Are SUVs Ruining Retirement Savings?

This was my favorite paragraph:

> Personal finance experts love to discuss how much money you can save by avoiding that daily Starbucks habit or packing a brown bag lunch every day at the office. While I guess you could add to your bottom line somewhat by cutting back on the little things (a) this stuff doesn’t move the needle all that much, (b) it’s the little things in life that can give you small joys on a daily basis and (c) the large purchases will have a much greater impact on your bottom line.

This is also a big difference I've noticed between a "rich dad, poor dad" mindset. Sweating the small stuff doesn't make much of the difference in the end, it's the much less frequent but more impactful decisions (where you live, who you marry, the car you buy) that determines your overall financial well-being.

This reminds me of a silly joke. 2 friends are talking, one of them has just lit a cigarette.

-"Dude, how much do you smoke? And do you like porsche cars?" -"Around a pack a day. And yeah mate, I love em!" -"Dude a pack per day costs $12. If you stop smoking, you can buy a porsche in under 10 years just from the savings from cigarettes alone..." -"Oh damn, never thought of that. Do you smoke?" -"No, never!" -"So, where is your porsche parked?"

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Now jokes aside. Unless you work towards a goal (eg new laptop at the end of the year), and you actively keep track of the extra savings it's very easy to blow the $4 saved per day on a whim, without even realizing. Your mindset changes to "I can buy drinks for my friends, I 've been saving this week it's cool", and you end up where you started. And that's fine, there is happiness to be had over buying your friends a drink.

A lease is a depreciation financing program. It only makes sense if you want to change your car every 3 years.

I think if they called it a Deprecation Financing Program they wouldn't get so many customers.

Sheesh, you can buy three new cars or a starter home (in some places), that's how expensive new cars are these days.

Auto loans also require you to carry full coverage insurance, which can be the same or more than your car payment if the loan is less than $20,000.

Personally, I can't stomach the idea of paying $500-700/mo for a used vehicle.

My current daily is a 2005 Chevy Aveo, I've owned it about 6 years and my total monthly cost (car, insurance, fuel, maintenance) is under $200/mo. It's a budget box, no frills, and I do all my own repairs and maintenance, and you can too! Youtube is a great resource and cheap hand tools can be found at Harbor Freight. Anyone who tells you that modern vehicles can't be maintained at home is mistaken, most maintenance tasks require no special tools and many repairs are attainable with limited skill and experience.

I think my favorite part of the article is this quote: "Personal finance experts love to discuss how much money you can save by avoiding that daily Starbucks habit or packing a brown bag lunch every day at the office." followed by "this stuff doesn’t move the needle all that much"

I think that buying SUVs are more of a symptom of the problem than the cause. Sure they're expensive to buy, insure, and maintain - but most drivers I see are the only one in their vehicle. People aren't doing what is practical, they're doing what makes comfortable now.

I found this article interesting because I couldn't for the life of me understand why so many people spend so much money on their cars. For me, a car was just a convenient way to get to where I wanted to go. My ego wasn't tied up in at all. I didn't own a car as a way to show off my status. I drove a series of "beaters" and often did my own maintenance and repair of relatively simple issues. I finally bought exactly one new car for cash, and drove it for twelve years.

I never carried collision or comprehensive insurance, having the opinion that dealing with insurance is always a pain in the ass. The insurance premium is simply a markup on the expected value of what the insurance company would pay out. My "inner mathematician" couldn't permit it.

Because of this, my total cost of ownership of cars was really low. I piled all the money I saved into investing, and came out far ahead.

I sold my last car when I retired. Now, I walk everywhere: to the supermarket, to the park, to the gym, to restaurants, to the downtown bars. I'm so glad not to own a car.

This article is missing a huge and expensive market segment - 4 door pick-up trucks. I was at the dealer last week and found lots of pick-ups in the 55-70k price range. They are seemingly popular here and I get the appeal especially if you want to just toss all your stuff in the back and hit the mountains, but they usually get worse mileage than a SUV and cost just as much.

> Personal finance experts love to discuss how much money you can save by avoiding that daily Starbucks habit or packing a brown bag lunch every day at the office.

I actually think the true long term cost savings is in health care costs and general personal health. Making food yourself will cut down on excess salt, sugar and fats which are so prevalent when eating out. This will certainly help you stay healthy in the long run.

That being said, almost all cars are a financial loss and you'd be better off driving a 2000s civic. I always found it ironic that Michigan was loathe to pay for plowing but instead just bought SUVs.

"avoid the"..."insane initial depreciation that exists with new cars."

This is a strange statement, because of course lease pricing is nothing more than paying for the depreciation of the vehicle. Not only are you paying for it over the term, the risks if you want to terminate earlier, after the worst of the depreciation, are identical if not even exaggerated with leasing.

It can be a good choice, especially for businesses because it greatly simplifies accounting for vehicles (just an expense and nothing more), but when people differentiate owning from leasing some strange statements are oft made.

The 15+yr list has as much or more to do with buyer demographics and consumer behavior as it does to do with actual reliability and value. It's basically a reflection of what vehicles just wound up being popular among demographics that are easy on equipment (the wealthy, the old, etc) 15yr ago.

