Minimalism and Your Money

The intersection of a minimalist lifestyle & personal finance

The $1,000 Rule for Car Buying

Purchasing a car is ALWAYS such a hassle – research the cars, search online, go to the dealership and test drive, wait 6 hours while the salesperson “checks with her manager”, negotiate a price, pretend to walk out of the showroom, repeat the entire process. The nuisance goes on and on. But, at the same time, this is such a huge decision. This is one of the more expensive purchases you will make. Try using the $1,000 rule to help you make a wise money decision. We try to be as frugal as possible in general, but it’s particularly important when making major purchases.

RIP, 2001 Honda Civic

Early in 2018, I took my 2001 Honda Civic (yep, 2001) to the mechanic for some routine work. That afternoon I got the bad news. The entire undercarriage of the car was quickly deteriorating. The car still ran well for being seventeen years old, but if I were ever rear-ended, there was nothing to absorb the impact. It was basically a great engine driving a whole lot of rust around town. With two kids in the back seat, I couldn’t take a chance like that, so I immediately started searching for a new (to me) vehicle.

The $1,000 Rule

When I started researching cars, I was all over the map. I was searching for 2014 cars just out of their original lease, but I was also searching 2005 cars that looked like they might have a bit more life left in them. After running some numbers and really thinking about the cost of a car over its lifetime, I developed the $1,000 rule. The idea is that when you purchase a car, you should aim to spend under $1,000 per year. Basically, if you buy a car in 2019 for $20,000, plan for at least twenty years. If you purchase an older car for $4,000, plan to have it for at least four years. It’s a pretty simple concept, but can be a tough rule to follow, especially as car prices seem to be rising astronomically.

With the $1,000 rule in mind, I started looking at the prices of cars relative to how long I predicted they would last. If I stumbled upon $6,000 car with 200,000 miles on it, it was immediately crossed off the list. This also bumped off just about any car that was over $15,000 because it’s hard to imagine a used car lasting an additional fifteen years, no matter the shape it’s in. Same goes for a new car, simply because the prices were just too high for how long I could possibly own it.

Cars between five and eight years old became my sweet spot with the $1,000 rule. If I could find a car that cost $5,000-$8,000 and keep it for at least eight years, then I’m well into that $1,000 threshold.

The New Ride

After about a month of searching, a family friend in the used car business was able to find a 2013 Mazda3 with only 76,000 miles on it. I did my research, and the car tested out reasonably well in terms of durability and reputation. I took it for a test drive, had my mechanic take a look, and offered a deal assuming they would fix up a few minor issues. Before long, the deal was done and the car was mine for $7,600.

I’ve owned the car for a year so far and have not had a single issue with it. (I know, I know….the second I hit “publish” on this post something will go wrong.) If I keep the car for the next seven years, I will be within the $1,000 rule. At that point, the car will be thirteen years old. My hope is that it will still be in good shape, and still be well under 200,000 miles, so I can keep it for a few years beyond. The car becomes that much greater of a deal with the longevity. In a perfect world, this little car will still be going strong by the time C and B are learning to drive. (A terrifying thought!)

Ashley drives a 2005 Acura MDX. This SUV has about 150,000 miles on it, but it’s still going strong and we hope to make it last for at least a couple more years. It’s obviously trickier to get SUVs under the $1,000 rule, but if we can get it to last three or four more years, we should be under the threshold.

The Misconceptions

We’ve all heard the questions and complaints about purchasing an older, higher mileage car:

“What about maintenance?”

“You’re going to spend twice as much fixing it in the shop all the time if you get a car that old.”

“Cars don’t run like they used to, you can’t rely on a high mileage car.”

“You’re better off leasing because then you don’t have to do any major repairs.”

There is no doubt that the chances of major maintenance and repairs rises in correlation to the age and mileage of a car. However, cars are a great unknown. There are stories of cars still on the road at 300,000 miles, but there are also stories of major work being needed within two years. Consider, as well, that the additional maintenance costs of an older, higher mileage vehicle are at least partially offset by lower taxes and lower insurance costs. Leasing a car can be tempting, but it costs much more than buying a used car. On top of that, there is nothing to show for it when the lease is up.

