My 27-Year-Old Car Will Make Me a Multimillionaire

The average American spends about half a million dollars purchasing cars during their lifetime. That’s an average across all income levels. Based on the data from my clients who are predominately early and mid-career physicians and dentists that plan to have, on average, two cars that they keep for ~6-8 years and spend ~$40,00-$60,000 per car (after trade-in/resale), the average is more like $700,000-$1 million in their “post-training” lifetime.

I just turned 40 years old, and I have spent $19,241 on all the cars I have ever owned. I don’t mean gas, maintenance, registration, etc. I mean the total amount our household has spent to purchase all past and present vehicles is less than $20,000 since I started driving 24 years ago.

I am not here to bully you into joining me on my (statistically) extremist end of the car-buying spectrum. I am here to invite you to drive just a little bit in that direction.

Prophylactic disclaimer premedicating against ragey commenters personally offended by levity, satire, and/or literary tone: This entire column is meant as a casual read, a piece of entertainment, a general lark. I do mean to create thoughtful reflection about how you personally—and how we as a society—view buying cars while also telling a few personal stories and poking at our “car culture” in a good-natured way. I am, at my core, a hopelessly nice guy and mean no harm. If something below irks or irritates, no such impact was intended.

Prophylactic disclaimer premedicating against ragey commenters personally offended by the notion of automotive frugality: OK, let’s put disclaimer No. 1 to the test. If you love cars and you spend lavishly on them because they bring you joy; I see you, I honor you, I mean you and your torque and your towing capacity and your slip differential and your horsepower no harm. This column just isn’t for you. Please keep spending whatever you want on those girthy camshafts, hard drivetrains, and thick tires that leave you feeling like the million bucks you will ultimately spend. As Dr. Jim Dahle often says, “The goal is to live the good life, not to be the richest man in the graveyard.”

The Three Big Rocks

When I begin a new comprehensive financial plan with a client, we always start by talking about their goals. These goals vary from person to person, but one thread that ties them together is “wealth.” In one way or another, every client wants to maximize, optimize, strategize, or organize their wealth now and in the future.
If you ask my 7-year-old what wealth is, she will say something like, “Having enough money to buy everything I want forever.” In other words, our first human impulse as it relates to wealth is about having stuff.

Tangible things = wealth, and one of the easiest and most commonly observed metrics of wealth is, “What do they drive?”

Interestingly and ironically, this baseline belief that how much we have is synonymous with how wealthy we are couldn’t be further from the truth. In the words of one wealthy financially literate EM doc blogger/podcaster with a new F-250 here in Sandy, Utah, “Wealth is the accumulation of all the things you didn’t buy but could have.”

Therefore, any conversation about building our wealth must center on our spending. This is why the next thing I talk about with clients immediately after they share their wealth-related goals is the “Three Big Rocks” of personal spending. These three rocks are so big that if we don’t have a thoughtful approach to each of them, any one of them can sink our financial plan. They are:

1. Housing
2. Cars
3. Education (your own education (student loans) and your kids’ education (K -12 public vs. private school and college costs))

There is a lot of content on this site about how much house you can reasonably afford, the destructive reality of living in California, the power of geographic arbitrage (especially Puerto Rico), the significant financial impact of private K-12 schooling, saving for college using 529s, and managing your student loans.

There are also several posts about cars but not nearly as many as there are about the other two big rocks, and the ones that do exist are often controversial. My intention here is not to stir up controversy (though I fear that is unavoidable), but it's to refresh the car conversation and examine some of the narratives I often hear from clients when it comes to justifying their goal-defying relationship with cars.

What I mean by goal-defying is that I rarely hear a financial planning goal that sounds like this: “I’d like to blindly accept and immediately adopt the consumeristic expectations placed on me by our capitalistic society as it relates to transportation for doctors.”

But I do hear a lot of goals like this: “I’d like to have the option to cut back or drop call ASAP, travel more, spend my time with my kids while they are little, and increase our savings so I have the option to retire early.”

