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Are SUVs Ruining Retirement Savings?

43 points by edward 8y ago

siberianbear 8y ago
I found this article interesting because I couldn't for the life of me understand why so many people spend so much money on their cars. For me, a car was just a convenient way to get to where I wanted to go. My ego wasn't tied up in at all. I didn't own a car as a way to show off my status. I drove a series of "beaters" and often did my own maintenance and repair of relatively simple issues. I finally bought exactly one new car for cash, and drove it for twelve years. I never carried collision or comprehensive insurance, having the opinion that dealing with insurance is always a pain in the ass. The insurance premium is simply a markup on the expected value of what the insurance company would pay out. My "inner mathematician" couldn't permit it. Because of this, my total cost of ownership of cars was really low. I piled all the money I saved into investing, and came out far ahead. I sold my last car when I retired. Now, I walk everywhere: to the supermarket, to the park, to the gym, to restaurants, to the downtown bars. I'm so glad not to own a car.
- cstejerean 8y ago
  What other types of insurance did your inner mathematician prevent you from getting? Did you also skip out on health insurance because the premiums are a markup on the expected value of your health care costs?
  - hyperpape 8y ago
    The difference is that health insurance has an enormous upper limit on what it can save you. You rarely want to spend money for insurance on things you can eat the cost of. You want to spend insurance money on things you can't afford, and health care often meets that criterion. Plus, if it's employer sponsored, you're getting it at a substantial discount.
  - gruez 8y ago
    it's not really applicable to health insurance case because getting it through your employer is tax free, effectively saving you 25% on the cost.
    - hyperpape 8y ago
      I believe it's not just tax free, right, it's just priced into your salary. They won't give you the employer contribution back as cash if you decline, will they?
      - gruez 8y ago
        The money that goes towards the health insurance isn't subject to income tax, so it's cheaper than taking the money and buying yourself. employer provided health insurance: $50k salary $5k health insurance $50k taxable income buy your own health insurance: $50k salary $5k in lieu of health insurance $55k taxable income
        hyperpape 8y ago
        But it's better/worse than that. Because they won't pay you $55k if you decline healthcare. Instead, you get paid $50k with the option to get healthcare (take it or leave it). My family's insurance healthcare isn't tax-free, which would mean saving $2k or $3k or whatever. It's over $10k of insurance a year that I pay less than $2k for.
    - seanmcdirmid 8y ago
      And if you must go to the individual market, you can’t deduct it until it reaches 10% of your income. Not really fair.
  - deleted 8y ago
    [deleted]
  - kileywm 8y ago
    Financially, insurance is only a smart purchase if you 1. Cannot afford the worst-case-scenario. (Example: replace your car if it were totaled) 2. You expect the return from claims will exceed the cost of premiums/deductibles. This should never happen if insurance companies are savvy and want to be profitable. Large companies with a vehicle fleet often self-insure those vehicles (AT&T last I heard) because they can afford every vehicle worst-case-scenario (ignoring liability, which is a legal obligation). Socially/emotionally, insurance is a peace of mind which is important and valuable to some people. Security and all that.
  - maimeowmeow 8y ago
    His car is less than 10k, its simply not worth the insurance on somethat that at best covers around 90% of the value. Other insurance covers hundred of thousands for not much more the price cost.
- seanmcdirmid 8y ago
  Car ownership really is cheap in the states at the low end. Amazingly so from the perspective of the rest of the world.
- gruez 8y ago
  >I never carried collision or comprehensive insurance, having the opinion that dealing with insurance is always a pain in the ass. The insurance premium is simply a markup on the expected value of what the insurance company would pay out. My "inner mathematician" couldn't permit it. so what do you do if you drive to work, and you total your car? do you have the cash on hand for a replacement car?
  - sokoloff 8y ago
    Considering the next "beater" is likely to be well under $5K, I'd wager they probably do.
  - maimeowmeow 8y ago
    He drives a beater, you can buy another one for around 10k. If you dont have that kind of money in emergency fund, your playing it risky
    - s5fs 8y ago
      I see "runners" on Craigslist all the time for around $1500, I'd say that's the bottom dollar for something that you can probably drive for a year without serious mechanical failures. However, used is always a gamble (at any cost) so if you're buying cheap, make sure parts are cheap too. Just because you can get a 2000s+ BMW for $3k doesn't mean you should!
  - gascan 8y ago
    He describes he piled it in to investing. Put the repairs on a credit card, and you've got thirty-ish days to liquidate, which is plenty of time.
- lolsal 8y ago
  Other people want or need vehicles that offer more than a conveyance of themselves: Kids, gear, livestock, boats, ATVs, lumber, etc. It's easy to own a 'beater' if you only use it to drive from your house to your job, to the grocery story and back for 40 years.
  - KozmoNau7 8y ago
    The vast majority of people grossly overestimate their needs, though. Rental vans/trucks exist.
    - lolsal 8y ago
      Fair point, but renting a vehicle most weekends could easily make owning more cost effective.
      - KozmoNau7 8y ago
        If you truly need it every weekend, that's a very legitimate reason to buy such a vehicle, if you can't afford the money/room for a smaller commute-friendly vehicle, or similar reasons. I'm talking about the people who maybe need it once or twice a year, or like to imagine themselves needing it, when in fact they really don't.
    - z0r 8y ago
      The vast majority of people are airily dismissive of the logistics of other peoples lives.
