First Person: The Dollar Value of Driving a Junker

Somewhere in my mid forties, I decided that a brand new luxury car was a serious waste of good money. Sure, luxury cars telegraph wealth and prestige, and all the good things associated with appearing to be rich, but on the practical side, there's really better ways to spend one's money.

Five years ago, we decided to replace the family car. While practically everyone at my childrens' school was driving the latest model of Lexus or Cadillac, I opted for a $1,000 Mercury Sable that my kids call a "POS" car. For a POS car, it was in reasonably good condition with working doors, new tires, and a brand new Earl Schieb paint job that didn't look too bad if you squinted a little bit.

Cost comparison of a 2006 Lexus LS 430 vs. my junker

When it comes to buying a new luxury car, the dealers are quick to point out the high resale value and low maintenance costs. While it's true that a 5-year-old Lexus LS 430 blue books at $29,000 and POS cars are virtually worthless, the dealer doesn't point out the high cost of insurance and depreciation.

I ran the numbers on my Mercury vs. the Lexus. Here's how they penciled out:

-- In 2006, the listed price of the Lexus LS 430 was $56,527
-- At 6% financing, a 4-year loan means monthly payments of $1,301.75
-- Finance charges were $5,956
-- Insurance costs average $151 month
-- 5 years worth of maintenance (according to automobilemag.com) is estimated at $2,800
-- I didn't bother running the cost of the gas savings since the Lexus only had a 2 mph per gallon edge on the Mercury, and I drive just 500 miles a month
-- Blue Book value after 5 years - $29,000

-- In 2006, I bought my Mercury POS for cash for $1,000
-- I had no monthly payments, no finance charges
-- Actual insurance costs $15 a month
-- 5 years of actual maintenance costs were $4,010 (This includes regular tune ups and emissions testing)
-- Blue Book Value is $0 but it can be sold for recycling for $300.

The bottom line...

When you total up the 5-year cost of owning a Lexus including the interest payments, high insurance, and maintenance costs and subtract the blue book price, the total cost of owning this car was $48,816. This averages to $813.63 a month.

By comparison, the cost of owning my Mercury POS car over the same 5 years with insurance and repairs, less the recycling bonus, came to $5,610 for an average monthly cost of $93.50. Total price difference? A whopping $43,206.

There's absolutely no arguing that a luxury car is nice to own. But when it comes to the bottom line, there are much better ways of spending $43,206 than putting it into an expensive car.

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