In other words, there is a disconnect between people’s stated values and what their spending actually reveals that they value. This can apply to any area of spending; the stakes are just a lot more mathematically impactful when it relates to a $70,000 car than a $7 latte.

More information here:

Here’s How Much We Make, Save, and Spend as ‘Moderate Earners’

4 Cars, 24 Years, $19,241

By way of context and disclosure, I offer a brief personal history of my relationship with cars.

My first car was a gift from my mom after my sophomore year of high school in the summer of 2000. It was a 1986 Honda Accord with 150,000+ miles, and I was stoked. I think she paid about $700 for it, and it was in pristine mid-'80s shape until I was rear-ended a couple of years later by a Yukon-driving mom digging goldfish crackers out of her purse for her demanding 3-year-old backseat driver. The Accord was totaled.

Total cost to 16-year-old me for the Accord = $0

The ”totaled” car actually ran just fine, so I duct-taped the mashed trunk together and got another year out of it before eventually using the insurance company payout, the $200 resale value, and the applied value of ~25 hours of laying sod for my neighbor who owned the car dealership to upgrade to a slightly used 2004 Suzuki Forenza. It may as well have been a Porsche. Only 30,000 miles, glossy black, a trunk that opened . . . it was a dream.

Total cost to 19-year-old me for the Forenza = $0 (sod-laying notwithstanding)

In 1997, when I was 13, one of my mom’s ex-husbands (who was a professional Santa Claus and one of the worst people I have ever met) had a fatal heart attack. We learned he had failed to change the beneficiary designations on his life insurance after the divorce. This unexpected windfall was used to buy me a Macintosh desktop (with a mouse!) and my mom the sweetest mid-sized Japanese sedan ever made: the 1997 Toyota Camry XLE complete with moonroof, CD player, leather seats, V6, power windows, AND power seats. Even to this day, the cassette deck works.

I had the Forenza, and it was awesome. I’d probably still be driving it now if it weren’t for Al Gore. In 2006, my mom watched An Inconvenient Truth and realized the only way to save the polar bears was to buy a Prius. With the new hybrid silently prowling the neighborhood, her 1997 Camry became dispensable so she offered it to newly married me and I saw a chance for automotive arbitrage. Megan and I didn’t need two cars, so we sold the Forenza and upgraded to the Camry. I say “upgraded,” because this Camry was blingin’.

That’s right, thanks to my bacon-loving former stepdad and a woulda/coulda/shoulda presidential nominee, I still drive this sweet ride today. It's got 228,000+ miles, and she just won’t quit. I have zero doubt that my 7-year-old will be driving this car to high school in 2033 with Creedence Clearwater Revival blaring from the tape deck.

Total cost to 22-year-old me for the Camry = +$5,000 from the sale of the Forenza.

The fourth car in our story came into the family in 2012, the year I graduated from dental school. We had just welcomed our first child into the world, and we were no longer living the life of a poverty-stricken dental student. We were outrageously rich owners of an FQHC public health contract promising to pay $108,000 over the next 12 months! We “needed” a new family car that was “safe for the baby,” so we went big.

We bought a 2008 Acura MDX with literally every feature that the model offered. That included the entertainment package with its rear-seat DVD player, power liftgate, running boards, premium rims, roof-rack cross bars, and Bose speakers. I was a doctor now, baby!

The Acura cost $23,500, but the net cost was $18,500—thanks to the $5,000 saved from the Forenza. However, the true purchase expenses didn’t end there because we financed most of the vehicle. It wasn’t until ~9 months later that I found The White Coat Investor and got my financial act together. I immediately paid off the car loan, but $741 of interest had already been paid.

Total cost of the Acura to 29-year-old me = $19,241

My tired 40-year-old body just got out of the Acura a few hours ago after getting home from some skiing. It has 259,000 miles, and she just won’t quit.

