Are you someone who needs to hear the purr of a loud engine as you hit the road? Do you like the wind on your face as you take the pilot seat of a coveted sports car, or a rumbling pick up truck? If so, hop into the passenger seat for a moment or two and let me tell you about how I was the same, and why my opinions have shifted during my journey to financial independence.
If you’re like me, seeing a family member or friend shuttling around in a higher-end car is normal. And, that’s not to say they can afford. On the contrary, these are cars that are leased or bought outright at too steep a cost. But they’d never admit that they paid the equivalent of a mortgage down payment. What they will do, however, is judge those who aren’t doing the same.
“You drive a Toyota?” one would say. “Go get a real car.”
“You have money, so why not use it?”
Comments like these are so common in our consumerist world, especially in American society, where measures of success are all topsy turvy. After all, an article from CarsDirect noted that, despite rising car prices, leasing in America grew to record levels of over 32% in 2019! What’s trouble isn’t that fact, although worthy of discussion in its own right. No, what should shock you is that the average monthly payment is $536.
That kind of money covers my cell phone bill, grocery bill, and any miscellaneous expenses in a given month. Or, conversely, that kind of money put towards a Roth IRA each month would more than max out the account (the benefits of which, are unreal)!
So, what to do instead? Well, according to Kelly Blue Book, a used 2016 Prius costs about $15,000 to buy. So, save that monthly payment and, in less than three years, you can own one of the most gas efficient cars on the market. But why am I mentioning a Prius, and why is it in the title of this piece?
Well, you must already be sold on the buying vs leasing piece based on what I’ve already said, so why not take it a step further?
I had employed the buying strategy for my Subaru, saving my hard-earned money before buying it outright two years ago for $16,000. My first choice had been a Prius, but I let my family and friends talk me out of that decision. I let their voices get in my head, and convince me I had to drop thousands of dollars more than a Prius just to show off.
However, in 2019, I drove about 20,000 miles between work and leisure. This is a big deal, friends, and if I were to do the math, you’ll understand why…
My Subaru gets 18.5 gallons per fill up, and goes about 29 miles per gallon, so that’s about 537 miles per fill. Given I drove 20,000 miles, that comes out to be 37 fill ups in 2019. So, assuming gas hovered at about $2 a gallon, I spent $1,369 (18.5 gallons x $2 x 37 fill ups)!
Meanwhile, since a Prius gets fifty miles to the gallon and a tank fits about 12 gallons, the car would get 600 miles to a fill up. Given the 20,000 miles driven, that comes to 33 fill ups. So, given the same price of gas, the cost would be $792 (12 gallons x $2 x 33 fill ups).
So, if you’re sold on ditching those monthly lease payments and buying a car outright, don’t be like me and laugh off the Prius as an option. You’re already saving by buying a used car outright, so why not tack on an additional yearly gas savings ($577 in my case!) and play it smart. Don’t be dissuaded by the short term bill of a new car. I always advise you play the long game, and as with the above, that means swallowing your pride. It means shutting out those ego-centric voices of family and friends.
Go ahead and buy that Prius over the new luxury car you planned to lease. Trust me, you’ll bank account will thank you later.
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