Is the Shiny, New Car Worth It?

Definitely not within the $1,000 rule!

Each and every year, almost without fail, the price of automobiles has risen in the United States. The average price of a new car is now up to $37,149. Remember the trusty, $1,000 rule? Think you can keep that new car for 37 years? Even the price of used cars are now averaging over $20,000. But is it worth it to spend all of that money? And just recently, a report has come out that seven million Americans are at least three months behind on their car payments. This is a staggering number, and might be a sign of future problems with the economy. But, at the very least, it shows that Americans are diving further and further into debt for a box and four wheels.

Finding a Good Deal

Here are a few tips when searching for that perfect car:

  • Look for a quality car – Get a feel for the dealer or private seller. Ask lots of questions and pay attention to how they answer. Does the car appear to be well taken care of by the previous owner(s)?
  • Do your homework – Research the durability of the models you are interested in. Figure out what constitutes a good deal or even great deal based model, year, and mileage.
  • Check with your mechanic before you purchase anything. You should always do a pre-purchase inspection from either your mechanic or an independent one. Never trust that the car is as perfect as the ad or dealer says it is.
  • The price is always flexible. Never start with your best offer. Find the sweet spot between a good deal and an offensive, low-ball offer.
  • Follow this additional advice from Ninja Budgeter.

What about you? What rules do you follow when searching for a car? I’d love to hear from you in the comments below.

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7 Comments

  1. The last time I bought a car, I nearly bought new because we decided on a Civic and those suckers retain their value (read: higher prices) like crazy. The ones under $10,000 all had 100k (or more) miles on it. In the end, we found a two-year-old Civic with less than 25k on it and thanks to some cosmetic damage were able to get it for $14,000 out the door. Four years later it’s still under 80,000 miles and now that it’s just me, the miles shouldn’t creep up as quickly as that even. I don’t know that it’ll keep for 14 years, but I’m going to do my best to drive it into the ground. In the meantime, I set aside $300 a month so that I’m used to a car payment (in case I need one) and more importantly so that I can hopefully pay for the next car completely in cash, even if I commit the ultimate sin and buy new.

    • minimalismandmoney

      That’s a great idea to set aside that money. I looked long and hard fir another Civic, but like you said, they are expensive because they are so reliable. I ended up with the Mazda and while I don’t think it is quite as reliable as a Honda, it should still hold on for a while. I think the only way to come out on top is to keep cars for a long period of time, so I’m right with you on that. Thanks for the comment!

  2. PFI

    I like the $1000/year system. I don’t follow it right now, – I tend to buy new and then drive them in to the ground. I think that probably gets me closer to $2000/year, but it’s still better than a new car every 5 years!

    I put in a lot of mileage right now for work related reasons, but could see myself hitting the $1000/year target in FI pretty easily.

    • minimalismandmoney

      Thanks for the comment. You bring up a great point. I think the real key is keeping cars for a long period of time. Ultimately, anyone who can view a car simply as a means of getting from point A to point B is doing the smart thing financially.

  3. We are looking at replacing our daughter’s car. It’s a 1996 Honda, which we picked up for $500 and it’s lasted for 5 years!

    Not too long ago, I bought a 2009 Honda for about $6000 (which my mechanic said was in pristine condition). Yes, it has a lot of miles on it (about 140,000) but I think it’s going to last awhile. Like PFI, we tend to keep out cars a long time & drive them into the ground as well.

    My new-to-me Honda is really nice, though!

    • minimalismandmoney

      Wow, you guys are down to the $100 rule for car buying! What a great bonus to find a car for $500 that you can get 5 years out of.
      Keeping cars for a while is really what it’s all about. The less we look at cars as status symbols and the more we can realize they are just a piece of metal meant to get us from point A to point B, the better off we will be. Not to mention, by buying less, you are avoiding sales taxes and higher excise taxes and insurance rates. Thanks for taking g th

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