It’s amazing how long a modern car will run if it is maintained according to manufacturer recommendations. My dad has always told me when it comes to keeping cars on the road that you only need to remember two things: “belts and fluids.” Sure enough, almost 600,000 combined miles into the Toyota and the Acura, keeping up with belts and fluids have them as functional today as they were when they set sail from Japan.

Why Aren’t Americans Keeping Their Cars for 20+ Years?

At this point, readers may be thinking I am some lean FIRE cultist who has adopted an extremist view on car longevity and/or personal frugality. That is not the case (though I do have warning signs). If I am a cultist for anything, it is being ruthlessly pragmatic and evidence-based in nearly every area of my life.

The facts are that modern cars are built to last 200,000-300,000 miles or 15-22 years.

So, why aren’t we keeping them that long and getting the maximum value out of these expensive depreciating assets? Why aren’t we willing to get the most out of our cars which would allow us to reach our other financial goals more rapidly and more readily?

The answers I most commonly hear are:

• Safety
• Functionality
• Maintenance concerns
• Fuel efficiency

The answers I most commonly observe which are not spoken out loud due to social mores are:

• Status
• Self-esteem
• Perceived value
• Exclusivity

We’ll have to save the latter list and an examination of how being a hapless pawn on the chessboard of consumerism, advertising, and social pressures represents an insidious erosion of our self-worth (let alone our net worth) for another day. For now, let’s see if we can unravel the logic that undergirds the motivations of the former list.

Safety

When we had a new baby, a significant motivator in buying “a big fancy car” was safety. I hear from clients all the time that “our current family sedan is running great but with baby No. 2 (or a teenager driver) on the way, we need something bigger and safer at this point.”

As the indomitable Mr. Money Mustache showed us back in 2012, safety is an expensive illusion.

Please take a moment to follow that link and experience Pete’s cutting logic about fear and safety firsthand. In case you don’t, I will attempt to recreate his argument here using more current data which only further strengthens his point.

The National Highway Traffic Safety Administration (NHTSA) puts out data every year about traffic accidents, injuries, property damage, and fatalities. It accounts for myriad variables, including age, sex, time of day, alcohol, urban/rural, number of lanes, and vehicle type among many others. This data has aided car manufacturers in improving safety features to the point that fatalities have decreased from 18.65 per 100 million miles driven in 1923 to ~1 per 100 million miles driven today. That’s a 95% decrease over 100 years of data.

Now, let’s looker closer at fatalities as relates to vehicle type. Does our cultural narrative that “bigger = safer” hold any water?

The answer is yes, bigger cars do have a lower fatality rate than smaller cars. A win for the gearheads and a death blow to my argument, right? Well, not really. Let’s quantify the difference.

A mid-size SUV is indeed about (10.26/7.10) 44% safer than a mid-size car. Let’s put that in the context of a lifetime of driving at today’s very safe rates of 1 fatality per 100 million miles driven.

If I drive 10,000 miles a year, I have a 10,000/100,000,000 chance of dying, which means I have a 99.98% chance of surviving on the road in a given year.
At age 40, let’s say I have 50 years of driving left ahead of me (hopefully). Thus, I have a 99.98%^50 = 99% chance of lifetime survival. In other words, driving 10,000 miles a year reduces my expected lifespan by 1%. One percent of 50 years is six months.

If I increase my chance of dying by 44% in my Camry compared to my MDX, I reduce my life expectancy by (6 months x 44%) ~2.6 months. MONTHS!
Before switching out of a lifetime plan to drive affordable, gas-efficient, low-maintenance sedans in favor of big, expensive, gas-guzzling SUVs or trucks in the name of safety, we may want to pause and ask ourselves this. How many of my financial goals am I willing to delay or give up on so that I can gain 2.6 months of average extended life expectancy?

The answer for me is none. I am not willing to compromise on maximum travel, earliest possible retirement, or experiences with my family in the form of more concerts, comedy shows, sporting events, Broadway shows, etc., so that I can eke out a few more statistically insignificant months from a lifetime of driving “safer” cars.

