This is why I hate car payments

April 8, 2012 · 31 comments

As you all know, Girl Ninja and I spent the last week gallivanting around San Diego; eating at our favorite restaurants, hiking/running at our favorite spots, and catching up with some of our closest friends. It was an amazing week and a great opportunity for us to charge our batteries before heading in to the upcoming work week. One of the nights we grabbed wine with one of my close friends (and personal finance blogger) Bruce Bucks and his wife. As usual, Matt and I started talking about money, which snowballed in to a conversation about cars.

I don’t know how much gas is where you live, but in Seattle $4.10/gallon seems about normal. Girl Ninja and I spend about $200-$250 a month on gas (thank goodness for a work vehicle, that can only be used for official business). Matt and his wife spend about $450/month. I pay around $160/month for car insurance. They pay $120/month. Let’s just assume in any given year we spend about $400 on oil changes and random maintenance (filters, belts, wipers, tires, etc).

Carry all these expenses out over a twelve month time frame and Matt and I are both paying about $5,000 a year to drive our (and our spouse’s) cars. FIVE THOUSAND DOLLARS! Do you know how many California Burritos that is? ONE THOUSAND BURRITOS! 

Driving freaking sucks. It sucks the money out of my wallet, and forces it in to a depreciating asset. That is no bueno.

I could drive less and probably find cheaper insurance (we have full comp/coll coverage on both vehicles), but even that wont drastically reduce our annual auto expenses. No. The only thing Girl Ninja and I can really do to ensure transportation has a minimal impact on our budget is a) don’t buy new and b) don’t finance our next vehicle. New vehicles depreciate like crazy (40% in the first four years). While taking out a loan means we will be paying the lender interest. After already allocating about $400/month to our cars, I have ZERO desire to increase that allocation much more.

I personally could not stomach a $400 car payment on top of the gas, insurance, and maintenance payments I previously mentioned. The disdain I have for debt, outweighs the joy I’d get from driving a new vehicle. 

That’s just me though. I have plenty of friends that have car payments (many who read this blog in fact). They are all intelligent people and are by no means reckless when it comes to their finances. I realize that just because I don’t have an appetite for a car payment, doesn’t mean that someone else wont find them beneficial or helpful. This is the very reason I love personal finance. You do you, and I’ll do me. 

So reader, How much do your transportation costs work out to each month? Break it down by line item (gas, insurance, maintenance, and payment). After adding all these numbers up, are you shocked just how expensive driving can be (I was with our $400-ish a month obligation)? Where does it fall on your balance sheet (I’m assuming probably your second largest expense after your rent/mortgage)? Do you hate car payments, find them a necessary evil to have reliable transportation, or love the ability to spread payments out over many years?

Favorite Nail from Yesterday: Awesome Dad

{ 31 comments }

1 DebtnTaxes

All my car obligations are pretty much spot on with yours. We pay about $250 in gas/month (will increase in the summer because we travel more). Full coverage insurance runs us another $104. Most maintenance is done by me, which keeps those costs down a little bit. Luckily both of our vehicles are paid off so no car payment for us. We have been paying ourselves payments though, that way when it comes time to purchase the next one it will be with cash. I hate car payments and plan to never have one again. But I also know that stuff happens and if we don’t have the cash for one we will take a loan out, that would suck though.

2 Kristin

Gas in Colorado where I live is currently about $3.89, which has been trending at about the 3rd lowest in the nation. My driving habits are really irregular right now as I can walk to class and I can take the bus easily, but I have been making a lot of ski trips to the mountains/airport recently. I drive a 2002 Chrysler Sebring, so it’s about 10 years old and has 123000 miles on it. Car insurance works out to be about $63/month for my regular insurance and an AAA membership. To try to get a better sense of my more regular driving habits, for the year when I lived 22 miles from work in Massachusetts, so August 2010 – July 2012, I spent:

