Why I drive a 13-year-old car

This is a guest post from Joel Berry.

I recently had a talk with a friend about why I haven't purchased a new car. He can't understand why I still drive a 1995 Geo Prizm. I can afford to buy a new car, but I choose not to. The fact is, driving an older car saves me money!

To prove my point, I ran some numbers. I was surprised by how much money I've saved by driving this car for so long.

Used vs. New

I bought my Geo Prizm in 1995 with 5,000 miles on it. It now has 140,000 miles on it and still runs fine. I paid off the car in 1999. It is now 2008. I haven't had a car payment in nine years.

How much has this saved? Our payments for this car were $250 a month. Over nine years, I've gone 108 months without making a payment. At $250 a month, that's a savings of $27,000.

Over the lifetime of the car, I've spent less than $2000 in repairs. Subtracting this from my savings still leaves me with $25,000 extra over buying a new car right after the Prizm was paid off.

Using past history as a guide, I can assume that my car will need more repair as time goes on. The most recent repair cost me $1,000. Let's assume the worst and say I would spend $1,000 a year for every year that I keep the car from this point forward. Now, let's compare that to the cost of buying a new car.

Assume that I could buy a newer car for about the same $250 payments I had on my Prizm. (I think that number is a little low, but let's just assume.) That means my annual cost for a new car would be $3000. If we figure that I'll spend $1000 a year repairing the Prizm, it still saves me $2000 a year over buying a new car. If I were able to keep the car for four more years, that would add $8000 to the $25,000 I've already saved.

I will have basically saved $33,000 by driving my old car for a total of 17 years.

Other Savings

But wait! That's not all! I've also saved money in several other ways not accounted for in the numbers above. Some examples:

  • Cheaper insurance
  • No down payment
  • I've freed up money so that I didn't have to take on as much debt for other expenses

I've also kept the Prizm long enough that the items I did have to replace early on for the car are now covered by a lifetime warranty. Any time my starter, alternator, struts, or brake pads wear out, I can get replacement parts for free from Autozone. I can fix the car for just the cost of labor, or fix them myself.

There are some drawbacks to having an older car. I once had to have the car towed, and then was without a vehicle for five days while it was being repaired. I also spent a few weekends doing work on the car myself in order to keep costs down. The car is starting to rust. And, of course, it no longer has that new car smell.

I didn't include the cost of oil changes or tires in the numbers for repairs. I figured this was normal wear-and-tear that would have occurred no matter which car I drove.

My goal is to drive the Geo Prizm for another four years. I am going to put away $300 a month. (I'm putting away $300 instead of $250 because the price of cars has gone up since 1995.) I'm putting this money in an ING Direct account to use for car repairs and a down payment on another used car. If this works out, I should have $10,400 set aside for a down payment on my next car, and will have spent an additional $4000 in maintenance for my current car.

I realize this might not work for everybody. And who knows? My next car might not be as good as the Prizm has been. But numbers like these are why I have opted not to buy a new car yet. I have better things to do with my money than to keep up with the Joneses.

J.D.'s note: I think Joel's story is awesome. Though I complain incessantly about how much I want a new Mini Cooper, the fact is I'm following Joel's plan, too. I'll drive my Ford Focus into the ground. This story reminds me of Dave Ramsey's Jami Dwyer.

More about...Frugality, Transportation

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Miranda
Miranda
11 years ago

Great post! If there’s something that you don’t need to buy new, and to replace regularly, it’s your car. We’re seven years into the ownership of the car we bought when we first married. We use public transit and planning so that we have only one car (I know at some point we’ll have to get another one), and we’re hoping to keep driving our current car for another few years. We love that we have it paid off, and we love that the insurance on it is cheap.

