I’ve been saying it for years: If you can keep a car for at least 10 years, you’ll easily save $100,000 to $200,000 more over your lifetime.
Now, Consumer Reports has weighed in. According to their 2007 Auto Online Survey, “When comparing the costs of buying and keeping a car for 225,000 miles over 15 years to buying and financing an identical model every five years, CR found the savings could be more than the original purchase price of the vehicle — and even greater if the savings were invested.
“For example, Consumer Reports estimated the popular Honda Civic EX, with an automatic transmission, could potentially save its owner as much as $20,500 if properly maintained over 15 years — $1,500 more than its purchase price.
“In its analysis, CR calculated the costs of purchase price including destination fees, depreciation, maintenance and repairs, finance and interest, fees and taxes, and insurance for 15 years against the same factors for purchasing a new model every five years.
“Factoring in three percent inflation and an annual five percent interest rate, Consumer Reports estimated an additional $10,300 in investment savings. As a result, maintaining the Civic EX over 15 years would be approximately $30,800 less than the cost of buying a new Civic EX every five years. Consumer Reports found similar savings with other models.”
How long does it take to put 225,000 miles on a typical car? The average American car owner drives around 12,000 to 15,000 miles per year. If you’re going to put 200,000 miles on a car, you’re looking to keep it about 15 years.
While that’s a lot of oil changes, and you have to have some luck (if the car rusts out, you’ll probably have to get rid of it even if you’re not at 200,000 miles), keeping each car for 15 years will result in a tremendous amount of savings that adds to the bottom line.
Want to boost those results even more? After you’re done paying off the car, take the amount you’re using to pay off the car each month and sock it away into a savings account. Imagine: If your monthly payment for the car is $250, and after your 5-year loan is up you continue to put away $250 per month ($3,000 per year) into a Roth IRA or 529 College Savings Plan, and you do that for 10 years, you’ll have saved another $30,000 or perhaps twice that if you’ve invested well.
Now that’s a way to save some real bucks.
Published: Aug 30, 2007