400,000 Miles? No Problem. How Driving a Tank Can Make You a Millionaire

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How many times have you thought to yourself, “My car has XX,XXX miles on it, it’s time to get a new one before something major happens to it“? Yeah, I’m talking to you.

For those that have bought into that (crap), have you also settled on the notion it makes complete sense because your payment won’t go up if you trade it in.  Now you know how I feel about “affording the payment” – if you don’t, go here now and report back  here when you’re done.

Just because you can afford the payment DOES NOT mean you have to.

I’m tired of listening to people complain about not having enough saved for their retirement, yet they constantly sink thousands and thousands of dollars into a meaningless car payments that could be better served elsewhere. I had almost given up all hope until a recent meeting.

The Couple With The “Tank”

A couple that was interested in doing some retirement planning were referred to me and came to the office for a first meeting.  They were both really nice people that had worked hard their whole lives.  They had scraped and saved and were ready for retirement to be here.  After reviewing their situation, they weren’t totally ready to be there, but they were close – very close.

As we continued our discussion, the topic of car payments and mileage came up.  If you’ve been dozing off to this point, this is where you need to pay attention.

Turns out the wife works for a small hospital and part of her job consists of driving around to 4 nursing homes in the area every single day. What that equates to is over 120 miles per day.  Plus, she’ll frequently work 6 days a week and often on call for the 7th.  All in all the Pontiac Aztek that they purchased  March 21, 2001 has over 396,000 miles (That’s the actual red tank pictured above).

Here's the odometer to prove it!

That’s almost 400,000 miles.

I couldn’t believe it.  For some people, it’s a milestone to hit 100,000 miles in their car.  She blew that out of the water.

They originally bought the car  for $23,724.04 in 2001 and had it finally paid off in 2007.   For the past 3 years (and counting) she keeps racking up the miles.  My hope has been restored.

Look at Some Numbers

Do you find yourself stuck with some silly car payment that you could really do without?  Do you find yourself constantly trading in your car just because you want to keep with your friends/co-workers/family members.   If so, stop it!   You’re potentially costing yourself thousands and thousands of dollars.

Don’t believe me? Let’s take a look.

Me being the numbers guy, I knew there would a ton of ways I could run some numbers.  In fact, if your curious to see some other results, let me know and I’ll be happy to do so.

The first example will look at is what happens if she didn’t have a car payment at all.  I know that I beat these type scenarios in your head, especially with my own Lumina example, but it’s worth repeating.

Here we’re assuming that instead of the $400 per month car payment, we are investing the money and earning 8%.  In that case she would have accumulated the following:

Note: These numbers are for illustrative purposes and do not represent depreciation numbers for all vehicles.

Remember what I’m saying here.  Buy not having a car payment and investing the money, she could have had

$1,243,471…..How bad do you want that new car?

In their case, they did have a car payment – at least for a little bit.  See they purchased the Aztek for $23,724 and with it came the $400 per month car payment.  The big difference with them is that when the car was finally paid off and having over 200,000 miles they could have justified to themselves that they needed to trade it in before something happened.

Well, something did happen.  The car needed a new transmission that cost $2,500.  In case you were keeping track, that’s about 6 months of car payments.  That’s it.  Well, that and the three deer that she hit.  Lucky for her (and not the deer) her car had no damage whatsoever.  See, I told you it was a tank!

When I asked her,why she’s been so determined to continue to drive her car instead of trade up, her response was fitting to the SOF principles:

The lack of car payment frees up extra money for other things, vacations, tour weekends, trips, home improvements, etc. Warranted but unnecessary items.

Stated another way: freedom.  Freedom from a car payment.  Freedom to do the things in life you WANT to do; not feel you HAVE to do.  I promise you that you don’t HAVE to make a car payment.

But She Did Have a Payment

I want to take away the fact that she did have a car payment at one time. So she wasn’t always able to invest the full $400 per month.  Just to give you another take, here’s some numbers of what it would look like if after you paid off the car, you would invest the $400/mo car payment:

• $116,231 for 20 years
• $320,470 for 30 years
• $761,408 for 40 years

Maybe not quite as much as no car payment, but there’s still a serious amount of money here.

Is My Rationale Flawed?

I’m sure my rationale has more holes in it than a pop-up target at an M-16 range, but don’t miss the point.  The point is that by either having no car payment at all or at least reducing your car payment by not trading it as frequently or not always buying a brand new car, can help put some serious coin in your purse.

I almost made this mistake when I was 18 years old when I tried to convince my mom to co-sign for me on an Acura Integra that I so desperately that I needed.  Luckily, you she didn’t bite and I was mad at her for not helping me the “car of my dreams” – not to mention the $400 per month payment that would have came with it.

I think about that time and reflect how financially damaging that would have been to be stuck with a stupid car payment at such a young age.

But what about you? I was 18 and stupid, what’s your excuse?   Here’s a quick measuring stick to see how you’re really doing:

If your number is a negative number, then you are wrong.

Don’t worry, you have time.  If you haven’t saved much for retirement and you’re shelling out hundreds of dollars per month on car payments, it’s time to do something radical:  trade in both cars for something used, sell one car completely and become a one car household, or succumb to the fact that you will be driving your vehicles past 400,000 miles.

Is it Really that Radical?

Ask yourself is it that really big of deal to do some of things that I’ve outlined above?  If you really think about, it’s not.  The couple that inspired this story had one vehicle with over 400,000 miles on it.  That’s pretty radical.

What I didn’t mention is that the husband has been driving the same truck for over 17 years, well over 200,000 miles.

This couple gets it.  Do you?