According to the U.S. Department of Transportation households spent an average of $10,961 on transportation in 2021, which is second only to housing. Sixty-eight percent of this transportation expense is dedicated to the cost of purchasing and maintaining personal vehicles.
Given that vehicles are such a big expense, I felt it was important to dig deeper. I interviewed the person who knows more about vehicle costs than anyone I know: Brian Barker. Brian and his family own and run neighborhood repair, maintenance, and gas stations in Raleigh. He says while there is no perfect science to managing vehicle costs, he’s learned a few important things through the years.
Brian’s advice has helped me manage my own vehicle costs, and this interview is chock full of wonderful advice. Without further ado, let’s hear from Brian!
Bobby: What are some thoughts about managing vehicle costs that not everybody knows?
Brian: I think most vehicles are good for about 100,000 miles if properly maintained. Your cost of ownership between 100,000 and 150,000 miles gets really expensive. Knowing that, if you want to drive a car to 200,000 miles or 250,000, you’re going to spend a lot of money in that 50,000 miles just after 100,000 miles.
But here’s the thing: Most people desire to own a reliable vehicle. For example, if they have a family, there’s a lot of stress that comes with, “Am I going to make this trip, and can I wait on the side of the road and ruin a trip? Can I get there and back safely?”
Bobby: You explained that a vehicle gets really expensive from 100,000 to 150,000 miles. Back of the napkin, for a car that you purchased for $60,000, how much are you going to spend from 100,000 to 150,000 miles?
Brian: I would say a solid $10,000. That’s going to be your 100,000 mile tuneup. Your water pump is going to go bad. There is always something with the air conditioning, and maybe an air conditioning compressor, maybe the condenser. Maybe something in the dash, your electronics, wheel bearings. You’re talking thousands of dollars to replace those things, and the chances of losing your transmission is very, very good. That alone can be $6,500 easily. You may be replacing suspension-related items too.
Bobby: Do you think that the cost of maintenance from 100,000 to 200,000 miles is as expensive as a car payment?
Brian: I think it’s more expensive to keep that high-mileage car maintained.
Bobby: Should people buy vehicles new or should they buy them used?
Brian: Assuming they aren’t buying it for a business and thus able to write that expense off, they should look for a vehicle that came off of a lease that has 22,000 miles of fewer on it because most people can’t do too much damage to a vehicle with less than 30,000 miles. They should drive it from about 20,000 miles to 90,000 miles.
Bobby: For those who want to purchase a new car, do you think leasing a vehicle is just as good as buying?
Brian: It’s pretty close. So in a scenario when you’re trying out a car, you’re probably better off to lease it. That way, in case you have problems, you can turn it back in. It’s a case-by-case scenario. Most people that are driving 20,000 miles a year, the lease is not going to work for them. With a lease, you only get 12,000 miles a year, and most people go over that amount between the ages of 35 to 65. For them, it’s probably better to buy a car. For our parents, as they get into their seventies, a lease would probably work for them because they may be flying on their vacations, so it can be a good situation for them.
Bobby: For those purchasing a used vehicle, what are a few tips on going about it?
Brian: You might be able to find a vehicle you want for sale by the owner, but if it’s not dealer-certified, I would be careful. Dealer-certified means that they’ve gone through and fixed anything that’s really going to be an issue for you in the next 10,000 to 20,000 miles. If it’s not dealer-certified, then you need to ask a technician to do a “pre-purchase inspection,” which includes a test drive, to give you an idea of where they are with the brakes, the tires, any kind of leaks, and seeing what kind of maintenance has been done.
If you’re looking at a used vehicle, make sure it’s been in North Carolina or south. Don’t even look at a vehicle from Virginia or north of Virginia because there is too much rust. Do not buy it. They put down that brine on the road for snow, and it gets in the undercarriage, that rust starts and it never stops.
Bobby: What about people who desire to drive a vehicle into the ground to save money? Like, “We’ve had this car since 2008.” Do you think using this approach has any financial savings merit?
Brian: Yes, you can save some money sometimes by “staying the course.” Now, I wouldn’t stay the course with a Chevy Cruze. I might stay the course with a Lexus RX 350. It depends so much on the vehicle that you’re supposedly driving into the ground. There are vehicles that can get to 300,000 or 400,000 miles — with some cost to get there.
I really point people to the Toyota and Lexus brands to get there these days. Kia and Hyundai are doing a good job too. But, the downside is, of course, what I was saying earlier: getting stranded on vacations and road trips. Another downside is that you have to go back to the dealership for old parts, therefore, the cost of replacement is high because if something goes bad, you’re paying a dealership price. There’s nobody in the aftermarket space that’s making those things like the alternator or the air conditioning. You could try at the junkyard, but I’m not a junkyard person. I’ve been burned too many times by the junkyard.
Bobby: How much does it cost per year to maintain a very old car — one with more than 200,000 miles — that you plan to drive into the ground?
Brian: Unless you have a big expense like a catalytic converter replacement or something like that, you’re probably talking $3,000 a year.
Bobby: What if you have a big repair that costs more than the amount the car is worth?
Brian: I have a friend that owns a Nissan Altima that needs a repair potentially worth more than the car, and he’s weighing whether to do that or not. I told him, “The only reason you would repair it is if you’re going to drive it for a long time after that repair. Essentially a lot more time than the equivalent amount you’d spend on a car payment.” That’s the only reason you’d pay for a repair in a situation like this; you can’t put this money into it and then turn around and sell it. There’s no gain there for you, so you either go trade it the way it is or fix it and drive it eight months and hope that you don’t have any more issues beyond that.
Bobby: How much should people spend on a car to minimize depreciation and maximize resale value?
Brian: These days, I’d say that a $60,000 to $80,000 vehicle is probably the sweet spot, but it also depends on the vehicle. You need to consider what the market will want in three years. Like, today, four-door trucks are probably among the most appreciated vehicles on the market. They hold their value better than anything else right now.
Generally speaking, a $25,000 to $40,000 dollar vehicle is going to depreciate faster than the $60,000 to $80,000 vehicle. On the other end, high-end vehicles may also depreciate faster. You’ve got instances where maybe a new Range Rover costs $120,000, and then three years later it’s only worth $70,000. So when you get really high-end, then you’re looking at the other end of the spectrum or the swing that you do get a huge depreciation in those first three years where if you want to turn around and sell it, it’s not going to be worth $100,000; it’s going to be worth $75,000.
[DISCLAIMER – Tilly is not recommending you purchase a vehicle only due to its pace of depreciation. First and forecast, it’s most important to consider your budget.]
I want to thank Brian for his input and advice, and I hope these tips provide peace of mind and lower vehicle costs. To learn more and plan your own budget, ask Tilly.