August 12, 2008

Buying a used efficient car can save typical Americans thousands a year.

Previously I discussed what a typical family spends in a given year. For transportation a typical family spends over $7000 annually on two cars. Car purchase was $3000, gasoline was $1,997 and other expenses were $2,146. In my mind this is way too much for a family to spend.

My last car was a 2 year old used 1995 economy model that I bought in 1997. I paid about $7,000 and drove that car for 10 years. I then sold it for about $1,000. The car got 29 MPG average and I drove it about 80,000 miles in those 10 years. I got the oil changed regularly around every 3k to 5k miles. I think I spent around $1000 to $1500 total in repairs other service. My insurance rates were around $600 a year give or take.

Purchase cost $7000
Sale return ($1000)
Gas costs 2758 gallons x $2.53 = $6,978
Oil changes 20 x $30 = $600
Repairs/service = $1500
Insurance = $6000
TOTAL = $15,078 for 10 years

My annual car cost = $1507

Typical American vehicle costs = $3,571

So compared to a typical American my vehicle cost $2,000 less per year.

Why was it cheaper? It was inexpensive, used, efficient and I drove it for 10 years before trading in.

Lets look at another example. Previously I discussed fuel efficient used cars. One of the cars from the Consumer Reports list is the 1998-2000 Toyota Corolla. According to Edmunds you can get a 2000 Corolla for $5600-5900 price range. If you bought one and then drove it for 5 years you should be able to sell it for around $2,000 or more. If you buy it for $5,900 then drive it 5 years and sell it for $2,000 your cost is $3,900 over 5 years or $780 per year. Compared to the typical expense of $1,500 annually per vehicle this is a $720 annual savings.

Since you are buying a fuel efficient car your gas expenses will go down too. The typical family spends about $2000 annually in gas (for the year 2006). I believe the average auto gets about 20 MPG. The Toyota Corolla averages 30 MPG. So with the Toyota the average gas use will be more like $1,333 a year. Thats a $667 annual savings in gasoline compared to average. Over two vehicles thats a $333 annual savings per vehicle. The 2000 Toyota Corolla is just one example of an economical used car.


Typical family expenses : Car + Gasoline = $5000

Two 2000 Toyota Corollas : 2x car + gasoline = $2,893

Between the cost of the car and the gasoline savings if a typical American family switched to two 2000 Corollas they'd save $2,107 each year.

Even if you don't have $5900 on hand right now you could finance the purchase of a $5900 car and your monthly payments would be $114 at 6% for 5 years. Even financing the purchase its still $432 less than what typical Americans spend annually on car purchase.

Saving $2,000 a year on a car makes a big difference. For a typical family making $42k annually this represents 4.7% of annual income.

No comments:

Post a Comment

I'm starting to get too many spam messages in the comments so I'm turning on moderation. Please be patient and wait for your comment to be approved. Note it may take up to a few days for approval, thanks. I've also had to remove anonymous posting of comments to cut down on spam and pure stupidity.

Blog Widget by LinkWithin