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New Car? Not yet for the Long family.

May 11, 2012

I found this picture on Wikipedia. Who puts a picture of a 2004 Ford Focus on Wikipedia?

A few weeks ago, Kerri, our two children and I took a road trip to Phoenix in our 2004 Ford Focus. While the Suburban would have offered us more comfort, we opted for the Focus to save on gas.

I am glad we chose to cram ourselves in the clown car, as we were able to get more than 30 miles to the gallon on that trip. Unfortunately, it was a little too much for the little Focus that could, which was shaking pretty badly by the time we pulled into Sterling.

We had run our back tires down a little more than we should have. About $200 later, the car rides well again. With about 115,000 miles, we need to spend a little extra money on it these days, but it is not that big of a deal for one major reason — we have not made a car payment on it in more than five years.

We bought the used Focus with about 30,000 miles on it seven years ago. We initially took out a car loan, but we worked to pay it off quickly.

The idea of not having a car payment is pretty unusual in our country. The average monthly payment on a car loan is around $400 these days, and 45 percent of new car loans are for more than six years. Americans have around $313 billion in auto loans altogether, and the average amount financed is around $26,000.

This being the case, it is easy to assume we always will have this debt. Once we get one car loan paid off, it is time to get a new car. If we still have a car debt and it is time to get a new car, just roll over the loan into a new car loan. Auto dealers are so generous to be willing to do this for us.

This is the mindset that has gotten people in this country into more than $300 billion in auto debt. To avoid car loans that can weigh you down, consider the following tips:

First, unless you are independently wealthy, buy a used car. The average amount of depreciation in the first three years of owning a car is 45 percent. That basically means the car you buy new is worth about half of what you paid for it in only three years. If you’re willing to let someone else take care of that first 45 percent depreciation and buy a car later, you can expect only an additional 25 percent depreciation during the next three years.

Eventually, if you drive it, your car will be worth only what you can get out of the spare parts. But, the longer you can drive a paid for car, the more you can save for your next car.

How much is it worth to drive a car for up to 225,000 miles? “Consumer Reports” did the math. If you are willing to drive a car 15 years, you will save around $31,000 as opposed to buying a new car every five years.  If you are willing to buy a used car after the first three years, which takes out most of the depreciation, you will save even more.

I’ll be honest. I’m kind of tired of our Focus. I look at some of the new cars on the road, and I’m a little jealous. I look at some of the fancy features on the newer cars and I’m pretty impressed.

It is tough, but I keep reminding myself why I continue to drive it. My yearly maintenance costs are a lot less than what my car payments would be, and I know that we can save a little every month so we can pay cash for our next car purchase, or at least make a good down payment on it. Our next car won’t be fancy, but it will be enough to safely get us where we need to go.

            Even though I don’t necessarily like the Focus, I can’t let my 4 ½-year-old daughter Quincy know. It may be a stretch, but I hope that when Quincy is ready to start driving, she will learn from her dad behind the wheel of the Focus.

6 Comments leave one →
  1. May 11, 2012 10:27 pm

    I’ve never had a car payment, ever. I have driven good cars, ok cars, amazingly ugly cars, and for a few very brief periods, no car. But throughout some serious ups and downs financially, I have never had to stress out about where the car payment was going to come from, I have enjoyed extremely low car insurance rates, and I have been able to to say with no hesitation “Sure, borrow my car. It’s paid for, no worries”. Sometimes I’m tempted by new cars, but lets be honest with ourselves. It’s a hunk of metal that we use to get around. If it moves from point A, to point B, it serves it’s function perfectly.

    • May 11, 2012 10:31 pm

      Thanks for the post. It is good to hear from you. I think you are probably in the less than 1% of the population that has never had a car payment. Great work. The only drawback is when your car starts on fire in the parking garage in downtown Lincoln :(.

  2. May 11, 2012 10:42 pm

    Yeah. That was a definite low point. But at least I didn’t have a car payment to worry about while they tried to sort out liability issues. 🙂
    I enjoy your blog. Financial responsibility is a big deal for me.

    • May 13, 2012 8:24 pm

      Sherry, I appreciate having you as a reader. I’m also happy that our paths crossed for a short while at Gallup in Lincoln. I hope things are going well for you.

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