"If it flies, floats or fornicates, always rent it.. it’s cheaper in the long run." - Felix Dennis
So which of those three does a car do?
The Real Cost of Owning a Car
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Re: The Real Cost of Owning a Car
#22> How much would I have after three years? Assuming a modest 10% return per year Is 10% really a modest return?
considering that the author is South African and the inflation rate there ranged between 5 and 10% in the past 10 years ( http://www.wolframalpha.com/input/?i=south+africa+inflation+... ), 10% would indeed be a modest return.
Fair point, but then the whole article should be accounting for the time discounted value of money, etc. etc.
Re: The Real Cost of Owning a Car
#23Found this very interesting, and especially so since I've been evaluating the financial efficacy of owning a car a lot as of late.
I own a Green 98 Subaru Forrester with about 150k on it that my father gave me on my college graduation. It's been a heap of problems, due mostly to its age, but I've come to realize that owning it is actually not a bad value (it is of course not an investment, but a consumable product). The problem is one of cash flow.
My Forrester recently had a wheel bearing go out on the rear passenger side, and it was going to cost several hundred in parts and labor to get it fixed. Since the car is so old and I'm tired of fixing it, I decided to just let it sit for a while and try out not having a car.
I started using a car sharing program (CityWheels), which requires you to pay for each time you use one of their cars. Although the cost of operating a rental car is higher and the use case is less flexible, it's not a terrible deal.
What it has made me realize though, is that for the cost, owning a car isn't a bad deal if (like me) you live outside of a huge city, there isn't a lot of public transit, and you want to get around. As I mentioned above, it's cash flow that gets in the way of realizing the value.
When you own a car, you pay for gas, insurance, incidentals and repairs, and it's the last category that really gets you. Figuring up the cost of ownership, I pay about $.27/mi to drive the Subaru compared to ~$.40 for the City Wheels car, but the CityWheels car feels like a better deal because I pay everything up front. If I need to drive 30 miles, I have to pay the $12 now. If I drive my car 30 miles, I sometimes don't have to pay at all (if I don't need to put gas in it). But then, about 2-3 times a year, I have to pay $400 or $600 all at once, and it makes me resent the thing.
I've heard it said that more millionaires own Toyota Camrys than any other model, and it makes sense: as some of the commenters above mentioned, paying for reliability and quality is worthwhile, but paying for an Aston Martin should not be viewed as an investment, but as a consumable.
Re: The Real Cost of Owning a Car
#24One thing this argument ignores is social signals.
If you're in sales, as one example, you may want an expensive car. This lets clients subtly know that you are doing very well, and can serve as a form of trust for some people.
If you have a small penis and no significant other...
Re: The Real Cost of Owning a Car
#25Yes cars are extremely expensive. But for many the ability to live within driving distance of work is worth it. I know people who don't have cars. They really miss them. I can drive 250 miles to see my family on a whim. It takes 4-5 hours. Taking public transit requires 7-8 hours, and only gets me within 25 miles of my parents' house (which is pretty good compared to much of the US). And something like reliability is…
Anecdotally, for the first time in 6 years I don't have a car and I'm loving it. I'm living about 10 minutes walk from the CBD. To visit anyone I'd fly anyway, and the airport is only 15 minutes away by bus.
Walking everywhere is much more satisfying, and not having to worry about breakdowns, oil changes, registration - not to mention the cost - is very nice. On the occasion that I decide to take a road trip, I can rent a car, for a small percentage of the annual cost of ownership.
It probably helps that I live in a dense, pedestrian friendly city though (Wellington, New Zealand).
Re: The Real Cost of Owning a Car
#26It depends on where you live. In the States or outside a fair-sized town, there's (so far) no alternative to owning your own car out of sheer necessity. In the city, especially here in Europe, it's a different story. The usual rule of thumb is the cheapest car costs you _at least_ 300 €/month (taxes, depreciation, not counting gas money)!
When my son was born this made it easy for me to decide to buy an Xtracycle (http://www.xtracycle.com) for my bike instead of a car. The Xtracycle covers 95% of my transportation needs and 300 € buys a lot of trips by taxi whenever that's necessary.
Still, the point of the article as I see it is that most people underestimate the cost of their car. That's a small problem. The big problem is that our societies underestimate the external cost of private car ownership. When you figure in loss of life and health through accidents, noise, and pollution, loss of usable space in inner cities through car-only streets and on-street parking, and general loss of quality of life - the private car becomes the most expensive mode of transportation ever invented.
Re: The Real Cost of Owning a Car
#27I dont understand the comparison of cars with investment.
Car is a utility which makes life better, hence expenditure. You invest to make money to spend on utilities which make your life better. :)
Re: The Real Cost of Owning a Car
#28Yes cars are extremely expensive. But for many the ability to live within driving distance of work is worth it. I know people who don't have cars. They really miss them. I can drive 250 miles to see my family on a whim. It takes 4-5 hours. Taking public transit requires 7-8 hours, and only gets me within 25 miles of my parents' house (which is pretty good compared to much of the US). And something like reliability is…
My strategy is to own a few $500-$1200 cars (might be different in your area) that work buy might not look very nice. When one breaks down, drive one of the other ones until the best one is fixed. Of course, sometimes they sit in my garage or driveway broken for months at a time. But it's always a learning experience (and a little time away from the keyboard).
Also, I'm not going to be impressing any clients with any of my vehicles.
Re: The Real Cost of Owning a Car
#29Re: The Real Cost of Owning a Car
#30I think the real title should be "why millionaires don't have great cars while they are becoming millionaires." When they are rich, they can and do by nice cars.