      - KozmoNau7 8y ago
        Some people do have a legimate need and reason for owning such an overly large vehicle. Most people dont. They have a desire, not a need.
  - throwawayjava 8y ago
    > livestock, lumber The latter two sound like business uses. The article is about personal use of personal vehicles. > Kids, gear Even then, a sedan or utility/mini van can do the job at much lower costs. > boats, ATVs Boats and ATVs are also good examples of money pits that prevent people from saving for retirement. (Especially boats. I looked into buy one, and quickly noticed that I'd have to be on the lake like half of in-season weekends and/or use all my vacation during the summer before ownership beat renting. But I'm only on the lake a few weekends a year, and even then only need/want something other than a kayak maybe every other visit.) And again, the conclusion of the article is "But if you’re one of the many people who are woefully unprepared for retirement or any of your other saving goals, a good place to start would be cutting back on any unnecessary spending on transportation." If you're on track to retire, go ahead and buy that nice car/boat/etc. But if not, maybe consider cheaper alternatives.
- KozmoNau7 8y ago
  Some people obviously have a genuine need for a larger vehicle. Those people usually don't spring for the blingmobiles. To a lot of people, their cars and or other material belongings are outwardly visible extensions of their (imagined) personality, and signifiers of wealth to their peers. It's just a different set of values. Personally I absolutely love cars. Not for any status or macho identity, but for the mechanical intricacies and neat design ideas. I am much more interested in a 1970s Opel Kadett than a big new Mercedes or something. I enjoy the act of driving, not the idea that "I am driving something expensive that other people desire". Have you considered cycling instead of walking? It's cheap and there are so many opportunities to geek out over neat ideas.
  - hyperpape 8y ago
    > Some people obviously have a genuine need for a larger vehicle. Those people usually don't spring for the blingmobiles. Eh, I've seen people in construction/trades buying "utility blingmobiles". They need a big truck, but what they buy is bigger and nicer than what they really need. It's the equivalent of buying a $10,000 workstation to do web development (you can, surprisingly, run slack on a lesser machine).
- EliRivers 8y ago
  The insurance premium is simply a markup on the expected value of what the insurance company would pay out. My "inner mathematician" couldn't permit it. Is that not true of all insurance? Does this mean you go through life with only whatever legal minimum of insurance is required in any given circumstance?
  - deleted 8y ago
    [deleted]
  - marssaxman 8y ago
    That's how I do things. Insurance has generally proven not to be worth it, in my experience; they always find some way to not pay - so I only pay for the insurance I'm required to have. It's just another tax.
- poulsbohemian 8y ago
  There are states (I don't know how common) that require a base amount of insurance, so perhaps you were "lucky" in this regard that you didn't have to carry that cost.
amalag 8y ago
A lease is a depreciation financing program. It only makes sense if you want to change your car every 3 years. I think if they called it a Deprecation Financing Program they wouldn't get so many customers.
- ellisv 8y ago
  I think they'd have about the same number of customers -- most people I know who lease their car just want to drive something new and not put much effort in to maintaining it. They don't really car about the long term financial downside.
octorian 8y ago
I think my favorite part of the article is this quote: "Personal finance experts love to discuss how much money you can save by avoiding that daily Starbucks habit or packing a brown bag lunch every day at the office." followed by "this stuff doesn’t move the needle all that much"
hn_throwaway_99 8y ago
This was my favorite paragraph: > Personal finance experts love to discuss how much money you can save by avoiding that daily Starbucks habit or packing a brown bag lunch every day at the office. While I guess you could add to your bottom line somewhat by cutting back on the little things (a) this stuff doesn’t move the needle all that much, (b) it’s the little things in life that can give you small joys on a daily basis and (c) the large purchases will have a much greater impact on your bottom line. This is also a big difference I've noticed between a "rich dad, poor dad" mindset. Sweating the small stuff doesn't make much of the difference in the end, it's the much less frequent but more impactful decisions (where you live, who you marry, the car you buy) that determines your overall financial well-being.
- sbov 8y ago
  Except they're wrong. Over the life of a car, a $5/day starbucks habit can cost more than the difference between buying a new vs used car. If you keep your car for 10 years, $5/day is $18k. Our current cars are 13 years, and 17 years old.
  - wernercd 8y ago
    Why aren't they BOTH wrong? Save $5/day AND $18/k over ten years? Compound daily the both of em... Or don't... each direction has pro's and con's.
  - projektir 8y ago
    > Over the life of a car, a $5/day starbucks habit can cost more than the difference between buying a new vs used car. Does this statement not express the concept? One decision (buying new vs used) can completely wipe out any benefit you got from buying Starbucks every day, for 10 years. That's a very long time.
  - Retric 8y ago
    Buying a new SUV every 3 years and paying taxes on every transaction quickly get's to vastly more than 18k/decade. Remember, you can change both car type and new vs used. New mid range SUV's can easily end up costing more than 100,000$ over a decade. Even cars can get insane. I just watched a view on a guy who spent 28,000$ owning an Aston Martin for 10 MONTHS. https://www.youtube.com/watch?v=hrrFAjxKtj0 https://www.youtube.com/watch?v=hrrFAjxKtj0
bryanlarsen 8y ago
Minivans aren't cheaper; the Dodge Caravan is cheaper, for both definitions of the word.
fred_is_fred 8y ago