~2740 on parts and repair (included new winter and new summer tires but some oil changes by my dad, several major repairs)
~2270 on gas
~1200 on auto insurance
~240 for license/registration/inspection
~115 parking
~40 subway fares (replaced cost of driving into the city and parking, so I count it)
~60 tolls

For those of you counting, that’s $5465 over a year, or $455 a month, and 17,400 miles for that year, for a car that is completely paid off. That is second place between rent/housing costs and groceries/dining for me. I filled up the car about once a week with regular driving. The year before that, though, I lived at my parents’ house, and filled up twice a week as I was 45 miles away from work, but gas was cheaper and I was still on their insurance policy. In the 8 months that I have been in CO (driven only 3000 miles), I drive much less, and am averaging $205/month (but my insurance is paid up for the rest of the year, so that pushes the average higher). That cost is now firmly third fiddle after food and dining.

3 Michelle

Our used to be around $900 a month, but now that I paid off my car, it is at $500 a month. Thankfully both of our cars are paid off, or the amount would be even higher. It adds up so fast!

4 StackingCash

Bought both of our cars new. 2001 and 2005, both paid off now. I feel I can maintain these cars for at least a 20 year run so in essence a fairly good “rate of return” for me. I was never keen on buying someone else’s car problems either. I feel I would be unlucky and get that abused car in the lot.

To me the costs of owning a car is insignificant compared to the costs of not owning one. Riding the bus is cheaper moneywise, but timewise it is expensive. I also don’t like making friends on the bus. Ultimately, the car wins this battle.

5 Rina

Per month:
insurance $97
gas $300 (gas in my city is $1.35/L, or $4.00/gal, it’s significantly higher the closer you get to Vancouver)

My husband is able to maintain our cars for next to nothing through his work – just basic stuff like fluids (oil changes, wipers, belts, other fluids etc). We did however recently put my husband’s classic car on the road as our summer daily driver (1970 Maverick) so we spent about $300 last month on maintenance (plugs wires etc etc etc). We also had to pay a $30 fee to transfer the insurance to this new car. Oh…and AirCare (http://www.aircare.ca/). We have to pay a yearly fee of $24 to take our cars through an ‘environmental test’ that tells us if our cars are over polluters (if you fail, you can’t get insurance). We passed.

So our car probably costs us about…$5,000 ish per year as well. I agree with StackingCash though – I’d definitely choose the car.

6 SavvyFinancialLatina

We just had to spend $615 on car maintenance last week. My husband drives about 80 miles on any given day. We live in Texas!!! Takes forever to get where you need to be. I am getting my “new” car soon, and definitely going for a used car. We just don’t want a car loan.

7 Mercedes

I just bought a new can and the payments kick in next month, but I should have it wiped out pretty fast (as long as I keep pulling in overtime hours at work!) Thankfully I was already putting away a ‘car payment’ a month saving for this purchase, so that money I’m paying out for the loan isn’t necessarily some extra expense I need to come up with the money for. Anyway, I think my monthly expenses would break down something like this:
- Loan payment – $231
- Gas – $250
- Insurance – $75
- Misc – $20
TOTAL: $567 a month or $6,912 a year

I hate seeing numbers like that… But having a car is a necessary evil for me. Even though there is fantastic public transportation in DC and the immediate surrounding area, once you move outside of that ring of awesomeness, transportation sucks! With all of the different buses and trains I’d have to take to get to and from work, it’d take me 3 hours one way. And that is if everything is on schedule… NO thanks!

I’ll happily fork over the $7,000 a year to save a little bit of my sanity (only a little because the driving commute can be hellish in its own right!)