Ryan2
Ryan2
11 years ago

Your plan is solid. Drive it as long as you can, keep costs to a minimum. Basically, squeeze the most value possible out of your resources. So I wholeheartedly agree with you, and I applaud your effort. But your accounting is fuzzy, at best. By dispatching your car payment of $250 monthly after four years, you are now “saving” $250 monthly indefinitely? What if you had only financed the ’95 Prism for one year instead of four? Then your monthly payments would have been close to $1000; let’s say $10,000 for the year. And you would have paid it off… Read more »

Jason
Jason
11 years ago

Don’t forget however that the repairs you are making for your old car are a sunk cost. On the other hand the monthly payments you will make for the new car are building equity (even though new cars depreciate very fast), so the equation isn’t as cut and dried as you might think.

Jamie
Jamie
11 years ago

You are very lucky though to only have put in $2000 in repairs. I had a 1998 Saturn SW1 that last year alone I put in $2000 in repairs. This plan works depending on the car. If you have a car that is and will be dependable it works. If your car costs more in repairs it does not work. The $2000 I spent in repairs is about $166.67/month not to mention the time cost of going to the repair shop.

Jeff
Jeff
11 years ago

JD, About 2 years ago, I got my first real “career-break” and landed a job where I was being paid relatively well compared to what I had previously been earning. The job was a good 45 miles away, though (but with zero traffic). After 2 months at that job my ’94 Mazda Protege gave out on me. It was going to cost about $800 in P&L to get her up on her feet again. I was faced with a decision – patch up the dented, rusting and ugly-looking (though I loved her dearly) Protege or get a new car…well like… Read more »

Leslie
Leslie
11 years ago

I am following the same sort of plan. Our cars are considerably younger than the Geo Prizm (2004 and 2005) but they are both paid off and we intend to drive them until the fall apart beneath us. When the second car was paid off, we started putting the same amount we paid on the car payment every month into and ING account. That money is for a down payment someday but it is also to be used for any repair bills that come up. Not regular maintenance like oil changes etc. but for bigger, unexpected things. The only thing… Read more »

Eber
Eber
11 years ago

here in Brazil things are a little more complicated. you buy a new car for like 10.000 dollars and after 10 years it is still worth 60% of that amount. this happens because most people dont have money to buy new cars, so the used ones have great value. i have a 1995 chevrolet vectra cd, which is worth some 6.000 dollars. crazy, isnt it? at least the good about used cars here is that most people dont have insurance on it. i dont. and the annual tax over cars is like 4% of its value. less tax too. and… Read more »

PrizmPimp
PrizmPimp
11 years ago

I’ve driven a 98 prizm for 7 years and recently graduated college with a well paying engineering job. All my friends are buying new cars and laughing that I’m still with the Prizm. I couldn’t care less since I’m saving so much. I took it in stride and created the PrizmPimp screename as a joke.

Good choice on the Prizm, it’s such a reliable car. Aside from tires and oil, my repairs have probably only averaged $300 a year with the exception of one year when I spent $1000.

the weakonomist
the weakonomist
11 years ago

I bought a brand new honda accord last year after driving my 93 camry into the ground (225k miles). I’ve already paid it off and plan to drive this one into the ground too.

Oh and if you’re worried I overpaid for a new car, don’t. I was well below invoice and for the first 6 months I could have resold the car for a profit at private sale.

Scott NJ DAD
Scott NJ DAD
11 years ago

Our cars are 10 and 22 years old, we can easily afford new ones, but don’t because the ones we have are perfectly sufficient. The 22 yr old car, ferries my wife back and forth from the train station, and the 10 year old car does the rest. On top of the savings, driving older cars is incredibly green. The manufacture of cars uses vast amounts of fossil fuels. The cost of replacement parts was a tiny fraction of that. Alas the 10 year old car is getting less reliable, and we feel it is time to buy a new… Read more »

Chris G.
Chris G.
11 years ago

My wife and I are following this philosophy now too. We are still paying off my 2002 Subaru Forester we bought used in 2006 (about $5600 left on that loan), but we are about to switch our debt snowball to that loan with the goal of paying it off this year. My wife’s car just died (a 1997 Dodge Neon that we road into the ground), but my grandparents decided to give us their 1993 Saab 900S Convertible that had been in storage for over a year. It has 160k on it, but is free and it runs great. Needs… Read more »

Jean
Jean
11 years ago

Yep. That’s why I drive my 1995 Geo Metro. It’s mine, it’s paid for, and it runs fine. That’s all it needs to do. I’ll drive it until it falls apart.

