Cars: Costs & Decisions

How much is the “right” amount to spend on BUYING or MAINTAINING a car?? A loaded question. For insight on the answer, know that experts in financial planning cite the “Big 2” expenses of life that must be addressed: Shelter and Transportation. These are the “Big 2” no matter a person’s economic situation. (Note that the experts also say that when analyzing monthly spending, to start with these “Big 2” items, then pay yourself savings monthly, then figure out the rest with Food another “big” and obvious item.)

mercedes benz parked in a row
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Regarding personal transportation, consider the ever-changing world of cars. Cars remain a sizable chunk of our lives in terms of expense, enjoyment …and frustration! It occurred to me to talk a bit about this major expense item when a certain car’s (whose owner will remain nameless) odometer passed the 163,000 mile mark this past weekend.

No matter income level or age, I find that EVERY client cares about cars.

  • When and how often to buy and replace cars?
  • How much to spend on a car?
  • How to balance important financial events like retirement, buying a first home or paying back student loans with a car purchase?

In planning terms, the answer is that there needs to be either an emergency fund, a dedicated bank savings account or a sizable line item in the short- AND long-term budget for automobiles. What is the smartest financial decision in the event that a car ages?

  • Maintain the car at XX thousand dollars per year?
  • Buy new? Or used (a.k.a. certified pre-owned)?
  • If new – lease, finance or outright buy for cash?
  • Combination of the above??

These decisions are based both on money saved and personal preference – and will differ for everyone. You can read books ranging from The Millionaire Next Door* to Life’s Little Instruction Book* to gain advice on both the money and personal preference considerations. One piece of advice reads: Buy the biggest house you can afford and drive an affordable car. Other pieces of advice are more precise and scientific in terms of spending on a car or cars. The decision can be a simple matter of money or a more complicated matter of combined factors plus family needs (think: multiple kids).

To further complicate these decisions, consider recent major changes with respect to cars and transportation, along with the things that have stayed the same:


  • Uber, Lyft and other car services
  • Hybrid vehicles
  • Curiosity over the Tesla (and other high-end electric vehicles)
  • Continued Rise of the SUV and Pickup Truck


  • In the absence of public transportation, a personal vehicle is still needed
  • Car loans have remained fairly consistent (5-7 years, low and promotional rates to those with good credit, higher rates and payments for those with less good credit).

It all adds up to taking the time – preferably NOT while driving – to think through these critical short-term and long-term spending decisions. Over the long-term, cars and personal transportation can make or break both a young person’s financial life and the financial lives of more established and wealthy people. Please feel free to pick up the phone to call me to talk through the specifics of your bigger spending picture on these “Big 2” items.

*The Millionaire Next Door: The Surprising Secrets of America’s Wealthy, Thomas Stanley and William Danko, Pocket Books, 1996.

*Life’s Little Instruction Book, H. Jackson Brown, Jr., Bookman Press, 1991.


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