8 Larry

- Interest rates are historically low. If you’re going to finance, no better time.
- I buy new once every 10 years or so, and pay as much cash as I can. I bought my 2010 Camry with about 40% cash and financed at 3% for a maximum of 5 years, and of course I can pay it off sooner if I wish. I would rather have a car that hasn’t been “used” or “abused” by someone else, as well as a full warranty.
- Because I don’t plan to get another car for about 10 years, the depreciation factor does not concern me. After the car is paid off, It is free and clear so long as I own it.
- I refuse to flagellate myself or get my stomach all in knots over a minor amount of interest. It’s not as if I’m taking out a $500K mortgage. It’s a small amount of debt, not a mortal sin. Even taking 5 years to pay, my 2010 Toyota adjusted for inflation is cheaper than my last 2000 Camry.
- You can always look for a cheaper model, like a Corolla rather than a Camry. You can shop around for insurance.
- Take good care of the car and it’s cheaper. I’ve gotten 50K on a set of tires because I accelerate and decelerate gently.
- If you want to keep gas costs down, why are you insisting on an SUV?

9 Errica

For my husband and I, we pay:

$150/month insurance
$200/month gas (which in Jersey is at about 3.75/gallon)
$200/Month in car payments
$500/year in oil changes, etc.

So, for us that’s $7100 each year. Yes, it hurts. Once the car payments go away next year, it will be $4700 per year. I’ll have to buy a car for the husband in the next four years, and we will pay cash for that one.

10 Emily @ evolvingPF

Actually, no, I don’t find our transportation expenditures oppressive. We spend about $195/month to operate one car that we share.

monthly costs
gas: $100
insurance: $60
parking permit: $22
tax, inspection, registration fees: $10

On top of that we have to save for possible repairs (maybe $100/month for two cars), but we haven’t poured much money into our older, bought-used, paid-for cars really. We recently consolidated to one car (details in my link), and the shocking part was that the second car cost less than $1,000 per year to operate, given the baseline of insurance and gas we already had on the first car. Our current car expenses fall fifth in our largest-expenditures ranking, after rent, our Roths, tithing, and groceries.

I used to have a small car payment, but I don’t want to do that again. Our plan is to always pay cash for used cars. They are not toys or status symbols to us but totally utilitarian.

11 SP

We paid about $25k cash to get out the door with our new car, so we have no payment. However, let’s assume it lasts 10 years, that’s still $200/month. BUT, actual costs in our budget right now?

Insurance: about $100/month
Fuel (diesel): $90/month
Oil change: free for the 1st 3 years
Registration: about $100/year
Repairs: Under warranty for awhile. $0

We share one car right now, which really means I mostly use the car and my husband uses public transit during the week. But he works from home 3-5 days each week.

12 Jeff @ Sustainable Life Blog

Hi Ninja,
Here are my car costs
Payment $315/mo (I pay $500 instead)
Insurance $135
Gas $60
Maint: $5 (assuming oil changes ever 3rd month, and I do it myself)

Total: 515 – not bad, but considering I rarely use it….probably a bit expensive.

13 Matt

I am fortunate enough to live about ten blocks from my office, so I get to walk to work; it takes me approximately eight minutes :)

We budget $75 a month for gas, $35 for insurance, and probably spend a couple of hundred a year in maintenance. Oh, and it is paid for, so no monthly payment either.

14 Allie

I work from home now, so my gas usage has decreased dramatically from when I was driving 30 minutes to and from work everyday, and gas in our area has hovered around $3.69 or so the last few weeks. We get gas as the local grocery store though because with the chain’s credit card, we get 5 cents off each gallon. It adds up pretty quickly! (I would guess the two of us spend about $150 on gas in a good month where we’re not doing much traveling. We live in a small town and it doesn’t take long to get anywhere.)

Really, gas and maintenance are all we pay for our cars. Both sets of our parents (blessedly) still cover our insurance, and both of our vehicles are paid off. But maintenance is getting kind of steep, since our cars are 12 and 9 years old.

15 bethh

I buy gas about once a month, so that’s $35 (I carpool or bike to work most days). My insurance is about $42/month. I change my oil maybe once a year (I drive less than 5k/year) so that’s another 35 bucks or so annually (or 3/month if you break it down). I’ve had no major maintenance expenses, I bought the car for 6k in 2005 and it’s still going strong – just rolled over 50k miles earlier this year.