This article is missing a huge and expensive market segment - 4 door pick-up trucks. I was at the dealer last week and found lots of pick-ups in the 55-70k price range. They are seemingly popular here and I get the appeal especially if you want to just toss all your stuff in the back and hit the mountains, but they usually get worse mileage than a SUV and cost just as much.
- gascan 8y ago
  Depending on where you live, pick-ups are not just handy but rather a cultural icon. Have you ever listened to country music? You're not a real country boy if you don't have a pick-up. The real bait-and-switch though is the disappearing low & middle end of the pick-up market. Pops working the farm didn't drive a $70k luxury F-150. But gone is the Ranger, 1st gen Tacoma, and the much cheaper rough-and-tumble F-series of twenty years ago.
  - poulsbohemian 8y ago
    gascan nails it here - trucks have been slowly transforming into luxury vehicles. I bought a used F-150 quad cab and paid half what my ladyfriend paid for her Nissan Murano. But, I also had the "luxury" of being in farm country where there are still lots of people who want a basic, stripped down model for work and thus there is inventory available. Also - take a look at the new aluminum body F-150s re: gas milage. There has been a significant jump there.
  - arprocter 8y ago
    Ranger will be back in 2019
    - vidanay 8y ago
      Not for $11K
- modzu 8y ago
  everyone i know with a truck uses it for work (at least partially) -- so the cost is offset by the income they generate
jorblumesea 8y ago
> Personal finance experts love to discuss how much money you can save by avoiding that daily Starbucks habit or packing a brown bag lunch every day at the office. I actually think the true long term cost savings is in health care costs and general personal health. Making food yourself will cut down on excess salt, sugar and fats which are so prevalent when eating out. This will certainly help you stay healthy in the long run. That being said, almost all cars are a financial loss and you'd be better off driving a 2000s civic. I always found it ironic that Michigan was loathe to pay for plowing but instead just bought SUVs.
rhapsodic 8y ago
I would like to see a similar analysis applied to living and working in Silicon Valley or San Francisco, as opposed to some metro area in the Midwest. I have a hunch that given two similar people, one in each place, with similar careers, financial habits, consumer habits, etc., the one in the Midwest will be able to retire sooner and more comfortably than the one in SV/SF.
endorphone 8y ago
"avoid the"..."insane initial depreciation that exists with new cars." This is a strange statement, because of course lease pricing is nothing more than paying for the depreciation of the vehicle. Not only are you paying for it over the term, the risks if you want to terminate earlier, after the worst of the depreciation, are identical if not even exaggerated with leasing. It can be a good choice, especially for businesses because it greatly simplifies accounting for vehicles (just an expense and nothing more), but when people differentiate owning from leasing some strange statements are oft made.
ellisv 8y ago
I think that buying SUVs are more of a symptom of the problem than the cause. Sure they're expensive to buy, insure, and maintain - but most drivers I see are the only one in their vehicle. People aren't doing what is practical, they're doing what makes comfortable now.
s5fs 8y ago
Sheesh, you can buy three new cars or a starter home (in some places), that's how expensive new cars are these days. Auto loans also require you to carry full coverage insurance, which can be the same or more than your car payment if the loan is less than $20,000. Personally, I can't stomach the idea of paying $500-700/mo for a used vehicle. My current daily is a 2005 Chevy Aveo, I've owned it about 6 years and my total monthly cost (car, insurance, fuel, maintenance) is under $200/mo. It's a budget box, no frills, and I do all my own repairs and maintenance, and you can too! Youtube is a great resource and cheap hand tools can be found at Harbor Freight. Anyone who tells you that modern vehicles can't be maintained at home is mistaken, most maintenance tasks require no special tools and many repairs are attainable with limited skill and experience.
dsfyu404ed 8y ago
The 15+yr list has as much or more to do with buyer demographics and consumer behavior as it does to do with actual reliability and value. It's basically a reflection of what vehicles just wound up being popular among demographics that are easy on equipment (the wealthy, the old, etc) 15yr ago. It's also worth mentioning that when you own the car you need to strike a balance between average use and peak use. Most of the people commuting in crew cab trucks are going to use the second row once a week (same goes for sedans) and the bed once a month. Compared to a owning a smart car and renting a nice sedan for a road trip once a year, taking a taxi a few times a month and paying for delivery/rental trucks it probably doesn't come out even but it's not the massive waste of money it seems like at face value and some of that can be attributed to people wanting luxury (sticking a fridge in the back of a truck is easier than strapping it to a car, having two rows of seating is much more pleasant than once bench for 3+ people). This applies to any excess capacity, it's just most obvious with trucks. Sizing for close to peak needs is why crossovers and SUVs are so popular. They can comfortably fit the family and/or a bunch of stuff. You might not need to do that every week but many people do it often enough to feel justified in springing for the luxury. If you want to see less massive vehicles on the road then stop acting like you're too good to cram X+1 people in a vehicle that officially seats X or strap stuff to the roof. People buy trucks on the justification that they will haul homeowner sized amounts of lumber or crossovers for a family with two/three kids because they perceive putting three kids in the back seat of a compact and sticking a Christmas tree on the roof to not be in accordance with how someone of their income level is supposed to act.
throwaway66666 8y ago