Clifton
Clifton
8 years ago
Reply to  Jean

Yep, Joel and Jean. After exhaustive research online in May 2008 for a car that was cheap to: buy, fuel, insure, repair, and, well, cheap on medical bills (i.e., safe), I found my own 1994 Geo Metro on ebay. I get a ridiculous 50 MPG, use it mostly for groceries and gas but also semi-annual trips to VA to see family (from NC, about 250 miles one way–exactly one 10-gallon tank of gas!), and have paid only for regular oil changes and tuneups, a new battery, and $450 for new head gasket and master cylinder (obviously also shopped around for… Read more »

Brett Legree
Brett Legree
11 years ago

I agree with keeping a car past the end of payments – to a point.

If I’m going to drive a 20-year old car, it is most certainly *not* going to be a domestic econobox.

As a husband and father of four children, safety is sometimes more important than saving money, so I’m willing to pay a wee bit more for maintenance on a larger car with a better safety record.

(e.g. a previously enjoyed Accord or Camry)

EscapeVelocity
EscapeVelocity
11 years ago

I drive a 13-year-old car, too (it’s a ’96 model, but it was manufactured in November 1995). The way I see it, when you buy a car, you might get a good one and you might get a lemon, but when you have 170,000 miles on a car, you know you have a good one.

christy
christy
11 years ago

I LOLed at the lack of “new car smell” comment.

Here’s a (currently) unquantifiable benefit to driving your old car:

The “new car smell” is actually the off-gassing of VOCs (volatile organic compounds). These are bad for your health. Some VOCs are thought to trigger cancer.

So by driving a car that’s done off-gassing, you’re saving your body too. 🙂

Kevin
Kevin
11 years ago

@Ryan2 – excellent points, thank you. I agree with the post wholeheartedly except for one issue which isn’t mentioned directly: it partly depends upon where you live and to a degree, your family situation. If my wife were still in her 30’s and was carting our two young sons around, I would not feel comfortable with her in a 13 year old car driving down I-80 in the middle of Nebraska. In the winter. Other than that, of course it makes sense to hang onto older vehicles and get your money out of them. But when the car’s proclivity for… Read more »

Irving Isler
Irving Isler
11 years ago

Buying used is also the way to go as well. Two years (especially cars just off a short lease) can be some of the best deals around. A car depreciates (depending who’s doing the talking I imagine) around 30% in the first two years. So just rolling a new car off the lot as the first owner costs you about 15% of the sale price. Two year old cars are generally still fully covered under warranty (except the new 2-year Tesla bandwagon others might jump in on), and if you can find one with low KMs (say about 16 000KM… Read more »

AD
AD
11 years ago

Our car was bought used in 2005 (it’s a 2003), and we paid it off last year. We’re now saving cash for repairs and/or the day we may need a second vehicle.

When my husband’s truck was rear-ended and totaled, we decided not to buy a second vechile just yet, which has saved us a ton of money. It’s not always an easy arrangment b/c we don’t live near public transit routes, but it’s been worth the effort.

J.D.
J.D.
11 years ago

I may not have time at the moment to write articles, but I can squeeze in a few minutes to leave a comment. As I mentioned at the end of this post, although I do very much want a Mini Cooper, I’m satisfied to drive my Focus into the ground. I bought it new on 08 December 2000. It’s got a ways to go, I’m sure. (I hope.) My wife is doing the same with her car, too. She has a 1996 Honda Civic (with only 60,000 miles on it!). She wants a new Prius. But she, too, is content… Read more »

Josh Baugher
Josh Baugher
11 years ago

This plan only has one loophole I can think of: safety. Safety features have improved since 1995. How can one only consider monies saved when safety is involved?

