Saturday, June 16, 2012

The $52,000 2002 Honda Accord

 I drive a 2002 Honda Accord with green paint peeling green paint. It has cost me $52,000. This is the story of how. 


The Paint on my Car

Background


I bought my car new in 2002. Technically, I leased it, learned more about personal finance, felt stupid and then bought the car at the end of 5 years in order to have some sort of atonement for my mistake. I now have a mentality of  'I'm going to drive this until the wheels fall off in order to get the most for my money'.

In addition to being a motorist, I'm also a personal finance geek. I love reading finance articles and understanding the ins and outs concerning the world of how we earn, spend and save our money. I also am obsessive about keeping track of expenditures (yes, I have a budget and you should too!).  I've always thought cars to be horrible, horrible financial drains. I decided to data mine the expenditure data to quantify just how large of a drain my current car has been on my wallet. The results astounded me.


 Expenses


I exported my expenses into the following spreadsheet:


There are a few interesting things to note about this data:
  • I've paid ~$52,000 (so far) for my peeling paint of a car!
  • I've paid almost as much in operating costs as I originally paid for the car.
  • I had horrible insurance costs in the early years. This makes the decision to buy a new car, much less lease it, incredibly dumb. I should have been driving a much older used vehicle until my rates improved. 
  • My fuel costs aren't typical in recent years since I only put about 7,000 miles a year on my car.
  • Did I mention that I've paid ~$52,000 for a car with peeling paint?

Thoughts


$52,000 is what a 10 year old ordinary looking sedan that has been paid off for over five years has cost me. Let that sink in for a moment.

This isn't a Lexus. I haven't bought a new car every 3 years, 5 years, etc. Still, I've spent over $50k. That is an astounding amount of money for a car that has peeling paint. Cars are a horrible waste of money.

My car is at the age where you start to have the 'I'd spend 1/3 of the value of the car to fix the transmission and have no guarantee something else expensive wouldn't break' type conversations with your significant other. I'm starting to think it is perfectly fine financially to keep repairing the car. A car clearly isn't an investment. I certainly don't want to spend another whopping sum of money to start the cycle over again. My plan is thus:
  • Drive the car for at least 5 more years. 
  • Fix it when it breaks.
  • Get a cheap-o paint job when the peeling paint becomes too hideous. 
  • Get rid of it when it starts consistently leaving me stranded/inconvenienced. 

Closing Remarks


I hope this article widens some people's awareness of just how expensive it is to own a car (any car). Just for fun, I wanted to see what the money would have been worth if it had been invested in the S&P 500 in the last (wild) decade: $64,508. Amazing.


 

1 comment:

  1. One reader pointed out that it's not like I invested the $52,000 at the beginning of 2002. He is correct to point this out and the figure I came up with took this into account.

    When coming up with the $64,508 figure, I did the following:

    * Save the monthly payments until the end of the year
    * Invest a lump sum on Jan. 1
    * Compound whatever the return was for that year PLUS my principle + interest that had accrued from the prior years returns.

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