What car should I drive to reach FI?

I just want a car that is affordable, reliable and capable. Enter the Toyota Corolla.  I may be a bit biased since I own a 2006 Toyota Corolla. However, I can write this article based on experience. So here we go. I have put this car through some serious abuse, such as driving up mountains on off road 4 x 4 trails. The dual front wheel drive has served me well in snow and mud. I  even built an entire off grid cabin with my Toyota Corolla. This car has a towing capacity of 1500 pounds. I put the same amount of abuse on the Corolla as I did on my new Ford Ranger (my first vehicle when I was 16). However, after one year my emergency brakes blew out and the transmission quit (I got rid of the truck, the dealer took it back under warranty). Anyway, despite all the abuse on my Corolla over the last 6 years it still performs like the day I bought it used. So how much does this car cost me to own?

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I bought my Toyota Corolla for $10,000 cash about 6 years ago now. I do the maintenance myself (so far, front brakes, oil changes, coolant change, spark plugs, belt, battery and tires) I suspect this car would last another 15 years without any major repairs.  Doing my own maintenance has saved me a lot of time (i.e. not booking appointments with the mechanic and waiting around for them to finish) and of course money. I can now do an oil change in 8 minutes and change the front brakes in about 25 minutes. Toyota cars are very easy to work on and require little on going maintenance to keep them running smoothly. Parts are cheap and readily available. Because I bought a used car, I do not need to insure for collision or comprehensive, this is just a total waste of money. This will save me about $300 per year on insurance and I don’t have to deal with all the headaches that go with the process of making a claim. If I ever get into an accident I can just repair the car my self or replace it with another used car.  In total my transportation costs are:

  1. Depreciation $500 per year
  2. Maintenance $225 per year (includes tool costs and tow hitch installation as well)
  3. Insurance $850 per year
  4. Gas $1320 per year

Total cost for my car is $241.25 per month average. If we take gas out of the equation then my total costs to own the car is $131.25 per month!

I went on to my local classifieds here in Victoria, BC to find a good reliable car that will help you on your journey to financial independence. So for around $4,000 you can find a car that should last you at least another 200,000 km and 12-15 years. Here are those results (3 out of about 70 similar ads at any given time) :


How would buying a used Corolla or similar help on the journey to financial independence? Let’s take two examples a new Mazda 3 base sedan ($23,720) and a used Corolla ($4,000).

We know that the Corolla costs about 131.25 a month to own. This assumes we can get 12 years out of the used Corolla before it cost more to fix than buying another used Corolla (In reality we can likely get upwards of 20 years from the car).

So the Mazda costs ~$20,000 more than the Corolla upfront.  If invested in an index fund, with opportunity costs at 9% after 12 years, that $20,000 used to buy the Mazda will be worth $56,253.00 (1.09^12 x $20,000). The Corolla will be worth a conservative $500 after 12 years and the Mazda would be worth ~$6500. That means the Mazda costs ~$50,000 more to own over 12 years than the Corolla ($56753-$6,000)! If you were to buy something more expensive like a new minivan ($45,000 new) then the mini van costs ~$120,000 more then the used corolla after 12 years (1.09^12 x $45,000) thanks to the compounding effect! I didn’t take into account maintenance costs for the new car. However, insurance costs are higher on the new car (about 400 a year more) so that would more than make up for the cheaper maintenance costs on the new car versus the used car.

So to drive that new vehicle we give up ~$50,000-$120,000 net worth every 12 years. Just think that new minivan could add as much as 5 years to your working career jail sentence. Sure the minivan is convenient, but is it worth 5 years of your life when a used car would work just fine?

Happy Saturday


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