Buying a Car Without Being Taken for a Ride

Freedom, here you come.

After saving and sweating over the espresso machine at work for long, tiring hours you finally have $8,000, which is the drive-off-the-lot price of that more-than-gently-used Ford Taurus you've had your eye on. It'll do. Those rusty spots just add character, right? And at least you have a set of wheels. You're going places, baby.

And it cost you $8,000.

Uh…not exactly.

You plan to drive this can for four years and then sell it for $4,000 to the guy down at the scrap yard who's willing to take the thing off your hands.

Let's say you really embrace the freedom of the road and drive 10,000 miles on this car; that's a lot of driving for a high schooler, but you're not buying a car to let it sit around.

Driving Costs

Your costs don't end with buying that lovable hunk of metal. Your baby is going to need…

(1) Gas

You're not going anywhere until you fill the tank, and if you plan on driving 10,000 miles a year, that's a lot of fuel. An older Taurus might do 20 miles per gallon and your town might see prices that average 4 bucks a gallon. 10,000 miles divided by 20 gallons to the mile means you'll need 500 gallons each year. At four dollars, that's a cool 2G a year or $8,000 over four years. So, you haven't even gotten in the car yet and it's already costing you twice what you thought the price was.

(2) Insurance

Oh, boy…now we've stepped in it.

Insurance is a huge topic, but what you need to know is that it's supposed to cover you if you're in an accident—and you need it to legally drive in every state. If you want a basic plan, it might cost you a thousand dollars a year ($4,000 for the four years you'll own the car). If you get in an accident, it won't cover much and that Taurus will end up costing you a bundle. And if you get dinged or get in an accident, expect that $1,000/year to soar sky-high.

Still thinking of that Taurus as your baby? That's cool—it's costing about as much as a dependent.

(3) Maintenance

In a year or two, you'll need new tires. You're going to need an oil change and basic maintenance every once in a while. Maybe your new ride will be good to you and maintenance will be just $500 each year. But if your transmission needs work or your muffler falls and rolls across the highway like tumbleweed, you're looking at thousands of dollars spent.

(4) "Oops" Expenses

See bright, flashing lights in your rear view mirror? That's the sight of your wallet shaking in terror because you've got a speeding ticket. Not only are you going to have to pay that ticket, but that's going to kill your insurance rate, unless you go to traffic school to get it swiped from your record. One tiny problem: that traffic school costs $500. Oops. Add a few parking tickets or other offenses, and suddenly you're looking at hundreds of dollars extra. Maybe it's time to slow down a little, Dale Earnhardt Jr.

(5) Incidental Expenses

Those terrific seat covers that make you smile? They're not free. And if you hate cleaning the car but don't want your parents on the case, you might be schlepping over to the local car wash, which is about $125 a year to get someone else to wash the dust off your trunk.

So what's the final damage?

$4,000 base cost (buying the car for $8,000 and selling for $4,000)
$8,000 in gas ($2,000 a year times 4 years)
$4,000 in insurance ($1,000 a year times 4 years)
$2,000 in maintenance ($500 a year times 4 years)
$500 for tickets
$500 for car washes and those little extras you can't pass up
GRAND TOTAL: $19,000 ($4,750 for each year you own the car)

Yowza.

Even when you're buying what you think is a cheap car, remember that the initial cost is just that: an initial cost that grows. It's the driving costs or the expenses of owning a car that will really add up (and up and up).

Is the Money Worth It?

Some people are predicting that millennials might decide it's not worth it. After all, with so many other transportation options available these days, owning a car isn't the only way to get around. That $4,750 a year could take you a long way on Uber or Lyft rides—without the hassle of paying for your gas, insurance, and all that other stuff.

But if buying the car is worth it to you, there's more than just the cost to think about. See, you don't have to pony up that $19,000 right away. Which is why the guy at the used-car lot was able to tell you that the car "only" costs 8G. Those expenses will be spread out over the time you own the car—and you're going to get mileage out of that.

At 4 years x 365 days (forget leap year; these are Shmoop-rough), you'll own that Ford for 1,460 days. At $19,000 in total costs, that's about $13 a day or over 50 cents an hour. Is it worth it? Maybe. A bus still costs a few bucks if you want to get somewhere.

If you put 40,000 miles on the car, that means you'll end up paying 47.5 cents a mile. Is it worth it to you to pay a buck to get to your friend's house two miles away? Is it worth it to pay about $50 to go on a road trip with your buddies? Possibly—especially since renting a car for that road trip would likely cost you more.

This isn't calculus (even with all these pesky numbers), so there's no right or wrong answer here. If you get the Taurus, that's not bad, good, or wrong. Just look at the numbers and know what you're paying. And know that you're paying for a liability: something that's going to cost you money and not make you money.

Then you can feel good knowing that paying $4,750 each year for a car rather than the $1,200 it would cost for unlimited bus travel in most cities is worth it to you. In the end, that's what matters…well, that and making sure you can afford $4,750 a year.