Stephanie
Stephanie
11 years ago

I love this article. I’m 23-years-old and drive an eight/nine-year-old car (a year 2000 model, which I don’t consider old) that I bought used in 2006. I plan to drive it until it falls apart. I get disgusted when I see my friends who, like me, are starting their first real jobs out of college, and who are buying new cars “because they deserve it” – like graduating college is such a hardship (get over yourselves…) that the only way to reward yourselves is to put yourself into debt, paying off a car you can’t afford.

JM
JM
11 years ago

I learned two things about cars from a friend who was an investment advisor:

1) Most of his $1 million (and up) net worth clients drove to his office in old cars. Some were beaters.

2) “The only thing that depreciates faster than a car is food.”

This is why I drive a 1997 Honda CR-V with over 127K miles. I hear Chad sitting on my shoulder talking me down whenever I visit edmunds.com.

The Happy Rock
The Happy Rock
11 years ago

I am right with you as I have a long since paid off 1994 Sentra that is quite a spectacle to look at, but continues to run without any repairs. I only paid 5k for it 7 years ago. We have two children and the two door and very small nature of it are an inconvenience, but how really cares. I have bigger dreams and things to focus my energy on. We have 3k-5k saved for a new used car whenever it should go. Somehow I take solace and pride in the fact that I drive a junker. It also… Read more »

Phil
Phil
11 years ago

Great post! I drive a ’92 Sunbird and as a 26 year old I get a lot of looks from my peers who ask me “why not buy a new car,” to which I respond much the same as you did. I also work with teenagers…who thought it was kind of lame until they got to know the why behind it. Now they think it’s cool because it’s “retro.” I have money to buy a “new” car (Read: used, but new to me) but will wait a few more years to see what I can get out of my Sunbird.… Read more »

SFB
SFB
11 years ago

We do it slightly differently in our family. We keep one nice car (a Mercedes) and use it when we go on trips, want to be comfortable, etc. For the daily stuff, my wife drives a 5 year old Toyota Corolla that is still in excellent shape and probably has at least another 3 to 5 years on it. Maintenance has been less than $1,000 per year, BUT I’m expecting that I’ll have to probably put in more than that over the next few years (but it’s still worth it). SO, we have an every day car that my wife… Read more »

Miss M
Miss M
11 years ago

I drove my first car, a plymouth neon, for 10 years. I’m amazed your maintenance costs were so low, mine on that little car were definitely higher. Lots of little things broke and I finally got tired of all the problems. I then bought way too much car! I finally paid that off this year and I hope to drive this car another 10 years. It will be great for when we have kids, has all the safety features and still makes me smile. Buying a car that you will be happy with for years is part of that equation.

real money
real money
11 years ago

There is a guy I work with who is a really cheap guy. Not frugal but cheap. For me frugal = good. Cheap = bad. He has a 95 Honda accord, which is starting to break down on him. His windshield cracked and it cost him $800 because he has to get some rust around the window fixed first. I have trouble investing $800 in a car that is probable worth $50. I told him to get rid of the car then. Well the next week his break lines went. Guess what I told him. After he spent just over… Read more »

J
J
11 years ago

This post is pretty relevant to me. I have a ’01 Nissan Maxima with 180k miles on it. These things seem to run forever, and at this point, I might as well run it until it dies, since the resale value is pretty much nil.

The plan is to save money now so we have $10-$15k banked up when we do need a replacement car. Trying to avoid payments at all costs!

John
John
11 years ago

Good idea and inspiring, but as Ryan2 (above) posted, unfortunately, the calculations don’t make much sense. When you buy a car, it is worth some amount of money initially, and then depreciates over time with use. So each year that you have it, you’re “saving” less money, because you can only “save” the value of your car. Once it’s worth practically nothing (i.e. only scrap), you save nothing. And in fact, it may actually cost you money, because of upkeep expenses. The calculation that you need to do is: how much did I initially spend, how much has the car… Read more »

kelle
kelle
11 years ago

We have two beaters, a 1991 Chevy and a 1995 Honda (40 mpg), both pass the 240,000 mark. Even though they both were running fine, we took them to a local mechanic for a maintence workover this past summer.
We have the cash to, but never have and never will buy new.