It's also worth mentioning that when you own the car you need to strike a balance between average use and peak use. Most of the people commuting in crew cab trucks are going to use the second row once a week (same goes for sedans) and the bed once a month. Compared to a owning a smart car and renting a nice sedan for a road trip once a year, taking a taxi a few times a month and paying for delivery/rental trucks it probably doesn't come out even but it's not the massive waste of money it seems like at face value and some of that can be attributed to people wanting luxury (sticking a fridge in the back of a truck is easier than strapping it to a car, having two rows of seating is much more pleasant than once bench for 3+ people). This applies to any excess capacity, it's just most obvious with trucks. Sizing for close to peak needs is why crossovers and SUVs are so popular. They can comfortably fit the family and/or a bunch of stuff. You might not need to do that every week but many people do it often enough to feel justified in springing for the luxury.

If you want to see less massive vehicles on the road then stop acting like you're too good to cram X+1 people in a vehicle that officially seats X or strap stuff to the roof. People buy trucks on the justification that they will haul homeowner sized amounts of lumber or crossovers for a family with two/three kids because they perceive putting three kids in the back seat of a compact and sticking a Christmas tree on the roof to not be in accordance with how someone of their income level is supposed to act.

I feel like it's a bit disingenuous to talk about this in the context of 1) paying MSRP and 2) buying new.

He even mentions the second point, then goes on to completely ignore it:

  - Never buy new.
  - Just buy something 2-3 years old after it comes off someone else’s lease.

A quick look on Kelley Blue Book says that $51,790 Ford Expedition drops to $24,925 after 3 years and 55,000 miles. Using the same parameters for the loan comes out to payments of $418 per month.

That's still a chunk, but it doesn't have quite the same shock value as the brand-new MSRP prices presented...

Now, $418/mo is still a far cry from the $165/mo you can get out of a lowend, 3-year-old Kia Rio, for sure. I drive something similar now. But the article still kind of rubs me the wrong way...

One thing that bugs me about this article is that the author chose the largest and most expensive SUVs, not the ones that are actually popular.

The smaller and more popular RAV4, Rogue, CR-V, Escape, etc aren't mentioned here. Comparatively, nobody buys Tahoes and Sequoias.

Minivans aren't cheaper; the Dodge Caravan is cheaper, for both definitions of the word.

Just to get this out there from the start: I don't like cars much, and I view them not just as an expense to be minimized, but a life unpleasantness to be minimized. Cars are horrendously expensive and I don't really like parking them, worrying about where I parked them, paying for parking for them, or not being able to have another beer because I'm driving them.

But I do surf and my kids love to fish and ride their bmx bikes in nifty places that are most easily accessed with a car, and I'm cool with that, so I look to balance the lowest cost and lowest hassle way to do that. We do plenty around the neighborhood, but can't do it all around the neighborhood. At least not yet.

So far, the right balance, I've found, is to buy a new car with a reputation for value and reliability. I accept that this isn't the most optimal possibility, but I've always been suspicious of the claim that a car loses x% of its value the moment it drives off the lot. Oh, I certainly agree that this is the case if you want to sell it, but that's hardly just true for cars. Go buy a thousand dollar suit and try to sell it on the street right outside the store where you bought it. It'll lose a lot more value than the car.

But here's the thing, try to buy that car (or that suit) at an x% discount from someone who just drove it off the lot. Even if you can, you might worry (well, I might) about what the hell is going on. It's just... weird.

Ok, so a year or two after it was bought new? Eh, I'm still not convinced. I suppose there are good deals out there, especially around people who dump cars after the lease, but even then, people often don't sell high quality cars that are only 2-3 years old. They sell cars they don't want anymore, and sure, that might be because they aren't brand new and shiny, but you often end up buying problems.

Could just be me. I've had bad experiences buying used cars and good experience buying new cars that I take very good care of for the life of the car. I certainly don't sell it at 3-4 years old, that's when the car is most valuable to me. It's a 3-4 year old car that I know is in great shape and has been cared for properly. I don't know if that is the case with a car that someone planned to dump at the end of the lease (or is selling cause... not sure why). You can have a great experience buying a used car, and on average it probably does work out to be less expensive but I don't like the uncertainty and variance.

Beyond that, I lust for the day I no longer own a car. Kid pick ups and drop offs still make it on the balance better to own one, but it's getting close. Maintenance, gas, parking fees (high in SF where I work), payments (or the lost value of the investment)... even if I buy a sensible car and take care of it and keep it for 10-15 years (until the maintenance costs exceed the value of the car), we're still probably looking at, what $4-6k a year, at least? That includes my very high parking costs. For others, it would be lower. This is when you make an effort to keep the costs down over the lifetime of the car (buying a quality car with a focus on value not luxury and keeping it for the usable life of the car).

I mean, seriously, you can take a lot of ride share for $5k a year. I'm starting to see some interesting things happening - like, I read about a surfing "club" with a monthly fee that has showers and boards and wetsuits and a lounge near the beach. If you're happy just surfing that one break, you could ditch the car and get a ride service, and even if you live a ways from the beach... 5k is a hell of a lot to work with.

Still, some major limitations. But man, I seriously mean it, I drool at the idea of getting rid of cars in my life.

I would like to see a similar analysis applied to living and working in Silicon Valley or San Francisco, as opposed to some metro area in the Midwest. I have a hunch that given two similar people, one in each place, with similar careers, financial habits, consumer habits, etc., the one in the Midwest will be able to retire sooner and more comfortably than the one in SV/SF.