Safety when it comes to vehicle type is indeed an expensive illusion.

What does matter when it comes to safety, according to the data, is avoiding the following:

• Being male between the ages of 21-24
• Driving between midnight-3am
• Driving with a blood alcohol level of .08 or higher
• Driving 55 mph and over
• Driving on a motorcycle . . . ever

Functionality

Let’s say that you buy the argument that safety is an illusion but you “need” a truck or big SUV for utility purposes—pulling a boat, hauling gear for road trips, transporting stuff in the truck bed, etc.

That very well may be true and completely rational in many cases. However, of the top 10 most popular vehicles sold in 2023, one was a sedan. ONE!

Five of the top 10 most popular vehicles were trucks, including the top three. Are we sure that two-thirds of us “need” a truck and that 90% “need” something other than a mid-size sedan for our lives to be functional?

Has cattle ranching exploded as a hobby, and I am just missing the trend? Has HVAC installation become the new can’t miss hustle? What are all these trucks for exactly?

When truck owners are evaluated for how many miles driven per year that the design of the truck was the only way the task could be accomplished, it is less than 2%. It turns out that not many of us are pulling the boat or moving hay from the field to the feedlot very often.

When we look at ways that affordable sedans can be efficiently turned into higher capacity/greater utility vehicles, we see that the actual need for 99% of us for a truck is essentially 0%. And for those few rare times such a vehicle is needed, we can rent one or borrow one (God knows your neighbor has one) for orders of magnitude less money than it costs us to own and maintain one for 50+ years.

In short, the rates of truck and SUV ownership cannot credibly be made on necessity. They aren’t actually serving a need, but they are costing us a ton of money. And they are killing us at higher and higher rates.

Trucks are the whole life insurance of the automotive world. They have 98% functionality that you don’t need, and they are the most expensive possible version of the only thing you actually do need. They are made to be sold, not bought, and the people doing the selling don’t have your best interest in mind.

Maintenance Concerns

Let’s say that you buy the argument that safety is an illusion and that the sales pitch from “Big Truck” is as credible as the Northwestern Mutual agent pitching infinite banking. You are happy to roll through life with a mid-size sedan, but it has 150,000 miles on it and it’s time for some costly repairs/maintenance. You may be the person saying, “I love my car and am happy to keep it, but the repairs are more than the car is worth, so the only rational thing to do is replace it.”

I have heard this logic for years and, for the life of me, I can’t understand it. If the repairs are $6,000 and the car is worth $5,000, what exactly does that ratio have to do with the decision to spend $50,000 on a new car? On the one hand, you can spend $6,000 and keep driving your newly repaired car for another ~10 years, and on the other hand, you can spend ~10x that on a new car THAT WILL STILL NEED MAINTENANCE!

Buying a new car does not come with immunity against future maintenance costs. If anything, a new car increases the likelihood that you spend more on it going forward because you want to preserve that “new car energy” for as long as possible.

One of the greatest parts of owning our two cars is that we don’t care at all what happens to them. A 6-year-old at dance pick-up slams their adjacent door into my car leaving a notable ding . . . no problem. An 87-year-old patient backs her Dodge Ram trailer hitch into my bumper after her root canal . . . no problem. My wife backs into a bright yellow cement post for the third time in two years . . . no problem. (These examples may or may not be based on true stories depending largely on if Megan reads this column before it posts. Love you, Meg!)

Old cars = cheap insurance, routine maintenance, negligible stress, and zero non-essential repairs. Sure, we have put some money into our cars over the years, but nothing outside the ordinary: on-time oil changes, tire rotations/replacements, timing belts, spark plugs, brake pads, oil valves, etc.

The idea that repair costs as a function of car value should be a meaningful part of the decision to buy a new car is, at best, overstated in my opinion. The decision is not, “How much are the repairs relative to the current market value?” The decision is, “How much are the repairs relative to the alternative cost of reliable transportation (aka a new-to-me car)?”

