Lessons Learned in Automobile “Ownership”

money-carNo one was a bigger idiot when it came to car ownership than I was a few years ago.

Until I was 35 years old, I never had a car payment.  Pretty cool, right?  But I bought my first car 5 years ago and things went south really fast.

Here are the cars I have owned in the last 5 years:

  • Honda Fit – My first new car.  Financed at 6% with a total cost of $17k.  I owned it along with a Honda Accord (totally paid for) with 130,000 miles on it.  The Fit payment was app. $200/month.
  • Audi A4 – I was commuting to work 50 miles each way and the Fit was killing my back.  So I traded it in after 1 year of ownership (losing tons of equity on top of a crap load of depreciation) and bought the used A4 for $22k.  The Audi payment was app. $400/month.
  • Honda CRV – I took on a CRV Lease at $250/month.  Still driving the Accord with 150k miles at this point.
  • Porsche Cayman S – This is where I lost my mind.  I traded the Audi A4 for it when the economy tanked.  I got the Porsche for $30k with 7,000 miles on it.  I loved the car dearly, but I have a wife and 2 kids…the car was a two seater.   By the way, I lost $6k on the Audi and now had three cars.  The Porsche payment was $700/month.
  • Audi Q7 – One year later I traded in the Porsche for the Q7.  Sure, I got over the bug of having an incredible sports car, but I bought a luxury wagon instead.  Payment = $800/month.  Add the CRV lease and I was paying $1k/month in car payments.  Can you say “freaking lunatic”?
  • Honda Odyssey and Honda Accord – I came to my senses (actually I freaked out and wasn’t sleeping because I was broke) and sold the Q7 (at a $5k loss) and traded in the CRV (with a penalty of $2k) for these two Hondas.  The Odyssey is totally paid off and I have $5k left on the Accord.  I have been paying $1k/month on the Accord, so after it is paid off in 5 months I will continue to put the payments in a savings account.  The Hondas should last me another two years (only 50k miles on each) at least.  By that time I will have banked $24k and will buy another couple of used beaters for way less than that.

7 cars in 5 years.  Isn’t that insane??

Between payments and lost equity I imagine that I lost upwards of $50,000 on automobiles.  Dave Ramsey calls this “stupid tax”.  I call it:

  • My kids’ college tuition
  • $300k-$500k in retirement savings if I continued my stupid ways
  • Paying off my mortgage 10 years early
  • Financial Independence in general

As soon as my Accord is paid off, I vow to never have a car payment again.  Cars are wealth killers; there are no two ways about it.  Sure, my scenario is extreme…but even if you have a car payment between $300-$500, you are throwing away your money on a material item to keep up with the Joneses.

Learn from my mistakes.  Don’t buy a car that you don’t need with money that you don’t have to impress people you don’t even like.

Instead, buy a used car for cash only and put your “car payment” into a savings account for later.  Do that for a while and you can even buy the Porsche for cash.  Funny enough, by the time you save $30k in a bank account I guarantee you won’t want to blow it on a car!

Feel free to share some creative car buying stories in the comments below!

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