This reminds me of a silly joke. 2 friends are talking, one of them has just lit a cigarette. -"Dude, how much do you smoke? And do you like porsche cars?" -"Around a pack a day. And yeah mate, I love em!" -"Dude a pack per day costs $12. If you stop smoking, you can buy a porsche in under 10 years just from the savings from cigarettes alone..." -"Oh damn, never thought of that. Do you smoke?" -"No, never!" -"So, where is your porsche parked?" ----- Now jokes aside. Unless you work towards a goal (eg new laptop at the end of the year), and you actively keep track of the extra savings it's very easy to blow the $4 saved per day on a whim, without even realizing. Your mindset changes to "I can buy drinks for my friends, I 've been saving this week it's cool", and you end up where you started. And that's fine, there is happiness to be had over buying your friends a drink.
nulagrithom 8y ago
I feel like it's a bit disingenuous to talk about this in the context of 1) paying MSRP and 2) buying new. He even mentions the second point, then goes on to completely ignore it: - Never buy new. - Just buy something 2-3 years old after it comes off someone else’s lease. A quick look on Kelley Blue Book says that $51,790 Ford Expedition drops to $24,925 after 3 years and 55,000 miles. Using the same parameters for the loan comes out to payments of $418 per month. That's still a chunk, but it doesn't have quite the same shock value as the brand-new MSRP prices presented... Now, $418/mo is still a far cry from the $165/mo you can get out of a lowend, 3-year-old Kia Rio, for sure. I drive something similar now. But the article still kind of rubs me the wrong way...
- Retric 8y ago
  It's not just the extra 250$/month it's also going from 29 city / 37 highway to 17 city / 24 highway plus higher taxes, insurance, and maintenance costs. Compound this with a family having 2 cars and a couple could be looking at ~2,000$ / month less in retirement. Which for many people would be the difference between comfortable and not.
  - loco5niner 8y ago
    My new car actually had lower insurance because of the safety features built in.
    - Retric 8y ago
      We are comparing both models and ages not just one or the other. Compare a new Ford Expedition vs a 3 year old 3-year-old Kia Rio.
      - loco5niner 8y ago
        Understood. I was specifically referring to this part: > plus higher taxes, insurance, and maintenance costs.
- scrooched_moose 8y ago
geebee 8y ago
Just to get this out there from the start: I don't like cars much, and I view them not just as an expense to be minimized, but a life unpleasantness to be minimized. Cars are horrendously expensive and I don't really like parking them, worrying about where I parked them, paying for parking for them, or not being able to have another beer because I'm driving them. But I do surf and my kids love to fish and ride their bmx bikes in nifty places that are most easily accessed with a car, and I'm cool with that, so I look to balance the lowest cost and lowest hassle way to do that. We do plenty around the neighborhood, but can't do it all around the neighborhood. At least not yet. So far, the right balance, I've found, is to buy a new car with a reputation for value and reliability. I accept that this isn't the most optimal possibility, but I've always been suspicious of the claim that a car loses x% of its value the moment it drives off the lot. Oh, I certainly agree that this is the case if you want to sell it, but that's hardly just true for cars. Go buy a thousand dollar suit and try to sell it on the street right outside the store where you bought it. It'll lose a lot more value than the car. But here's the thing, try to buy that car (or that suit) at an x% discount from someone who just drove it off the lot. Even if you can, you might worry (well, I might) about what the hell is going on. It's just... weird. Ok, so a year or two after it was bought new? Eh, I'm still not convinced. I suppose there are good deals out there, especially around people who dump cars after the lease, but even then, people often don't sell high quality cars that are only 2-3 years old. They sell cars they don't want anymore, and sure, that might be because they aren't brand new and shiny, but you often end up buying problems. Could just be me. I've had bad experiences buying used cars and good experience buying new cars that I take very good care of for the life of the car. I certainly don't sell it at 3-4 years old, that's when the car is most valuable to me. It's a 3-4 year old car that I know is in great shape and has been cared for properly. I don't know if that is the case with a car that someone planned to dump at the end of the lease (or is selling cause... not sure why). You can have a great experience buying a used car, and on average it probably does work out to be less expensive but I don't like the uncertainty and variance. Beyond that, I lust for the day I no longer own a car. Kid pick ups and drop offs still make it on the balance better to own one, but it's getting close. Maintenance, gas, parking fees (high in SF where I work), payments (or the lost value of the investment)... even if I buy a sensible car and take care of it and keep it for 10-15 years (until the maintenance costs exceed the value of the car), we're still probably looking at, what $4-6k a year, at least? That includes my very high parking costs. For others, it would be lower. This is when you make an effort to keep the costs down over the lifetime of the car (buying a quality car with a focus on value not luxury and keeping it for the usable life of the car). I mean, seriously, you can take a lot of ride share for $5k a year. I'm starting to see some interesting things happening - like, I read about a surfing "club" with a monthly fee that has showers and boards and wetsuits and a lounge near the beach. If you're happy just surfing that one break, you could ditch the car and get a ride service, and even if you live a ways from the beach... 5k is a hell of a lot to work with. Still, some major limitations. But man, I seriously mean it, I drool at the idea of getting rid of cars in my life.
orbitur 8y ago
One thing that bugs me about this article is that the author chose the largest and most expensive SUVs, not the ones that are actually popular. The smaller and more popular RAV4, Rogue, CR-V, Escape, etc aren't mentioned here. Comparatively, nobody buys Tahoes and Sequoias.