Gunnar Tveiten
Gunnar Tveiten
11 years ago

That’s a AMAZINGLY silly way of calculating the cost of a car. There is no direct relation between the cost of a car and the payments. The correct way is to say that the cost of a car is equal to value-loss, plus repairs. So a new car will generally have a larger value-loss, but less repairs. A new $20K car can easily lose 20% of it’s value in the first year, or $4K, which makes it expensive, even if has zero repairs needed. The most inexpensive car to drive, is the one where the sum of value-loss and repairs… Read more »

Samantha Bailey
Samantha Bailey
11 years ago

Another advantage to driving an older car–less likely to have it broken into or stolen! I typically drive my cars for 10-12 years (around the time that the cost of maintenance and the inconvenience of breakdowns begins to eat into the benefit of driving an old car). Driving an old car isn’t a guarantee it won’t be broken into or stolen, of course, but I do think it lowers your chances! Also, I tend not to be stressed about little dings, worried about having the car “keyed,” etc. I always feel more stressed out the first 2-3 years driving my… Read more »

Eric
Eric
11 years ago

I think I’d rather be broke than drive a Geo Prism.

The Personal Finance Playbook
The Personal Finance Playbook
11 years ago

My dad used to always say that there was never a good reason to take out a loan to buy a car. Thus far in my life, I never have. Of course, I’ve driven some pretty junky cars, especially when I was younger. I recently bought a new car (to me). I sold my 95 mercury for a nominal value and purchased a 2004 Toyota Camry. I paid all cash for the purchase. I don’t know if it was a good decision or not. It would be nice to have that 11k back, but I also have a car that… Read more »

DebtFreek
DebtFreek
11 years ago

I employee this exact same philosophy!

I currently drive a 2000 Jeep Cherokee. I bought it used & currently still owe on it, but plan on driving it well after I’ve paid it off.

Great article…people should REALLY take note of this article. Yes it goes against popular opinion, but isn’t that what we have to do to “Get Rich Slowly”??

DebtFreek!

najt
najt
11 years ago

Not everything is as nice as it looks at first glance. Firstly, here in Europe (at least in Poland) owning an older car actually makes your insurance more expensive. The insurance company assumes that the older the car gets the more accident prone it is. Secondly, having an older car may save you money only when it is a fairly dependable car. Sometimes buing sth new is more profitable because it brokes less often. What’s more, older cars tend to have less economical engines, which means you’re going to spend more on gas. However, this post is still a nice… Read more »

KC
KC
11 years ago

I drove an 89 Nissan Stanza from 93-05. My parents bought the car for me used and I just pocketed the money saving for my next car. In 05 I got rid of the Nissan w/150 mi on it. I bought an 01 Acura for $18k. I paid cash. I’m still driving the car and its still a very nice car. And its still worth $7k or so. Last year I did put about $1600 in repairs in it. First off I bought a new set of Michelins in January (good for another 65k miles). Then in December I had… Read more »

Jorge
Jorge
11 years ago

Great post! What’s great about driving your car into the ground is that it’s a strategy that everyone that drives can implement. Put it in your plan to drive your car for at least 10+ years and watch your savings account grow!

-Jorge

jeffeb3
jeffeb3
11 years ago

Ryan2, Gunnar, I think it’s a perfectly reasonable way to calculate the savings. Here’s my justification: The geo was worth what $13,000 new? After 4 years, maybe it’s worth half $6,500? But, what most people do is trade it in (trade in value $4,000), they get a more expensive car, maybe $17,000. They have the same loan, $13,000, and the same payment, and only one car. They 2nd car might be nicer, but it still has 4 tires and one steering wheel. That’s the argument made, and if you look at the expenses that people incur when they get into… Read more »

Frank
Frank
11 years ago

Hi,

why drive a car at all? I commute to work by subway, which is cheaper then the gas only. And faster.

From time to time I’m renting a car for the weekend. Which is about 90€ for the whole weekend.

And I’m a member of a car sharing community. I can pickup cars anywhere in the city. This costs about 2.30 € an hour plus 0.24 € per km. Including the gas.

