KateHorrell

Helping Military Families Make The Most of Their Money

  • Home
  • About
  • Resources
  • Contact/Hire Me
  • Our Privacy Policy
  • Make Money Now

The Long Term Cost of Your Car Purchase (aka Possibly My Biggest Financial Mistake Ever)

5 March 2021

This post may contain affiliate links, from which I may earn revenue to support this free site. All opinions are my own, and I only promote products that I use and love!

Facebook0Tweet0Pin00Email0

Disclaimer: This post may contain affiliate links, from which I may earn money. As an Amazon Associate, I earn commissions from qualifying purchases. All opinions are my own, and I only promote products that I use and love!

Way back when, my family needed a bigger vehicle. We didn’t even want a bigger vehicle, but you can’t fit four car seats in a station wagon. I dutifully did my research and went car shopping. A lusted after a fun little SUV, but was practical enough to realize that I didn’t want to spend my life leaning over a seat to buckle people into car seats in the third row. A minivan was the right tool for the job.

And for some reason, that baffles me now, I needed a new minivan. Maybe it was because old minivans weren’t much less expensive, or because my pregnant brain thought that I deserved a new car, or maybe I just didn’t want the hassle of trying to buy a used car while juggling three toddlers alone. I don’t remember.

And so, I did all the smart things: Read all the reviews, picked the right vehicle and the right trim level for our needs, and comparison shopped between multiple dealerships. I found the best loan deal, and bought my new car. It genuinely was a great thing for our family – we could reconfigure the seats in different ways for different purposes, and there was plenty of room for all of us and all of our stuff. We worked that van hard until we donated it before moving overseas.

And yet, it was still a huge financial mistake. Buying that car new cost us a lot of money in the long-term. Was it worth it? Who can say? But I do wish I had thought this decision through a lot longer.

The Sticker Price

I paid just shy of $30,000 for the minivan. It was the most I had ever paid for a car, and still is the most I’ve paid for a car. Minivans that were a few years used were running around $20,000 at the time. They were a little newer, but otherwise substantially the same vehicle. I would have been perfectly happy with the $20,000 van. So I flat out wasted $10,000 right there.

Financing

I don’t remember the specifics of the financing, but the interest rate was around 3%. Because that seemed crazy low (given the time), I didn’t put any money down AND I picked a six-year loan term – 72 months! That meant our payment was around $455 a month. We did end up paying it off early, but not terribly early. Let’s say we paid it off in five years. In those five years, we paid around $2,700 in interest. Sigh. So the total cost of this purchase was $32,700.

The Short-Term Impact

Let’s imagine that instead of buying the new van, I bought the used van at $20,000. And let’s imagine that I still financed it, but I put $5,000 down. That’s not unreasonable considering that I was selling a previous car. (Whatever did we do with *that* money?) Even if I financed $15,000, with the same payment amount, I would have paid it off in 35 months, saving myself $2,000 in interest. So the total savings by purchasing used and making a 25% down payment would have been $12,000. Geesh.

The Long-Term Impact

At the time I made this purchase, I was 33. Let’s take $12,000 and invest it in the market at a conservative growth rate of 6% per year. In 37 years, when I am 70years old, that $12,000 would be worth $103,000. Thank you, compound interest.

While $103,000 won’t change my life entirely, it’s a lot of money to lose for one car purchase that I didn’t even keep for 8 years. And imagine that I add that $103,000 to other dumb financial moves I have made over my lifetime. There have been quite a few. I don’t even want to think about it too much, because it makes me kind of ill. I could buy an entire fleet of minivans for the total amount I’ve wasted on cars over the years.

We all make financial mistakes, and they help us learn. But sometimes it is OK to learn from other people’s financial mistakes. If you are contemplating your next car purchase, learn from my mistakes. You can make a significant impact on your long-term financial goals by simply making slightly different decisions along the way.

Do you want to know more about your military pay and benefits?

Things change fast around here! Keep up-to-date with email alerts about the topics that are important to you!

Success! Now check your email to confirm your subscription.

There was an error submitting your subscription. Please try again.

I don't like spam, and I won't send it to you, either. Unsubscribe at any time. Powered by ConvertKit
Kate
Facebook0Tweet0Pin00Email0

1 Comment
Filed Under: Spending

Comments

  1. Steveark says

    5 March 2021 at 11:13 pm

    Any car you can’t pay cash for without reducing your savings rate, is just more than you can afford. I agree with Dave Ramsey in that, until you are a millionaire, brand new cars should not be an option. $103,000 isn’t enough money to make a difference in the long run but if you stack one new car after another then it’s going to add up to real money.

    Reply

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

  • Bloglovin
  • Email
  • Facebook
  • LinkedIn
  • Pinterest
  • Twitter

Search

Welcome

Hi! I'm Kate! Accredited Financial Counselor®, Navy spouse, and mom of four.

Here at the blog, I talk about the financial issues that affect military families - pay, allowances, and benefits. Plus college stuff, landlording, moving, taxes. We cover a little bit of everything.

My goal is to give you the tools to make the best decisions right now, so you'll be confidently prepared for whatever comes next - whether that's a PCS move, transition to civilian life, or retirement.

So grab a cup of coffee, tea, or whatever makes you happy, and let's get to know each other.

Home About Resources Contact/Media Privacy Policy
  • Bloglovin
  • Email
  • Facebook
  • LinkedIn
  • Pinterest
  • Twitter

Affiliate Disclosure

This site does contain advertising and affiliate links. If you click on an advertisement or link, I may be compensated. I only promote companies that I love and trust. Kings High Media/KateHorrell.com is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com

Disclaimer

Kate does not represent the Department of Defense, the Department of Veterans Affairs, or any government agency. This blog is strictly for informational and entertainment purposes only. The content on this site should not be considered professional financial or legal advice. I may receive compensation through affiliate or advertising relationships from products mentioned on this site. All reviews on this site represent the personal opinions of the author. All references to third party products, rates, and offers may change without notice.

©2020 Kate Horrell and Kings High Media. All Rights Reserved.
Site development by Olive & Ivy Design

Share this ArticleLike this article? Email it to a friend!

Email sent!