43 points by edward 8y ago

I found this article interesting because I couldn't for the life of me understand why so many people spend so much money on their cars. For me, a car was just a convenient way to get to where I wanted to go. My ego wasn't tied up in at all. I didn't own a car as a way to show off my status. I drove a series of "beaters" and often did my own maintenance and repair of relatively simple issues. I finally bought exactly one new car for cash, and drove it for twelve years. I never carried collision or comprehensive insurance, having the opinion that dealing with insurance is always a pain in the ass. The insurance premium is simply a markup on the expected value of what the insurance company would pay out. My "inner mathematician" couldn't permit it. Because of this, my total cost of ownership of cars was really low. I piled all the money I saved into investing, and came out far ahead. I sold my last car when I retired. Now, I walk everywhere: to the supermarket, to the park, to the gym, to restaurants, to the downtown bars. I'm so glad not to own a car.

cstejerean 8y ago
What other types of insurance did your inner mathematician prevent you from getting? Did you also skip out on health insurance because the premiums are a markup on the expected value of your health care costs?
- hyperpape 8y ago
  The difference is that health insurance has an enormous upper limit on what it can save you. You rarely want to spend money for insurance on things you can eat the cost of. You want to spend insurance money on things you can't afford, and health care often meets that criterion. Plus, if it's employer sponsored, you're getting it at a substantial discount.
- gruez 8y ago
  it's not really applicable to health insurance case because getting it through your employer is tax free, effectively saving you 25% on the cost.
  - hyperpape 8y ago
    I believe it's not just tax free, right, it's just priced into your salary. They won't give you the employer contribution back as cash if you decline, will they?
    - gruez 8y ago
      The money that goes towards the health insurance isn't subject to income tax, so it's cheaper than taking the money and buying yourself. employer provided health insurance: $50k salary $5k health insurance $50k taxable income buy your own health insurance: $50k salary $5k in lieu of health insurance $55k taxable income
      - hyperpape 8y ago
        But it's better/worse than that. Because they won't pay you $55k if you decline healthcare. Instead, you get paid $50k with the option to get healthcare (take it or leave it). My family's insurance healthcare isn't tax-free, which would mean saving $2k or $3k or whatever. It's over $10k of insurance a year that I pay less than $2k for.
  - seanmcdirmid 8y ago
    And if you must go to the individual market, you can’t deduct it until it reaches 10% of your income. Not really fair.
- deleted 8y ago
  [deleted]
- kileywm 8y ago
  Financially, insurance is only a smart purchase if you 1. Cannot afford the worst-case-scenario. (Example: replace your car if it were totaled) 2. You expect the return from claims will exceed the cost of premiums/deductibles. This should never happen if insurance companies are savvy and want to be profitable. Large companies with a vehicle fleet often self-insure those vehicles (AT&T last I heard) because they can afford every vehicle worst-case-scenario (ignoring liability, which is a legal obligation). Socially/emotionally, insurance is a peace of mind which is important and valuable to some people. Security and all that.
- maimeowmeow 8y ago
  His car is less than 10k, its simply not worth the insurance on somethat that at best covers around 90% of the value. Other insurance covers hundred of thousands for not much more the price cost.
seanmcdirmid 8y ago
Car ownership really is cheap in the states at the low end. Amazingly so from the perspective of the rest of the world.
gruez 8y ago
>I never carried collision or comprehensive insurance, having the opinion that dealing with insurance is always a pain in the ass. The insurance premium is simply a markup on the expected value of what the insurance company would pay out. My "inner mathematician" couldn't permit it. so what do you do if you drive to work, and you total your car? do you have the cash on hand for a replacement car?
- sokoloff 8y ago
  Considering the next "beater" is likely to be well under $5K, I'd wager they probably do.
- maimeowmeow 8y ago
  He drives a beater, you can buy another one for around 10k. If you dont have that kind of money in emergency fund, your playing it risky
  - s5fs 8y ago
    I see "runners" on Craigslist all the time for around $1500, I'd say that's the bottom dollar for something that you can probably drive for a year without serious mechanical failures. However, used is always a gamble (at any cost) so if you're buying cheap, make sure parts are cheap too. Just because you can get a 2000s+ BMW for $3k doesn't mean you should!
- gascan 8y ago
  He describes he piled it in to investing. Put the repairs on a credit card, and you've got thirty-ish days to liquidate, which is plenty of time.
lolsal 8y ago
Other people want or need vehicles that offer more than a conveyance of themselves: Kids, gear, livestock, boats, ATVs, lumber, etc. It's easy to own a 'beater' if you only use it to drive from your house to your job, to the grocery story and back for 40 years.
- KozmoNau7 8y ago
  The vast majority of people grossly overestimate their needs, though. Rental vans/trucks exist.
  - lolsal 8y ago
    Fair point, but renting a vehicle most weekends could easily make owning more cost effective.
    - KozmoNau7 8y ago
      If you truly need it every weekend, that's a very legitimate reason to buy such a vehicle, if you can't afford the money/room for a smaller commute-friendly vehicle, or similar reasons. I'm talking about the people who maybe need it once or twice a year, or like to imagine themselves needing it, when in fact they really don't.
  - z0r 8y ago
    The vast majority of people are airily dismissive of the logistics of other peoples lives.
    - KozmoNau7 8y ago
      Some people do have a legimate need and reason for owning such an overly large vehicle. Most people dont. They have a desire, not a need.
- throwawayjava 8y ago
  > livestock, lumber The latter two sound like business uses. The article is about personal use of personal vehicles. > Kids, gear Even then, a sedan or utility/mini van can do the job at much lower costs. > boats, ATVs Boats and ATVs are also good examples of money pits that prevent people from saving for retirement. (Especially boats. I looked into buy one, and quickly noticed that I'd have to be on the lake like half of in-season weekends and/or use all my vacation during the summer before ownership beat renting. But I'm only on the lake a few weekends a year, and even then only need/want something other than a kayak maybe every other visit.) And again, the conclusion of the article is "But if you’re one of the many people who are woefully unprepared for retirement or any of your other saving goals, a good place to start would be cutting back on any unnecessary spending on transportation." If you're on track to retire, go ahead and buy that nice car/boat/etc. But if not, maybe consider cheaper alternatives.
KozmoNau7 8y ago
Some people obviously have a genuine need for a larger vehicle. Those people usually don't spring for the blingmobiles. To a lot of people, their cars and or other material belongings are outwardly visible extensions of their (imagined) personality, and signifiers of wealth to their peers. It's just a different set of values. Personally I absolutely love cars. Not for any status or macho identity, but for the mechanical intricacies and neat design ideas. I am much more interested in a 1970s Opel Kadett than a big new Mercedes or something. I enjoy the act of driving, not the idea that "I am driving something expensive that other people desire". Have you considered cycling instead of walking? It's cheap and there are so many opportunities to geek out over neat ideas.
- hyperpape 8y ago
  > Some people obviously have a genuine need for a larger vehicle. Those people usually don't spring for the blingmobiles. Eh, I've seen people in construction/trades buying "utility blingmobiles". They need a big truck, but what they buy is bigger and nicer than what they really need. It's the equivalent of buying a $10,000 workstation to do web development (you can, surprisingly, run slack on a lesser machine).
EliRivers 8y ago
The insurance premium is simply a markup on the expected value of what the insurance company would pay out. My "inner mathematician" couldn't permit it. Is that not true of all insurance? Does this mean you go through life with only whatever legal minimum of insurance is required in any given circumstance?
- deleted 8y ago
  [deleted]
- marssaxman 8y ago
  That's how I do things. Insurance has generally proven not to be worth it, in my experience; they always find some way to not pay - so I only pay for the insurance I'm required to have. It's just another tax.
poulsbohemian 8y ago
There are states (I don't know how common) that require a base amount of insurance, so perhaps you were "lucky" in this regard that you didn't have to carry that cost.

