*This post is not part of any tutorials.
Two years ago I made a seemingly bad decision that turned out to be one of my best: I bought a twenty year old car on Ebay. It was a 1994 Mazda Miata with 142,000 miles, no rear brakes, a dented fender, rust, a gaping hole in the convertible roof, and a bonus hard top with a smashed window. The big question is: did I make the right financial decision buying a wicked old car or would I have been better off investing in a newer one? If you are reading this you probably have or will ask yourself the same question one day about your beloved car.
The Back Story
The story of how I became the proud owner of this Miata, named Murphy after Murphy’s law that anything that can go wrong will go wrong, goes something like this: I impulsively place a bid on Ebay while at the office which to my surprise win a few days later, fly down to Baltimore, get a rental car, drive an hour west, drop-off the rental, run 11 miles, pay $1,700 to the dealer, drive 20 miles and break down on the highway, get stranded on the highway with an overheated car, find a mechanic, get another rental car, drive 400 miles back to MA, wait a week for said mechanic to make car roadworthy, drive back to Maryland, drive car back up to MA. If I may share some wisdom with you, only buy a car on Ebay if you are an adventure seeking individual with a ton a patience and time on your hands. Otherwise I’d stick to the local classifieds.
So how much did Murphy cost me in total, excluding insurance, taxes, and fees? Over our 778 days together, I have spent $6,500 in total. To get a better idea of what the monthly maintenance cost will be for the car, let’s assume the initial repair bill and paint job were part of the car’s original sticker price, since most people will buy a used car that is roadworthy. So I essentially paid $4600 for the car and another $1900 on repairs. That comes out to about $75 a month in maintenance. To be safe, I budget about $100 a month but so far that’s been enough and I have not had to tap into my savings to cover bills from my mechanic.
|2014-11-14||irregular||1200||Refill cooling system, test engine for any leaks, new timing belt,water pump, thermostat, spark plugs, plus miscellaneous|
|2014-12-06||regular||85||Replace leaking clutch slave (holds liquid for hydraulic clutch)|
|2015-01-16||regular||675||New rear brakes: pads, rotors, calipers. Repair exhaust leak. Replace clutch master.|
|2015-08-02||regular||259||Four new tires|
|2015-08-21||regular||725||New soft top|
|2015-09-10||regular||125||Repair exhaust leak|
|2015-12-04||irregular||1665||Full paint job and new fender|
Keep the old car or buy a new one?
To answer this debated question, let’s look at the major expenses:
(Total Cost) = (Sticker Price) + (Maintenance Cost) + (Other Costs)
Go ahead and calculate the total cost of your used car over the next 3 years or 5 years and compare that to the cost of a new car. Other costs may include insurance, gas, and excise tax. Murphy would look something like this:
$7300 = $4600 + ($75 * 36)
Assuming my maintenance costs remain the same and I keep Murphy for another year, I will have paid about $203 a month, excluding insurance and other costs. Financially speaking, a new car could only compete if it costs less than $7000. Having said that, $75 a month is not necessarily an accurate prediction given I’m only basing this on 2 year’s worth of data from one car. Nonetheless, my hypothesis is that buying a newer car will most likely cost you more in the long run. The smart thing to do is to calculate how much more this newer car will cost you so you understand the impact on your finances. Whether or not it makes sense comes down to how much more are you willing to spend for a nicer ride. In some cases, such as if your current repair costs are high, you may have to only spend a little bit more to get a much nicer car. That can be worth it for a lot of people.