One of the things I've noticed in looking at the vehicles people drive is that those who have serious money problems tend to drive run-down cars. And that's not surprising, but what is a shocker is that these people would actually save money if they drove well-built new cars. Let me explain.
An old car is actually more expensive to drive than a new car. If it is sufficiently old, then it's a car that has high maintenance costs. Maybe the alternator goes out and requires a couple of hundred dollars to repair. Maybe the power windows stop working. There's another $300. It's always one thing after another with old cars. You're always replacing parts and taking it on the chin in terms of the labor expense you pay to the car repair shops.
This is especially true if you buy an older American-made car. Anything that was made before 1995 is going to have very high maintenance costs. If you add it all up, you're probably spending several hundred dollars a month just on the maintenance of the old beater you're driving around, thinking that you're saving money. You would be far better off financially to actually go out and buy a new car that has zero maintenance costs.
A new car that's well built, such as a Toyota, which is my top-recommended car company, will work as promised. Plus, it comes with a strong bumper-to-bumper warranty, meaning that if anything goes wrong for the first three years or 36,000 miles, you're not spending any money out of pocket at all. The dealer will repair it for you free of charge.
So instead of spending all this money maintaining an old beater car that costs you several hundred dollars a month on parts and labor, you could be spending the same dollars (or perhaps even less) on a monthly payment for a brand new Toyota vehicle. But that's not the whole story of how driving a new car actually saves you money.
New cars are also more fuel efficient, especially if you're driving a Toyota. So you'll save money every month in terms of gasoline alone. And as fuel costs continue to rise in our uncertain global economy, this could save you even more in the years ahead. Longer term, you may even consider switching to a hybrid vehicle, although hybrids are today not well justified in terms of cost savings alone. (There are other reasons to own a hybrid, however...)
The second thing to consider is the value of your life and safety, since new cars have much better safety features. They have better airbags and restraint systems, better crumple zones and better road handling for dangerous conditions such as icy or wet roads. You'll be much safer in a newer car, no question about it. You might think you're safer in an old Chevy, but in reality, these cars are far more likely to lose control, and they weren't designed with the same sort of crumple zones and restraint systems as today's smaller, lighter and more technologically advanced cars.
The third reason to move to a new car is based on the value of your time. Even if it costs you the same per month to drive an old beater versus a new Toyota, what's the value of your time in terms of waiting around for repairs on your old car? If you have to take that car into the shop once a month, you're probably wasting at least three or four hours every time a repair has to be done. And what's the value of your time? Is it worth $20 an hour? $50 an hour? Or perhaps just $10 per hour? Let's say it's worth just $10 per hour, which means for every repair, you're wasting $40 of your time, plus probably a couple hundred dollars on the repairs itself in terms of parts and labor. Wouldn't you be much better off putting that money into a new car and using that time to be productive and earn money at your job or earn extra revenue if you're running your own business?
Now you might say, "Okay Mike, all of this makes sense. But I don't have the money to buy a new car." I understand the situation. It takes a little bit of money in savings to get ahead and start making these smart financial decisions that will save you even more money in the long run. But the truth is it doesn't take much money to make a down payment on a new car. Only a few thousand dollars. And it's easy to set aside a few thousand dollars if you simply watch your consumption. You could probably save a few thousand dollars a year just by not buying coffee at Starbuck's, or by avoiding fast food meals and making your own meals at home. If you have any kind of a job or income whatsoever, it's pretty easy to set aside a few thousand dollars by watching your consumption.
Think about all the stuff that's in your house right now. Do you really need all that stuff? You probably spent a couple of thousand extra dollars in the last year alone buying this stuff. So now, this year, instead of buying more stuff, set aside that money as a down payment on a new car. Then you can sell off your old car for a few hundred bucks, buy a new car and start driving a vehicle that's going to save you money and probably make you feel a little better at the same time.
The bottom line is that people who have financial difficulties are almost always in that situation they've made a series of bad financial decisions. Those decisions could be about auto insurance, purchasing a new car, buying life insurance, working with a home mortgage company or dealing with credit card companies. Poor people tend to make poor decisions. Most of that is because they haven't been taught how to make good decisions about finances. Very rarely is anyone poor because of circumstances alone.
Now, of course I'm talking about people in industrialized nations like the United States. Without a doubt, there are poor people in less economically advantaged countries all around the world who are indeed poor by circumstances alone. But it is our responsibility as relatively wealthy individuals on this planet to help out those disadvantaged people around the world, and the only way we can do that is by first gaining control of our own financial circumstances. As we make better financial decisions and set aside more money, make more money, boost our productivity and function as smarter consumers, we have more discretion about what we wish to do with that extra money we have set aside.
Personally, I'm a big believer in making donations to charitable organizations and helping out those in need, especially in the aftermath of natural disasters such as tsunamis and earthquakes. But in order to get there, you have to start making sound financial decisions. Otherwise, the entire economic system in this country serves as a financial trap. We are told the rich get richer and the poor get poorer, and it's absolutely true, but not for the reasons you might suspect. Part of the real reason is because people who are financially poor tend to keep making poor decisions about their finances.
We have in this country a remarkable degree of economic mobility. That is, you have within your hands the ability to alter your financial destiny. Here in the United States you can move from poverty to wealth in just a few years. Likewise, a person can move from wealth back to financial poverty by making poor financial decisions in rapid succession, such as driving an old beater vehicle that costs more to repair than just buying a new car.
So even if you are financially strapped today, realize that you are in a country that offers you unprecedented opportunities for economic mobility. You can alter your financial future by wising up about how to deal with home mortgages, home loans, credit card debt, your personal credit rating, food purchasing and other discretionary purchases. If you're wise about it today, you can start saving money and, just as importantly, start finding ways to stop wasting your money on things like old cars.
REVIEW TYPE