchased used at 4 years and 52K miles – cash. Sold it when it hit 17 years, and still only 92K miles! Took a year to figure out what we wanted and find the right dealership. Toyota Highlander, 3 yrs., 28K miles. Paid cash – boy the dealerships hate that! (Don’t let them know you are paying cash until the deal is done! Make them think you will need to finance – better deal that way.) Unfortunately, hubby’s been retired – no company car. After 2 yrs, the mileage is over 46K. But, the newer cars last longer – hoping to get at least 10 out of this one. Although we got a few more bells-and-whistles with this car, I bought it because it is going to last.
Love this story. And hooray for 2004 Honda Civics! That’s still the car I drive, after buying it new below invoice back in the day. We also bought a new Subaru Outback in 2011, and don’t regret that — they retain such high resale that we were only going to save like $3k (and lose the warranty) by buying used with 60k miles!
Most of all, I love your point about black and white thinking. Buying a new car is neither an American entitlement, nor the precursor to financial ruin. It’s simply a decision that’s sometimes good, sometimes bad. Same with any financial decision, and it’s a good reminder that personal finance is personal! No one path is right for everyone.
Very well said about the black and white thing. I think I’ve read too much advice saying a new car is always a bad move. I disagree with that. Figured it was time to speak up since we’re entering the market.
We almost bought a Forrester but got the CR-V instead. Resale is very good on these cars. A lot of times the used ones just aren’t that cheap.
Hey, great story. I like new cars too. If you’re going to get an economy car, I think buying new and driving it into the ground is the way to go. You need the reliability especially with a young child.
Which minivan are you going to get? 🙂
Thanks. Probably an Odyssey or a Sienna. Both do what we need. It will be a matter of which dealership has the inventory and is willing to give me the best price. I’ll be calling all around town to get the best deal. The used inventories are quite low in our area. But I may be able to save a good chunk going in that direction. Either way, the car should last 10 years or longer.
I only ever owned one car, that car had belong to my father, then to my grandfather before me. The car was literally older than me, and it was my first car.
It was in a bad shape. It had been taken care of, but an 18 year old car that has spent its life outside will only take you so far. It made me very wary of cars in general.
Ultimately, that car went to one of my younger brothers, and at some point was totaled in an accident (nobody was injured). The car had a good life.
I’ve never owned a car since, and always managed to live in places where public transportation takes you wherever you want to go. We have two kids now, we’ll see how it gets when we need to take them to places…
I love that story about the old car. What kind was it?
I’m impressed you you 2 kids and no car. I can see that scenario for me if I lived in certain parts of the DC area. But schools would be challenge. By age 3-5, we’d have to compromise somehow.
Thanks for the comment!
I just buy vehicles at invoice price as advertised on many car buying sites. Most dealerships will sell at invoice value. Always buy new, always run it till it is starting to be unreliable. Generally 12-15 years.
ZOMG. I liked this so much I’m stealing the idea and doing my own ‘new car is now 13 years old’ blog post. Thanks for a good read.
I had to look up that acronym. Glad you liked this one. Looking forward to reading yours. It’s not stealing if you link back to this one!
Great post. We are driving a 2002 VW Jetta that has 110k miles on it and we just replaced the rear barkes for the first time 5k miles ago and the shop told us the front ones were still fine. Ok, I kinda drive like a grandma sometiems. 😛
I have started a fund for the next car though. I have always loved Audis and am looking at either an A3 or A4, used of course. I can’t see spending $50-60k on a car, even if I keep it for 20 years, which isn’t likely. We will probably keep the used one for another 10 years.
I will be kicking off a monthly “Getting My Audi” post showing how I have been saving for it. Not going to finance it if I don’t have to. The Jetta is still working fine, but getting rough around the edges.
That’s some good mileage on the Jetta. Original front brakes at 110k miles is unheard of, wow!
Looking forward to the getting your Audi posts. I’ve also started a car fund for the next car we’ll need, in about 5-10 years. It’s actually sort of a repair fund too. But I’m hoping enough goes in there to cover repairs and still save a good chunk for the next one.
I can totally relate to this post. I just traded in my old car this year, a 2002 Accord manual with 177k miles on it, the #2 cylinder was going sadly and the engine repairs were 2-3k. I traded in got one of those lot specials, and walked in and out to get a solid deal on a new Civic. Mileage is awesome (34), and I fill it up less than my old Accord despite the smaller tank.
I also view my car the same way as you, a tool between points. While somethings can be nice, they are not necessary. Also fun fact, according to Honda, all new models have Bluetooth standard, and I got them to throw in free stuff easily – internal trunk cover, extra bumper to bumper coverage, and a side camera (right side). I would not call the salesmen desperate, but it was easy to get a lot of good stuff and pay less than $250 / month.