I’m forever being asked by people, why I choose to daily drive a huge 1990s V8 land yacht. They say, with the price of petrol being at an all-time high, I should be driving something newer and more economical and that I simply must be crazy to even consider doing this. But what if I told you I’m not crazy. And that this is actually, one of the smartest decisions you could ever make.
Let me explain. Let’s say you’ve got your eye on an old car from the 1980s or 1990s with a $5,000 budget. Something you’ve always liked, it could be an old BMW, Mercedes, or something Japanese. But you’re scared. Perhaps the car in question has a large, thirsty engine. Or maybe you’re worried that the potential maintenance costs of owning an older car would eventually bankrupt you. Your girlfriend says you’re crazy and you should instead use the $5,000 as a downpayment on a brand new Toyota Corolla. After all, it’ll be much cheaper to run, and you’ll all live happily ever after. Except she’s wrong, and let me tell you why.
Let’s look at the two cars in question – my 1993 Ford Fairlane V8 and a new Toyota Corolla Ascent. The Fairlane can be purchased outright using your $5,000 budget. A new Corolla currently costs $26,000 drive away, so we’ll be using the same $5,000 as a deposit and paying the rest off with a 3-year loan.
First up we have the cost of registration. This is what you’re hit with first, and to register the 4-cylinder Corolla in Australia it’ll currently set you back $716.60 per year. The V8 Fairlane, on the other hand, will cost you $1107.85.
Nevermind, next up we’ll look at the cost of Petrol. Now I currently drive 15,000km per year and this is a fairly typical amount, and petrol prices currently average $1.40 per litre (or $5.30 per gallon). According to Toyota, the Corolla can achieve 6.0L/100km, meaning it’ll cost $1,260.00 to drive that 15,000km. The Fairlane returns 13.1L/100km, so that same distance will cost $2,751.00. That’s more than double the cost.
In the interest of fairness, we’ll be covering both vehicles with comprehensive insurance policies – and they cost $492.92 and $516.65 respectively.
Next, we’ll look at servicing and maintenance costs – which for the Corolla is currently capped at $120 per year. With an older vehicle like the Fairlane, it’s important to buy one which has a long service history in order to keep your maintenance costs down. Even so, in the time which I have owned it, it has cost me around $400 per year to service and maintain this car myself – including the cost of oils, filters, and replacing various parts as they fail. This is also assuming that you can do most of the work yourself.
So I’ll admit, things are not looking good for the Fairlane. So far, it has cost me almost $2,200 more to run in the first year alone. Now the costs we’ve gone through already are typically the only figures people consider when it comes to cars. They’ll tell you that the registration fees on older, larger engined cars are too expensive and that petrol prices are a killer. But there’s a far more sinister danger lurking in the shadows – and his name is Depreciation.
Now I’ve looked up prices of used Corollas and in general, they appear to lose around $4,000 in value per year. So by the end of your first year, your $26,000 corolla would be worth around $22,000 if you look after it. And this is where the Fairlane begins to claw its way back. If you buy an older car which is in good condition and already at the bottom of the depreciation curve, you stand to lose pretty much no value at all if you look after it. In fact, depending on the vehicle, the value might actually start going up. In this case, I’m simply going to call it $0 – I could resell it for roughly what I paid for it.
People say you shouldn’t worry about depreciation because it is a fact of life.. and that’s sort of true – it happens whether you like it or not. But unless you’re going to keep your Corolla until the day you die, you’re absolutely going to feel the effects of this financial loss when it comes time to sell. And if you have the choice of buying something which depreciates less, why wouldn’t you?
So the Fairlane is back in the black again and the Corolla is looking even more unappealing, who thought that was even possible. But I’m not done yet.
And that’s because we now have to consider loan repayments. We put $5,000 down on the new Corolla and used a secured 3-year personal loan at 8.49% to purchase the vehicle. When it comes to new cars this is a fairly run-of-the-mill loan here in Australia, but even so, it’ll cost you an additional $169 per week, or $8,788 per year. The Fairlane was bought outright, so we’ve got no repayments to make.
So where does this leave us? In the first year alone, it’ll cost you almost $10,000 more to own the Corolla. $10,000! That’s enough money to buy over 7,000 litres of petrol at the current price. Or let me put it another way – without touching any of the other figures, the price of petrol would have to rise to more than $11.50 a litre (or $43.50 a gallon) in order to make the Corolla the more financially economical choice. Or think about it this way – if the second-hand car you bought turned out to be a maintenance nightmare, you could spend $8,000 a year on repairs, modifications or upgrades and still come out $2,000 ahead of owning a new Corolla. So again, why wouldn’t you?
And you have to remember that this is actually quite an extreme example. If your dream project car is a 6-cylinder or 4-cylinder vehicle with cheaper registration and lower running costs, the numbers will sway even further in your favour.
So here we arrive at a MotoringBox top tip. If there’s an interesting old car out there which you’ve been wanting to buy and drive every day, just go ahead and do it! You only live once and don’t let all the naysayers out there tell you that you shouldn’t. You can even share this article with your partner or spouse if it’ll help you get your next used car purchase across the line, and let me know how you went in the comments below!