My Half Price Ride - Buying It

Cars are expensive. You have to buy them, fuel them, maintain them, and buy insurance.

The average American spends $12000 a year on a car. That’s $120,000 over 10 years. I was doing better. My van was costing me $7600 a year - $2700 in gas, $4K in repairs, $700 in insurance, $200 in registration, plus depreciation.

My new car costs $5700 a year. Here’s how I did it.

The first step was to decide to act. My 2007 Toyota Sienna was supremely useful, but the 15-year-old vehicle was getting expensive. Repair costs, $3-5K/year, and bad fuel economy, 20 miles per gallon, were adding up.

I had just moved into an area without good transit, bike lanes, or sidewalks. I had a longer commute and needed a better vehicular appliance car. If my neighborhood had better weather, dense housing, and good bike lanes, I would have purchased an electric cargo bike.

Thus, in the midst of a “the worst time to buy a car”, I…bought a car. A vehicle is the 2nd biggest purchase most folks make, and I was determined to do this right.

1. Know Thyself

To start, I kept my goal clear and focused. I wanted the most economical car that meets my needs.

I’m frugal: I focus on value per dollar.

Cost is money spent.

Value is personal, harder to define, and depends on your priorities. I sorted car-related features into three categories: “must have”, “nice to have”, “don’t care about”

Must Haves

Tip 1 - Keep your ‘Must Have’ list small

Nice to Have

Don’t Care About

2. Goals & Options

My next step was to identify the makes and models of cars that would meet these goals. I used a simple criteria to identify options:

I found 13 options:

Model Reliability Mpg
Toyota Prius 99 52
Toyota Prius Prime 99 54-133
Toyota Yaris 99 35
Toyota Venza 95 39
Honda Fit 92 36
Toyota Avalon Hybrid 91 43
Mazda 2 89 35
Toyota Corolla 86 34
Toyota Corolla Cross Hybrid 86 42
Toyota Camry Hybrid 85 52
Honda Insight 81 52
Toyota RAV4 Hybrid 80 40
Mazda 3 70 31

Then I went to 6 auto shops and asked their senior mechanics to chat about cars over a beer. I asked which cars only need basic maintenance, and which cars they’d recommend to family. I heard many of the same answers. When in doubt, ask experts.

Tip 2 - Get the smallest car you can

I had defined value. Let’s look at cost.

3. Cost & Metrics

“You Manage What You Measure” ~ mangled quote originally by Lord Kevlin.

How much something costs depends on what you measure. Don’t ignore costs - they won’t ignore you.

My goal was a “vehicular appliance for as cheap as possible”, so I chose a single metric: the 10-year Total Cost of Ownership (‘TCO’). That’s the cost to buy the car, and the cost of insurance, repairs, fuel, and registration over 10 years. I chose 10 years because I will keep my car for a long time.

To pay less for a car, I included all the costs of owning one:

  1. Buying the car
  2. Fuel (gas, electricity)
  3. Repairs / Maintenance
  4. Car insurance
  5. Parking
  6. Registration

Tip 3 - Ask your insurance how much it costs to insure different makes/model

I’m a data guy, so I made a spreadsheet, showing a rough ‘10 Year TCO’ for all of the cars on my list, plus the most popular vehicles in the US.

You can see there’s a huge range of costs. Some things make cars cheaper: a small size, hybrids, and manufacturers with a history of making reliable cars (Toyota, Honda).

Now I needed to narrow down my options.

4: Winnowing

I went to car dealerships and test drove the cars, to create a shortlist of 1-4 car models. This was the first time I’d interacted with dealerships in this process. It had been only research thus far.

That narrowed down my shortlist to 3:

It was time to look at individual cars.

5: Individual Vehicles

I started with the spreadsheet I’d used for previous car purchases. I updated it with more features, such as:

I looked at all of the Honda Fit, Toyota Prius, and Prius Primes for sale within 250 miles of home. A scatterplot shows the relationship between car purchase price and its 10 Year Total Cost of Ownership:

The graph is clear - a Toyota Prius or Prius Prime would be cheaper than a Honda Fit. The cars with the lowest 10 Year TCO are towards the bottom.