amalag 8y ago

A lease is a depreciation financing program. It only makes sense if you want to change your car every 3 years. I think if they called it a Deprecation Financing Program they wouldn't get so many customers.

ellisv 8y ago
I think they'd have about the same number of customers -- most people I know who lease their car just want to drive something new and not put much effort in to maintaining it. They don't really car about the long term financial downside.

octorian 8y ago

I think my favorite part of the article is this quote: "Personal finance experts love to discuss how much money you can save by avoiding that daily Starbucks habit or packing a brown bag lunch every day at the office." followed by "this stuff doesn’t move the needle all that much"

hn_throwaway_99 8y ago

This was my favorite paragraph: > Personal finance experts love to discuss how much money you can save by avoiding that daily Starbucks habit or packing a brown bag lunch every day at the office. While I guess you could add to your bottom line somewhat by cutting back on the little things (a) this stuff doesn’t move the needle all that much, (b) it’s the little things in life that can give you small joys on a daily basis and (c) the large purchases will have a much greater impact on your bottom line. This is also a big difference I've noticed between a "rich dad, poor dad" mindset. Sweating the small stuff doesn't make much of the difference in the end, it's the much less frequent but more impactful decisions (where you live, who you marry, the car you buy) that determines your overall financial well-being.

sbov 8y ago
Except they're wrong. Over the life of a car, a $5/day starbucks habit can cost more than the difference between buying a new vs used car. If you keep your car for 10 years, $5/day is $18k. Our current cars are 13 years, and 17 years old.
- wernercd 8y ago
  Why aren't they BOTH wrong? Save $5/day AND $18/k over ten years? Compound daily the both of em... Or don't... each direction has pro's and con's.
- projektir 8y ago
  > Over the life of a car, a $5/day starbucks habit can cost more than the difference between buying a new vs used car. Does this statement not express the concept? One decision (buying new vs used) can completely wipe out any benefit you got from buying Starbucks every day, for 10 years. That's a very long time.
- Retric 8y ago
  Buying a new SUV every 3 years and paying taxes on every transaction quickly get's to vastly more than 18k/decade. Remember, you can change both car type and new vs used. New mid range SUV's can easily end up costing more than 100,000$ over a decade. Even cars can get insane. I just watched a view on a guy who spent 28,000$ owning an Aston Martin for 10 MONTHS. https://www.youtube.com/watch?v=hrrFAjxKtj0 https://www.youtube.com/watch?v=hrrFAjxKtj0

bryanlarsen 8y ago

Minivans aren't cheaper; the Dodge Caravan is cheaper, for both definitions of the word.