So my car costs me about $80/month. I do have other transit costs, if I take public transit or cross a toll bridge, but even including that my total transportation costs run about 100/month. I started saving $100/month in my car replacement fund over a year ago, so when my car eventually goes I hope I don’t have to take on a car loan. I’m planning to keep my 7-year-old-car as long as possible.

16 Derek

Due to a genetic anomally (I’m a nerd) I actually track each of these at the end of the month.

Car Payment $175
Gas (avg) $130
Parts (avg) $75
Service (avg) $21
Insurance $87

So my monthly average is $488, and for fun the total cost per mile is $.52

17 Derek

Might be worth mentioning, I’ve been tracking this since I bought it in June 2010.

18 Laura

We are actually in San Diego. I am very lucky in our commuting situations. I walk about a mile to work and my husband usually takes the train (and it is subsidized by his work.) We live in downtown and my work is just across the downtown area from our condo.

We both drive old cars that are paid for.

We still spend:

~85/month in insurance
~150/month gas for weekends/the times the husband has to drive

He might have to start commuting by car but we are considering buying an electric car and selling his car. The gas prices make this pretty tempting. We would pay cash for it.

19 Lysander

For 2011:
Total: $275/month or $3300/year
Gas: $140
Maintenance: $80
Registration: $10
Parking Fees: $15
Insurance: $30

So far in 2012 (i’m driving less than I did in 2011):
Total: $160/month or $640 YTD
Gas: $85
Maintenance: $10
Parking Fees: $20
Insurance: $45

20 Melissa

The costs of owning a car are just something I try not to think about. Because of where I live, I have to have one, so complaining about it just won’t get me anywhere. I just try to make sure I keep my costs at a reasonable percentage of my income.

Here’s what I’ve got:

Car payment: $180
Insurance: $140
Gas: $100
Total Monthly: $420

It’s a brand new car, so I expect the maintenance will be pretty low this year, just the regular oil changes and stuff, and I also paid $100 a couple of weeks ago to have it rust proofed. The insurance is high because insurance is just high where I live (I’m 25 with a perfect driving record), and the payment is low, because I put down a large downpayment and financed the balance over seven years (I knew I was going to be going back to school at some point when I bought it, so I wanted to keep the payments as low as possible so I could stay flexible; I hope to pay it off in three years, though). I’d say my expenses are pretty average, though maybe a little on the lower side.

21 Melissa

Also, to answer your last question, I obviously don’t mind car payments. Buying in cash wasn’t an option for me. I don’t have a fancy car by any means, but I wanted newer (ended up getting brand new) and reliable car, and those don’t come cheap! (I drive a Kia Rio hatchback.) Even if I could have paid cash, though, I don’t think I would have, unless I was literally swimming in dough. My loan is only financed at 2.99%, which as far as I’m concerned is not a terrible price to pay for the ability to keep my cash liquid and not have it all tied up in a vehicle. I fully plan on paying the loan off before my term is even half over, but I like the flexibility that comes with a low monthly payment. (That is, I *can* put $400 or $500 against the loan every month, and couldn’t afford such a payment, but I don’t *have* to.)

22 Kate

Car Payment: $232/mo
Gas: $90/mo (Average of the last 12 months; I drive 50 miles round trip to work 2 days per week and ride with coworkers the other 3 days per week)
Insurance: $61.17/mo
Parking: $33/mo

These are the costs for one person with one vehicle.

23 Kate

Also, license plate renewal is $85/year where I live.

24 Jenna, Adaptu Community Manager

Ugh, I was just telling my mom how much gas is here in the States (they live in China and don’t have to buy gas). It’s $4.20 around PDX. I hardly ever drive, but when I do it’s to go skiing or go camping so it’s a full tank $75+ in a Sequoia, which is crazy painful. I remember in high school $20 couldn’t even fill up my gas tank on my Volvo. Now $20 gets me maybe 6 gallons. PAINFUL.