So my annual costs are less then 2500€. And I’m always having a car that smells new 😉

anne
anne
11 years ago

I actually like your way of thinking ‘saving’ the car payment every month. It’s using the same philosophy as Dave Ramsay’s snowball method of paying off lowest cc debt first to gain a sense of accomplishment which leads to more confidence and less liklihood of abandoning your new and improved budgeting ways. Guess the critics are not seeing the philosophy behind it!!
Concrete thinking is depressing.

Ian
Ian
11 years ago

Great Post! My car is going on 10. And until it no longer runs, it will be my car. I think though when you do have to buy a car, you should try to find something not too old to make sure you get the benefits of the milage and hopefully some warranty. Just not new.

TosaJen
TosaJen
11 years ago

We try to avoid investing in depreciating assets, too. Most cars are transportation, not investments. Our current cars are a 1994 Toyota Corolla (165k) and a 2002 Honda Odyssey (80k). They look a bit trashy, but we’re OK with that. They run fine. We’ve had a few expensive repairs on the Corolla over the past 3 years, but they’ve been a lot less than a replacement used car. I remember someone asking Click and Clack when it’s time to stop paying to repair a car, and they said that when the repaired car is worth less than the repair *to… Read more »

Emily
Emily
11 years ago

Or you could ride a bike, walk and take public transportation. If you have a gym membership, you won’t need it if you bike and walk. If you skip using your car even 20% of the time, think of the money you’d save, the wear and tear you’d save on your car, and the health benefits. I won’t go into the environmental benefits! 🙂

Jeff
Jeff
11 years ago

As some of the comments above have mentioned, this type of money savings is highly dependent on the individual car, but it also depends on where you live. In 2003 I was driving a 1994 Dodge Spirit with 169K on it. The engine still ran perfectly, and it never gave me any problems. My problem, however, was that I was moving from New York to Pennsylvania. In New York they use a ton of salt on the roads in the winter, and everyone that lives there knows that no matter how much you was your car it will eventually take… Read more »

Irving Isler
Irving Isler
11 years ago

@Emily; and yet I think it’s important to look at things we do in as large a frame of reference as possible, because everything you mentioned should weigh into any decision. And it’s a pretty easy, logic argument to make for decreased dependance on the automobile. OFFTOPIC Warning I bet if one were to chart the easy access to car loans, with the popularity of tvs and cross reference to obesity we’d see a pretty big increase around there. I got pretty chubby after I got my first car. I used to bike everywhere. It was a challenge to work… Read more »

Sam
Sam
11 years ago

We just bought a new (to us) car this past fall, we saved up and bought the car with cash. I had been driving a 1999 paid for car that I hated. In the same time period that I owned the 1999 car I have a friend who leased two cars (her first least cost $500 a month and her second lease is $700 a month and she still has student loan debt) and I have another friend who is on his fourth car. Those car payments add up my friend leased her first car for 3 year years and… Read more »

Ashley
Ashley
11 years ago

I was able to pay off a new 1992 Honda Accord within 6 months, and it was still going strong in the fall of 2008 with 252,000 miles when I hit a deer :(. While I had some high maintenance years (up to $2000 on a really bad year), all maintenance costs (including oil changes) averaged to less than $70/month for the life of the car. And my insurance was down to less than $50/month. And I did splurge on occasional detailing (~$130 and worth every penny – I only did it 2 or 3 times over the 16 years),… Read more »

Mirrah
Mirrah
11 years ago

I too have an older car, a 1993 Honda Civic. I bought it new in 1993 and paid it off in 2.5 years. It has been the best running car I’ve ever had, only about $2500 of repairs in the last 16 years. I simply like my car, so that’s one reason I haven’t updated, the other reason is I can only put so much away per month, but I am almost there so when my Civic finally gives up, I’ll be ready. Great post.

Spend&Save
Spend&Save
11 years ago

We do basically the same thing. DH drives an ’01 that has 120k and runs great. I got a “new” car (2002 with 60k) in April ’08 and sold my ’92 with 185k very cheap.

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