Thursday, July 5, 2012

Cars: Rent vs Own

At one time, we had a mini fleet of cars parked in our garage and on our driveway.  Five cars, to be exact.  All of those cars required gasoline, repairs, insurance and registration.

Today, we are down to two aging cars with high mileage and neither car can be trusted outside of the confines of our city.  Forget about long road trips.  I recently scrapped the newest car of three because the engine was halfway shot and the transmission crapped out and I wasn't about to sink another $4000+ into a ten year old car.  Ergo, we have two cars left. 

One of the two remaining cars needs a paint job because two-thirds of this car's surface area is down to bare metal.  It has been sandblasted by the desert heat and wind.  This fact alone is pushing the spouse towards the dealer lots, despite our conviction not to buy another car within the next 3 years, and as a result I have been dragged around a couple of dealerships this week 'just to look'.  Fortunately, the spouse is disgusted by the high prices of even the used vehicles on the lot and no salesman has yet been able to get us into a cubicle to 'run the numbers'. 

I decided to total up our car ownership costs over the past 4.5 years.  These costs include all gasoline expenses, repairs, insurance costs, maintenance (tires for example) and registrations ... any expense in fact that could be tied to owning a car.  How much money did we spend in owning vehicles?  The chart reveals all.  Click the graphic to enlarge!

In adding up the costs and looking back at expenses I discovered the following:
*As we got rid of cars, our expenses naturally began to drop especially wrt repair bills.
*We shopped around for cheaper car insurance and lowered our insurance payments.
*We began to make the kids more responsible for their own gas and insurance.
*Major car repairs totaled thousands of dollars.
*No car payments of any kind.  All cars were purchased with cash but that still means that there was a break-even point to consider.  In the case of the car that I recently junked, I paid $25k cash which meant, given a hypothetical car payment of $250/month (which it would've been had I not paid cash), I would have to drive that car for at least 8.5 years approximately to break even without sacrificing purchase money.  I barely achieved that before scrapping the car.

My goal now is to rent a car whenever I need one for long road trips without incurring the cost of buying a new car and all that would entail.  I have no idea whether or not renting would be beneficial in our household, and so I will keep a monthly chart to track and compare expenses with expenses of the past.  I really don't want to buy another new car just yet but I know that when the spouse retires, a new car is inevitable because, by that time, both of the cars we currently own will be fit only for the junk yard.

It should be real easy to determine whether or not renting makes sense.


Lena said...

I think renting is a great idea if you go on a long trip or need a bigger and more reliable car.

Anonymous said...

Please do not buy a car from a dealer.
You will get hosed!
Look on craigslist, repo from credit unions, banks etc....
Use your kelly blue book and look at the trade in value and they also have ratings for cars as well so you can get an idea of problems or comments people have on cars.
People buy from dealers thinking they are getting guarantees but a lot of times those are not what they seem plus with the difference of what you could pay for the car from an individual or other source you can afford to do some fixes.
The renting should hold you over and give you time to do research. Look at less popular types of cars that are less expensive upfront. Also pay cash no loans.
Stay off those lots!!!!!

The Quest said...

@Lena ~ So far, it's working out well. The cost of renting a new car, over the cost of gasoline that I would otherwise put into my gas guzzling SUV, is only a difference of around $20 extra when I factor what the trip would've cost me using the SUV. Plus, I get to drive a new and much more fuel efficient vehicle.

@Anon ~ I hear you! I don't have a problem staying off the dealer lots because I have had nothing but negative experiences in buying cars from dealerships. It's OK .... the spouse lags a little behind me these days in making sound financial decisions but he'll catch up! He still tends to make decisions based more on emotion than practicality but I'm not criticizing him for that. I was far worse than he ever was.

I bought my last vehicle, the aforementioned SUV, from a private seller who parked it at our intersection just over 2 years ago. It is an expensive vehicle to drive but it only cost $3000 and it has plenty of use left in it. To buy it new, we're looking at spending close to $45k and there is just no way I was gonna do that! We've driven several different cars over the past month and I'm finding it to be cost effective provided we don't do it too often.

I promise to stay off the lots LOL

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