The Pandemic Crazy

It looked like people were impatient. New cars were selling for thousands over MSRP. 3-year-old used cars with 40K miles were selling at MSRP, as if they were a brand-new car. People were spending more than they because they wanted or needed a car right now.

The typical behavior of new cars rapidly depreciating wasn’t happening. Folks weren’t willing to wait a few months to buy a new car at MSRP.

Buy at MSRP

There’s a single dot below 55K at the bottom of the above graph - that was a new Toyota Prius, at MSRP.

I made my decision. I could wait 6 months for a new car. The cost differential of doing so, operating the van for 6 months, was $960, far less than the price/value difference of buying a used car at a premium. I would be patient.

Intermission

I ordered a new 2022 Toyota Prius at MSRP via Costco Auto. I waited 9 months and was finally told I wouldn’t receive one, because it was now 2023, and the new Prius was a different, and smaller, design.

Thus, I had to look at used cars once again.

6. Car Search 2, Electric Boogaloo

Then I realized I’d missed something: the Prius Prime calculations were wrong. Its fuel costs must be calculated differently, because they’re part gas, and part electricity. Driving a ‘Prime would cost $.08/mile in gas mode (50mpg, $4/gallon), but only $0.029/mile in electric mode (4.5 miles/kWh, $.13/kWh). Electric mode would be 2.7x cheaper than gas mode. Its fuel cost depends on how much the car is driven in electric mode.

Experiments with Google Maps suggested I could drive 55% of the time in electric mode on a typical day.

If I drove 15K miles a year, the fuel costs for each car would be:

I updated my spreadsheet with the new fuel calculations. Lo and behold, Prius Primes were the best option.

Having added all local cars for sale, I knew what a good deal was. Every morning I checked used car listings (Autotrader, Craigslist and TrueCar) and updated my spreadsheet. I researched cars if they were in the top ten cheapest options by 10 Year TCO. I ignored the rest.

During my search, I noticed 2 things.

  1. Many cars from private sellers weren’t in great shape, with high mileage or a bad maintenance history.
  2. Most cars that were ‘great’ deals were rebuilt, meaning they had bad accident damage.

Dealership Negotiations

Finally, a good deal popped up at a dealership: $29.5K for a 2018 Prius Prime with 19K miles, with a 10-Year TCO of under $59K.

I went to the dealership, took the car for a test drive, and liked it. This was the first time in this process I’d really interacted with a car salesman. People dislike car dealerships because there is no transparency with pricing, and we don’t have many ways to learn to negotiate. Having done this before, I negotiated the price down to $28K. It helped that I had a spreadsheet showing ever other Prius Prime for sale in the state, so I could point out other good deals. Sales tax brought the price up to $30,940. I was careful to negotiate the “out the door” price, so they couldn’t nickel-and-dime me with random fees. We agreed on a price of $31,400 including sales tax, doc fee & registration.

I was carefully to tell them I’d buy the car only if it passed an independent mechanic’s pre-purchase inspection. NEVER buy a used car without one! My mechanic’s inspection found no major issues with the car. There was a tiny crack in a rear turn signal from a minor accident, not even enough to leak. Nothing epoxy can’t mend.

In the end, my ‘new’ car was a 2018 Toyota Prius Prime Premium with 19K miles on it.

7. The Results

I spent the next month outfitting the car for my needs:

Total Spent: $33,128

My out-of-pocket cost to get the car was $25,168.

10 Year Costs

Return On Time

My van’s 10 Year TCO was over $90K, compared to the Prius’ $57K. Replacing my van is going to save me $33K. I spent about 80 hours doing this whole process, for a “savings” rate of $412/hour.

Coming Up Next

This was half the battle, getting a more economical car. The second half was next: owning it…

Published 01 November 2024