25 TeacHer

My car is paid off (I drive a tC, too!) and I spend $69 per month on insurance and about $175 on gas. Registration costs $42 per year and inspection is $16 per year. Obviously, this doesn’t include any repairs or anything, but I still think I spend an outrageous amount on my car each month and several times a year for maintenance. I absolutely HATE spending money on my car. I wish public transit were an option :/

26 MoneySmartGuides

My insurance runs me about $100/mo and gas is $150/mo. I own my car, so no payments for me. When it comes to maintenance, I do most of the basics myself to keep that cost down too. Before I buy a car, I always create a spreadsheet to figure out how much I’ll spend each month in gas, insurance, and maintenance. The number I end up with influences whether or not I buy the car.

27 Courtney

I estimate for a 2001 Toyota Corolla and a 2000 Toyota Rav 4, it costs about $150 a month for gas, oil changes, and taxes/tag/insurance. This doesn’t include trips to our hometown 2 states away (which usually runs us about $250 round trip for gas), or any maintenance other than oil changes. Our county has emissions testing and when we first moved here, it cost us nearly $1000 just to get the cars legal to drive here because they failed emissions. But we’re trying to hold on to them as long as possible in order to save up for another vehicle. We’re to the point now where we have to weigh repairs: “would it be better to fix the piece of junk, or save this money for something better?” and we’ve considered going to one car since it’s a very walkable city and we work from home. Honestly though, I wouldn’t know which one to keep and which one to toss. The Rav has a million miles on it, chugs gas and the smell isn’t great due to years of working for Pizza Hut, a vandalism adventure a few kids had with a marble that left it windowless in the rain, and a dog that had the worst smelling pee I’ve ever smelled. The Corolla is needing more repairs despite having below 100,000 miles, but cosmetically it looks like cats were living in it and hung from the ceiling like bats most of the time and there aren’t many more door handles that can break before we’re gonna have to Dukes of Hazzard it.

28 Miss JJ

Here is something for comparison. In my part of the world, before one is allowed to own a car, one has to get something call a “Certificate of Entitlement”. In other words, you have to pay for the right to own a car.

The COE prices are now about USD 64,000 for a 1600cc vehicle, I think. The COE is valid for 10 years after which, you pay the going rate for another COE to continue driving the same car. In the meantime, insurance, road taxes etc all go up once the 10 year mark is passed. Otherwise, you send your car to the scrap yard and get a new COE for a new car.

This is all before you even think about the money for the car itself. Doesn’t this make all the cars in your part of the world look really cheap? :)

With prices like this, you’d think nobody in their right minds would drive over here. But we still have daily traffic jams. And perhaps it becomes more understandable why we send teenagers who vandalise cars to jail and caning.

29 Mo D.

1 New Car – $394/month
1 Old Workhorse of a vehicle – Paid in full
Gas for both cars: Approx. $300/month (I budget for $400/month)
Upkeep – I’d say every 6 months, we get hit with a $500 repair on the Workhorse.. she’s getting old, but until we can afford to get a “newer to us” car, we’ll fork over the $1000/year on repairs/upkeep
Insurance: $204 for both cars
License Plate Renewal for both cars (every Sept.) – $150

All in all, with the lease, gas and insurance, we spend about 27% of our net income… repairs bump that # up every 6 months or so.

30 dreemsie

I think about gas and vehicle associated costs often, which leads me to my disdain over cars and car payments. My fiance (wife to be this weekend!) and I spend about $500 per month on gas. We pay 240/month total for insurance and another $200 total for yearly inspections. Add another few hundred for oil, washes, and other random needs and it is close to 7k a year.

Thank god for cash back rewards.

31 Matt

I think buying two Vespas is the best solution to our problem. Thanks for the link love/mention.

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