fred_is_fred 8y ago

This article is missing a huge and expensive market segment - 4 door pick-up trucks. I was at the dealer last week and found lots of pick-ups in the 55-70k price range. They are seemingly popular here and I get the appeal especially if you want to just toss all your stuff in the back and hit the mountains, but they usually get worse mileage than a SUV and cost just as much.

gascan 8y ago
Depending on where you live, pick-ups are not just handy but rather a cultural icon. Have you ever listened to country music? You're not a real country boy if you don't have a pick-up. The real bait-and-switch though is the disappearing low & middle end of the pick-up market. Pops working the farm didn't drive a $70k luxury F-150. But gone is the Ranger, 1st gen Tacoma, and the much cheaper rough-and-tumble F-series of twenty years ago.
- poulsbohemian 8y ago
  gascan nails it here - trucks have been slowly transforming into luxury vehicles. I bought a used F-150 quad cab and paid half what my ladyfriend paid for her Nissan Murano. But, I also had the "luxury" of being in farm country where there are still lots of people who want a basic, stripped down model for work and thus there is inventory available. Also - take a look at the new aluminum body F-150s re: gas milage. There has been a significant jump there.
- arprocter 8y ago
  Ranger will be back in 2019
  - vidanay 8y ago
    Not for $11K
modzu 8y ago
everyone i know with a truck uses it for work (at least partially) -- so the cost is offset by the income they generate

jorblumesea 8y ago

> Personal finance experts love to discuss how much money you can save by avoiding that daily Starbucks habit or packing a brown bag lunch every day at the office. I actually think the true long term cost savings is in health care costs and general personal health. Making food yourself will cut down on excess salt, sugar and fats which are so prevalent when eating out. This will certainly help you stay healthy in the long run. That being said, almost all cars are a financial loss and you'd be better off driving a 2000s civic. I always found it ironic that Michigan was loathe to pay for plowing but instead just bought SUVs.

rhapsodic 8y ago

I would like to see a similar analysis applied to living and working in Silicon Valley or San Francisco, as opposed to some metro area in the Midwest. I have a hunch that given two similar people, one in each place, with similar careers, financial habits, consumer habits, etc., the one in the Midwest will be able to retire sooner and more comfortably than the one in SV/SF.

endorphone 8y ago

"avoid the"..."insane initial depreciation that exists with new cars." This is a strange statement, because of course lease pricing is nothing more than paying for the depreciation of the vehicle. Not only are you paying for it over the term, the risks if you want to terminate earlier, after the worst of the depreciation, are identical if not even exaggerated with leasing. It can be a good choice, especially for businesses because it greatly simplifies accounting for vehicles (just an expense and nothing more), but when people differentiate owning from leasing some strange statements are oft made.

ellisv 8y ago

I think that buying SUVs are more of a symptom of the problem than the cause. Sure they're expensive to buy, insure, and maintain - but most drivers I see are the only one in their vehicle. People aren't doing what is practical, they're doing what makes comfortable now.

s5fs 8y ago

Sheesh, you can buy three new cars or a starter home (in some places), that's how expensive new cars are these days. Auto loans also require you to carry full coverage insurance, which can be the same or more than your car payment if the loan is less than $20,000. Personally, I can't stomach the idea of paying $500-700/mo for a used vehicle. My current daily is a 2005 Chevy Aveo, I've owned it about 6 years and my total monthly cost (car, insurance, fuel, maintenance) is under $200/mo. It's a budget box, no frills, and I do all my own repairs and maintenance, and you can too! Youtube is a great resource and cheap hand tools can be found at Harbor Freight. Anyone who tells you that modern vehicles can't be maintained at home is mistaken, most maintenance tasks require no special tools and many repairs are attainable with limited skill and experience.

dsfyu404ed 8y ago

The 15+yr list has as much or more to do with buyer demographics and consumer behavior as it does to do with actual reliability and value. It's basically a reflection of what vehicles just wound up being popular among demographics that are easy on equipment (the wealthy, the old, etc) 15yr ago. It's also worth mentioning that when you own the car you need to strike a balance between average use and peak use. Most of the people commuting in crew cab trucks are going to use the second row once a week (same goes for sedans) and the bed once a month. Compared to a owning a smart car and renting a nice sedan for a road trip once a year, taking a taxi a few times a month and paying for delivery/rental trucks it probably doesn't come out even but it's not the massive waste of money it seems like at face value and some of that can be attributed to people wanting luxury (sticking a fridge in the back of a truck is easier than strapping it to a car, having two rows of seating is much more pleasant than once bench for 3+ people). This applies to any excess capacity, it's just most obvious with trucks. Sizing for close to peak needs is why crossovers and SUVs are so popular. They can comfortably fit the family and/or a bunch of stuff. You might not need to do that every week but many people do it often enough to feel justified in springing for the luxury. If you want to see less massive vehicles on the road then stop acting like you're too good to cram X+1 people in a vehicle that officially seats X or strap stuff to the roof. People buy trucks on the justification that they will haul homeowner sized amounts of lumber or crossovers for a family with two/three kids because they perceive putting three kids in the back seat of a compact and sticking a Christmas tree on the roof to not be in accordance with how someone of their income level is supposed to act.

