Let’s talk cars for few.
I love cars, all cars, well… most cars.
They can be fun, fast, sporty, rugged, sleek, luxuries. You get the picture. But ultimately, they’re for getting you from A to B and sometimes C. Yet I feel in today’s world we find it necessary to have something nice to show for our labors and what better way to show off a bit than by having a nice car that 1000 of people will see when you drive it every single day? Again, we forget the purpose of a car. We don’t need something with huge tires, a banging sound system, leather and alcantara wrapped interiors.
Earlier this week while in North Carolina hanging out with my Uncle (who’s been a CPA for 30+ years now), him and I started talking cars and money. He then took me to his driveway to show off his meticulously well maintained 1998 Honda Accord with 178,000 miles on it. I was shocked. I asked why he still had that “old junker” and he grinned and said, “I’m going to drive it until it’s no longer financially reasonable to do so.”
“I’m going to drive it into the ground, sell it for scraps, by a new one, and start all over again.”
Still shocked, I asked why.
He began to tell me how cars are one of the few major investments we make that will almost never turn a profit so in that regard why not try and minimize that negative return in any way possible. For him that’s driving a car until the repair cost outweigh the value of the car. Being a business grad myself I started to ponder if there was another way. I’ve always loved cars, I’ve owned a couple sports cars, a truck, a tank, a granny sedan, a roach, and a motorcycle. Only two of those I drove into the ground, the rest I either sold or some other force of nature reclaimed them from me. I thought I was being financially smart though, I know my random car facts and I know the value of each car I buy and where that value is going so I try to minimize that negative ROI. In some cases, I thought I could beat the system and buy a car that could appreciate, due to rarity or something else. And some have!
There’s still a problem with this approach.
The amount of depreciation a car accrues over the course of its life (of being a daily driver) will almost always outweigh the amount of appreciation (for collector status) and maintenance cost that come with driving a car regularly.
Initial cost of vehicle + maintenance cost + (depreciation/time) > Return on Investment
It’s a rough equation, but you get the picture. The cost of owning a car and using it will almost always be greater than what you can make selling it. That’s why classic cars that look nice and sell for a profit have low miles.
So maybe my Uncle is on to something. Will other people do it? Some are, but most won’t. But I am convinced, I’ll keep driving my tank until it’s no longer reasonable to repair and if I need a break from that and want something new I’ll just rent a weekend car with Turo (Check out our blog on Turo here).
Let me know what your thoughts are in the comments below! How many miles do you have on your car? Do plan to hold on to it for a while or get something new? How do you feel about the new car/used car debate?