When a Car Payment Is Not the Norm

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One of our rules for building wealth is not to borrow for depreciating assets, which includes cars. But our old car is starting to fail and we're struggling with the idea of spending a lot of cash to buy a new (to us) car.
It’s winter in New Zealand and just recently my car heater decided to crap out. Well, technically it still works, only it blows cold air, not hot.

As we don’t have a garage the car is exposed to the elements. I have to de-ice windscreen with warm water before driving in the morning. It’s a total pain in the arse but if it was just me I wouldn’t care. I’d wear a blanket over my legs and suffer the cold. But with 2 little kids I feel slightly neglectful (although they do love their car blankets). All this is to say that I’ve been considering buying a new car because my $1,000 banger is no longer cutting the mustard. The front electric windows stopped working just before we purchased it and now the heater has gone.

Because we don’t borrow for depreciating assets, buying a new car is a big deal. I really don’t want to spend money on something that gets me from A to B and doesn’t provide me any actual joy in my life. And $5k on a car just feels like an unnecessary luxury.

I didn’t always think this way. When I was 18 and working my first full-time job earning around $300 a week after taxes I believed that I deserved a nice car. One Sunday afternoon I went shopping with a friend and came home with an $8,000 car loan (and a new car, of course). Only I didn’t think of it as an $8k car loan. To me it was a $75 weekly payment. Which was much more palatable. Eventually I left the country and had to sell the vehicle at a loss to pay my loan back.

After that experience I no longer compliment people on their new cars. It feels stupid to congratulate them on acquiring more debt for a depreciating asset (unless it’s vintage car – which is rarely is).

Since a car payment is out of the question, spending $5,000 on a car seems like so much money. Still, a decision needs to be made. Here’s a list of pros and cons:

For keeping

  • We replaced the cam (timing) belt on it in 2014, which cost about $600. Having that done removes a fair amount of the risk from owning second-hand cars.
  • It’s cheap as hell to run – like $55 per month cheap.
  • It’s a manual (or a stick for my US friends) – I’ve always driven manuals but they are getting harder to find in newer cars.
  • It’s a lovely smooth car to drive, and I really think it’s got at least 5 years left.
  • We can spend the money on investments or travel.
when a car payment is not the norm
Here she is in all her glory. The question is – do we keep her or is it time to upgrade?

For getting rid of

  • It’s not quite big enough. My husband’s head nearly hits the ceiling.
  • We could drive in the heat of the day in summer again!
  • We’d probably do more weekends away and road trips if we had a slightly bigger and more comfortable car.
  • We’d be 5k poorer.

I’m at odds – do I take the old banger to the mechanic and pay whatever it costs them to diagnose and fix the issue? Or do I suck it up and take 5k from our travel funds, buy a slightly more modern used vehicle and call it a life cost? What would you do?



I'm a mum on a mission to achieve financial freedom and have fun with my family along the way. You can find out more here.

13 thoughts on “When a Car Payment Is Not the Norm”

  1. Personally, I would run it into the ground. I am currently doing that with both my cars. I love cars but every time I look at them I see investment income that isn’t being earned.

    Its such a big hit. You lose money while the car is depreciating, you lose income on the capital invested in the car and you have to pay for repairs, maintenance, petrol, registration, insurance…

    They really are a bottomless pit.

    • I agree with everything you say Troy, and after a few days thinking on it I’m definitely leaning towards keeping it.

  2. Recently we spent money on the most expensive car I have ever bought. $6000 plus the cost of the new papers and so on. We needed to get a second car as we moved to a remote place ( thus saving us money as it is cheap to live here). It is so great to have a car which I invested in. I paid the cash for the car because I had saved the cash and it is reliable. I like being able to drive in all conditions which is important here,Cars cost money no matter how you look at it, They suck the life out of the budget when they need registration, new tyres, petrol and an inspection however getting a new car and spending money on something decent, one time, is worthwhile. My husband is 6 foot 3 and there is no way he would be able to sit in a car where his head almost touches the roof which is the other reason we opted for this new car as our previous one had a low ceiling,

    • It sounds like our husbands have the same issue. Although mine’s put up with it for this long so he’ll survive. But the other issues I agree with. I do hate having my kids wear blankets in the car – that said, my Dad (who’s a bit handy) reckons it’s just the thermostat and should be an easy fix. I think I’ll invest in a new thermostat and let him have a tinker at it. If he fixes it – great. If not, time to make a decision.

  3. About this time last year I bit the bullet and spent $6000 on a new (to-me) car after my $1000 car of 7 years had transmission failure. Worst decision ever! The new car caused me no end of grief as it had immediate issues and the company I bought it from just completely ignored my attempts to return it. Eventually, after going to 3 different mechanics and countless emails, calls, threats and complaints to the commerce commission, the car was finally fixed enough that it went without dying in the middle of the road (though is still noisier than when I first purchased it for some reason). Fast forward to last week and I had to spend another $600 on repairs when it failed its warrant.

    Moral of the story? Buying a new car, even from a dealer, doesn’t mean you’re not going to end up with a pile of junk! I wish I’d just paid whatever it took to fix my old car. I loved that old beater!

    • Woah – what a mess! I’m glad you got some resolution but your story is exactly the reason I’m erring on the side of keeping it. Buying another 2nd hand vehicle does not mean we get a reliable car. I love my old beater too!

  4. I would replace my car if it seems repairs and maintenance are becoming frequent. Also factor in safety. The money, even at intermittent intervals add up as well.

    • I agree Vanessa. We had a car like that before this one. It cost $900 and within 6 months we’d spent 3k on repairs. We then sold it for $750. So all in all, a terrible waste of money. This car, on the other hand is so reliable. It’s just the little things (heater etc). As they say with used cars – it’s better the devil you know.

  5. Do you have 2 cars? If so I’d suck it up and keep it (answer MIGHT change if you are a one car household…not sure).

    I reluctantly took out a loan for this car (and paid it off early) and it has been the SINGLE best car decision I have ever made. Buying cars in cash (read, CHEAP) has never worked out well for us. Hope to run this for many years more trouble free. As a one car household it’s vital for our vehicle to be reliable and not cause us stress.

    • Sounds like that was a good call on your part. We are a one-car household but as my husband can (and does, every single day) bike to work the car is really my runabout. It’s super reliable and drives well. It’s just the heater. And the windows but that’s been an issue since we bought it. It’s passed every warrant without issue for the past 3 years and even worked perfectly after being stored for 15 months whilst we travelled in 2014-15. It’s a bloody legend of a car. But if it did die we could still function as I can walk everywhere I need to go within about 15-18 mins, and my other half’s workplace is 2kms from our house.

  6. I think it depends on how important that one car is to your life. For us, when I was traveling to clients each day, I needed a reliable car so when I ended up at the mechanic every month, it was worth it to purchase a new car. If you don’t depend on it, then Jeep it going until the repair is big enough that it doesn’t make sense to repair instead of replace.

  7. Speak to your accountant. You said your husband is a tradie; does he have his own company? If so I would think there would likely be a way for your husband to purchase a car through the company; and that doing so would likely have some tax benefit (for instance claiming the cost of the loan as a deduction or claiming the depreciation of the car as a deduction). You’d still have to spend the money but because you could claim a tax deduction it would cost a lot less than what you now think it will cost. Obviously the benefits of doing this depends on NZ tax law; I know nothing about it but your accountant will.

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