throwaway66666 8y ago

This reminds me of a silly joke. 2 friends are talking, one of them has just lit a cigarette. -"Dude, how much do you smoke? And do you like porsche cars?" -"Around a pack a day. And yeah mate, I love em!" -"Dude a pack per day costs $12. If you stop smoking, you can buy a porsche in under 10 years just from the savings from cigarettes alone..." -"Oh damn, never thought of that. Do you smoke?" -"No, never!" -"So, where is your porsche parked?" ----- Now jokes aside. Unless you work towards a goal (eg new laptop at the end of the year), and you actively keep track of the extra savings it's very easy to blow the $4 saved per day on a whim, without even realizing. Your mindset changes to "I can buy drinks for my friends, I 've been saving this week it's cool", and you end up where you started. And that's fine, there is happiness to be had over buying your friends a drink.

nulagrithom 8y ago

I feel like it's a bit disingenuous to talk about this in the context of 1) paying MSRP and 2) buying new. He even mentions the second point, then goes on to completely ignore it: - Never buy new. - Just buy something 2-3 years old after it comes off someone else’s lease. A quick look on Kelley Blue Book says that $51,790 Ford Expedition drops to $24,925 after 3 years and 55,000 miles. Using the same parameters for the loan comes out to payments of $418 per month. That's still a chunk, but it doesn't have quite the same shock value as the brand-new MSRP prices presented... Now, $418/mo is still a far cry from the $165/mo you can get out of a lowend, 3-year-old Kia Rio, for sure. I drive something similar now. But the article still kind of rubs me the wrong way...

Retric 8y ago
It's not just the extra 250$/month it's also going from 29 city / 37 highway to 17 city / 24 highway plus higher taxes, insurance, and maintenance costs. Compound this with a family having 2 cars and a couple could be looking at ~2,000$ / month less in retirement. Which for many people would be the difference between comfortable and not.
- loco5niner 8y ago
  My new car actually had lower insurance because of the safety features built in.
  - Retric 8y ago
    We are comparing both models and ages not just one or the other. Compare a new Ford Expedition vs a 3 year old 3-year-old Kia Rio.
    - loco5niner 8y ago
      Understood. I was specifically referring to this part: > plus higher taxes, insurance, and maintenance costs.
scrooched_moose 8y ago

geebee 8y ago

Just to get this out there from the start: I don't like cars much, and I view them not just as an expense to be minimized, but a life unpleasantness to be minimized. Cars are horrendously expensive and I don't really like parking them, worrying about where I parked them, paying for parking for them, or not being able to have another beer because I'm driving them. But I do surf and my kids love to fish and ride their bmx bikes in nifty places that are most easily accessed with a car, and I'm cool with that, so I look to balance the lowest cost and lowest hassle way to do that. We do plenty around the neighborhood, but can't do it all around the neighborhood. At least not yet. So far, the right balance, I've found, is to buy a new car with a reputation for value and reliability. I accept that this isn't the most optimal possibility, but I've always been suspicious of the claim that a car loses x% of its value the moment it drives off the lot. Oh, I certainly agree that this is the case if you want to sell it, but that's hardly just true for cars. Go buy a thousand dollar suit and try to sell it on the street right outside the store where you bought it. It'll lose a lot more value than the car. But here's the thing, try to buy that car (or that suit) at an x% discount from someone who just drove it off the lot. Even if you can, you might worry (well, I might) about what the hell is going on. It's just... weird. Ok, so a year or two after it was bought new? Eh, I'm still not convinced. I suppose there are good deals out there, especially around people who dump cars after the lease, but even then, people often don't sell high quality cars that are only 2-3 years old. They sell cars they don't want anymore, and sure, that might be because they aren't brand new and shiny, but you often end up buying problems. Could just be me. I've had bad experiences buying used cars and good experience buying new cars that I take very good care of for the life of the car. I certainly don't sell it at 3-4 years old, that's when the car is most valuable to me. It's a 3-4 year old car that I know is in great shape and has been cared for properly. I don't know if that is the case with a car that someone planned to dump at the end of the lease (or is selling cause... not sure why). You can have a great experience buying a used car, and on average it probably does work out to be less expensive but I don't like the uncertainty and variance. Beyond that, I lust for the day I no longer own a car. Kid pick ups and drop offs still make it on the balance better to own one, but it's getting close. Maintenance, gas, parking fees (high in SF where I work), payments (or the lost value of the investment)... even if I buy a sensible car and take care of it and keep it for 10-15 years (until the maintenance costs exceed the value of the car), we're still probably looking at, what $4-6k a year, at least? That includes my very high parking costs. For others, it would be lower. This is when you make an effort to keep the costs down over the lifetime of the car (buying a quality car with a focus on value not luxury and keeping it for the usable life of the car). I mean, seriously, you can take a lot of ride share for $5k a year. I'm starting to see some interesting things happening - like, I read about a surfing "club" with a monthly fee that has showers and boards and wetsuits and a lounge near the beach. If you're happy just surfing that one break, you could ditch the car and get a ride service, and even if you live a ways from the beach... 5k is a hell of a lot to work with. Still, some major limitations. But man, I seriously mean it, I drool at the idea of getting rid of cars in my life.

orbitur 8y ago

One thing that bugs me about this article is that the author chose the largest and most expensive SUVs, not the ones that are actually popular. The smaller and more popular RAV4, Rogue, CR-V, Escape, etc aren't mentioned here. Comparatively, nobody buys Tahoes and Sequoias.