I am currently driving 6 year old Toyota Corolla and recently thought about buying a new car, one that gives a very good mileage just like my Corolla. But then again, if I can drive my Corolla for several more years, I realized I could be saving a lot of money without much effort. The only thing I will be losing is my pleasure of driving a new car.
Then I became more curious about how much drivers spend in their lifetime on cars. Below is the break-down of my calculations. My calculation is more on the conservative side as I did not add any insurance and I used fixed 6% annual return rate every year. You could be very surprised…
So what does this mean? Are we really spending more than one million dollars on cars in our lifetime? The total principal amount spent during 50 years lifetime is slightly below $300,000 if we were to buy cars every 5 years. If we become frugal and bought a car every 10 years, the principal amount drops to below $200,000. If you take this principal amount from not buying a car every 10 year and start investing, you could grow your investment over $700,000 next 50 years. For those who buys a new car every 5 years, you could grow your investment over $1 million.
Everyone knows in reality we cannot live/work without cars in the U.S. However, sometime I hear and read about some people living and surviving with less than $20,000 earned income per year. Without owning and maintaining a car, maybe this is really possible. As you can see, car expense is really high. With some creativity, maybe you can start cutting cost associated with cars and start saving/investing the extra cash.