Fuel Efficiency

The other justification I hear a lot these days with the increasing availability of electric vehicles and the government subsidies to purchase them is, “My current car is running just fine, but I feel like it makes sense to get an EV. And with these government credits and the savings on gas, I should break even pretty soon.”

If you want to get an EV to save the sea turtles, Al Gore and I totally support you. If you want to get an EV to save on gas, I totally support you in the same way I support you if you want a truck so that you can help move your sister’s fridge when she asks four summers from now. It is a reasonable idea, albeit one that is not always fully thought out from a mathematical perspective.

Personally, I like the idea of an EV if for no other reason than I hate getting gas in the Utah winter. But to do it now while I have reliable transportation in the name of saving money on gasoline is neither mathematically nor environmentally sound (ditching a car years before its useful life is complete is terrible for the environment in the same way that throwing our perfectly good clothes in the landfill is environmentally problematic).

Depending on where you look, the average new EV costs ~$60,000. With gas averaging $3.40/gallon at the time of this writing and with our MDX and Camry averaging ~23 miles to the gallon, I can drive another 405,882 miles before I would break even on a new EV—and that’s not counting what I would need to pay to install the right electric plugs in my garage ($1,000-$2,500) or what the charging costs would be on my electrical bill ($60-$100 per month).

In other words, you can buy a lot of gas for $60,000 + $2,500 + $100 per month. Suffice it to say that it may not make sense to jump from an internal combustion car with many years left in it to an EV simply in the name of saving money.

More information here:

The Cheapest Way to Own a Car

Should I Buy A Nice Car Or Save My Money?

The Math

If I had followed the “normal” doctor track of car purchasing up to this time in my life, we would be on our family’s third and fourth ~$50,000 car by now. Factoring in some trade-in value and some financing costs (sadly, car loans are widely accepted as “normal”), we’d be in the ~$200,000 lifetime total car costs range, which is right in line with the average upper-middle class American trajectory.

Given we have spent just under $20,000 to this point, what has our “sacrifice” yielded us?

For the sake of simplicity, we will spread out that $180,000 savings evenly over the 12 years since I graduated from dental school. During that time, the Vanguard Target Retirement 2050 Fund has had an average annualized return of 11.13%. So, that $15,000 that we have saved each year for 12 years by driving “luxury beaters” accounts for ~$381,000 of our net worth today.

If we keep up some more moderate version of this car relationship for the rest of our lives, we are on pace to come out nearly {FV(5%,40,-381000,-5000,0)} $3.3 million dollars ahead compared to where we would otherwise be if we had chosen to accept the commonly held beliefs about cars in America. Not a bad return on investment for driving and maintaining cars that we have come to love and appreciate.

There is a lot of talk on this site about side hustles, passive income, and increasing our rates of return, all of which are worthwhile to consider and can produce meaningful results. But in the words of Jim Dahle, “The best side gig is just spending less.”

If you are looking for a surefire way to boost your nest egg and reach your goals faster, I invite you to consider keeping one of your three big rocks small by reimagining your relationship with cars.

Possible takeaways:

• Keep in mind this was meant to be a little bit thoughtful and a lot bit of fun. If your blood pressure is higher than your oil pressure, go for a drive in your sick ride, and remember that I honor your choice to live the life you want.
• You don’t owe it to anyone to compromise your financial goals to live up to any cultural pressures about what you drive.
• Check your internal beliefs about cars, their longevity, and their safety against the evidence and basic logic before making the big financial decision to replace your current vehicle.
• Don’t watch environmental documentaries without a Time Value of Money calculator in hand.
• Keep your life insurance beneficiary designations current.
• Don’t feed your toddlers while you are driving.
• Mall Santas are at risk of being just as creepy as you always feared.
• Save a penguin, ride a Civic.
• Please let me borrow your truck.

How much do you figure you've spent on vehicles in your life? Do you prefer to drive a car into the ground, or do you upgrade your vehicle to the newest model every few years? What else is there to debate about buying cars?