Cars are an interesting concept if you stop and think about it for a moment. You dump some “move juice” in a 3,000 pound metal box with a sofa inside and race around to your job and other errands. Almost everything we do in the U.S. is built around the car. Garages on newer houses are always bigger than the ones on older homes. We have entire buildings erected to house cars, with someone charging you to park there for a brief period of time. Retail companies have to build a certain number of parking spots as required by law, causing a 20,000 sq ft retail shop to cover 5 acres of land. It’s amazing when you think about how ingrained the car is to our society and also how expensive they are to operate.
And as I write this in February of 2018, there’s a shift happening in the marketplace. While SUVs and trucks are still breaking sales records, electric cars are becoming more and more popular. The shift into electric is happening on the high end of the market. The Tesla Model S is between $70 – 80K and competes with the luxury brands like BMW, Audi, and Mercedes. While electric cars may make financial sense in the near future, they still seem to be way too expensive to operate. Since this article is about the best car to save money, we’ll focus on the smaller gas-powered used vehicles.
I was interested in this topic because I recently ditched my 2001 Honda CR-V for a 2012 Honda Accord (both pictured below). I would have loved to have kept my CR-V but it needed repairs that would have cost more than car was worth. And that brings up a great point: anytime you have to pay more in repair bills than your car is worth, you should just sell it and roll that money into a new used car. That makes the most financial sense unless you can do the repairs yourself and keep your out-of-pocket costs really low.
I was able to get $750 from the dealer for the old CR-V and thought that was a great deal. I would have driven to the junk yard and sold it for $500 otherwise. That money helped pay for the 2012 Accord, which I had negotiated down to $11,600. So I was able to get this new-to-me car for $10,850 + tax, tags, and title.
As an Optimizer, I wanted to make the most of my money. I wanted to get a good deal on a car that I liked that also wouldn’t be too expensive to operate. Later on in this article I have a Vehicle Cost Spreadsheet so you can see just how much it costs to operate your vehicle.
Considerations for Saving Money on a Car
1) New vs Used – Buying a used car will save you thousands right away and is the only option I consider for this article. I bought a used CR-V for $7,000 cash back in 2009 after my second tour overseas. I could have purchased anything I wanted and financed it to the hilt. That’s one of the best financial choices I made, ever. Buying that used Honda saved me thousands and maybe even tens of thousands. If you consider that I invested the savings and then those savings grew over time, then the amount would be into the tens of thousands saved.
2) Size / Fuel Efficiency – It’s no secret: smaller cars generally use less gas. Gas is the most expensive operating cost, above tires, oil, filters, brakes, etc. Anytime you can chip away at the most expensive operating cost, you’re on the right track.
3) Dependability – We all know dependability when we see it and we also know which cars are more dependable than others. I’m no expert in this but have had a Ford, Chevy, Toyota, and several Honda’s. You can guess which cars were more dependable than others.
4) Insurance Cost – Your insurance cost is somewhat non-negotiable based on the zip code in which you live. Live in a big city where people run into each other more often? You’ll face higher insurance rates. Comprehensive insurance also costs more and you may not even need it. I didn’t have comprehensive on the car I recently sold. I considered this to be self-insured. That is, if I were to get into an accident that was my fault, I’d pay for the repairs to my car (or simply ditch the car). This generally works well if you’re car is worth under $5,000.
5) Overall Cost – I recommend paying cash for cars if you can. Financing is a waste but I understand some folks feel it’s necessary. I also believe that a car shouldn’t exceed 10 – 15% of your annual income. 10% to be on the safe side and 15% is a stretch. For example, if you make $100,000 a year, you shouldn’t be driving a car that’s greater $10,000 ($15,000 is max but not recommended). That may seem a little crazy on the surface but I would argue it’s crazy to drive around in an expensive yet depreciating asset that’s more than 10% of your income. I’ve heard other financial bloggers use similar percentages.
What’s The Best Car to Save Money?
Listed below are the three best cars to save money. They are all used to varying degrees and none are hybrids or straight electric. Individual preferences may differ but all of these cars will be the least expensive to buy, operate, and insure. You can get a car delivered straight to your house with Vroom, use CarGurus to search by best deal, or buy directly off of craigslist from a private party.
1) 2008 – 2013 Honda Fit – It may look a bit goofy but the Honda Fit is one of the best cars to buy to save money. You can buy a 2008 – 2013 Fit for between $4,000 and $7,000. The one pictured below is a 2008 and is worth about $5,000. You should be able to get 28/35 mpg city/highway. The Fit gets high marks for the best used cars under $10,000.
2) 2007 – 2012 Honda Civic – It seems like a decade ago Civics used to be every third car on the road. Why not buy a Civic from a decade ago? These cars run forever and so there are a lot of used Civics to choose from. You can get a dependable Civic for as low as $3,500. A 2010 Honda Civic LX is pictured below. Make sure to get the LX (base model) to save the most money.
3) 2008 – 2012 Toyota Corolla – Toyota Corolla’s are boring cars. They look boring. They’re boring to drive. But best of all, they’re boring on your wallet. Check out this 2009 Toyota Corolla pictured below. You can pick one of these up with reasonable mileage for about $5,000. Go with the cheapest one you can find, then self-insure for comprehensive and you’ll be saving so much money you won’t believe it.
Vehicle Cost Spreadsheet
The preceding cars are just some low cost options. There are many more small, cheap, and dependable cars out there. Because we’re numbers people, I’ve developed a spreadsheet that you can use to figure out how much it costs you to drive your car per mile and per year. You can access a copy of the spreadsheet via Google here. Go to File and then Make a Copy to save a copy that you can edit.
The spreadsheet is simple to use. Input all the data in the yellow cells and the green cells will generate various costs. I have my 2012 Honda Accord numbers in the yellow cells as an example. There are two main types of costs when driving a car:
1. Variable Costs
2. Fixed Costs
Most of us think of certain Variable Costs when we drive. “It’s going to cost $40 in gas to drive to my in-laws in the adjacent state.” That’s the main cost in drivers’ minds. How much are they going to have to pay in gas. But there are other variable costs which I just call “wear and tear.”
The “wear and tear” cost or variable depreciation is a per mile cost for things like oil, filters, tires, gaskets, hoses, etc. The spreadsheet calculates a higher per mile charge for newer models. I set it up like this because I’ve noticed this to be the case; older cars just don’t cost as much to fix as newer ones. Is there anything wrong with this logic? If you disagree you can change the numbers in the second tab of the spreadsheet to whatever you like. Then let me know your thoughts on this please. I’d like to refine this calculator so that everyone can benefit.
The Fixed Costs are made up of insurance and depreciation (how much vehicle value drops per year). The spreadsheet uses the year and value of your car to figure out how much to depreciate each year. Newer vehicles will have more depreciation each year. Older vehicles will depreciate next to nothing. In my example above, I can expect the value of my car to decrease by $1,000 in one year. That, along with the insurance cost, makes up my fixed cost per year of $1,500.
I’ve also broken down the cost per mile driven. I think this is a better way to look at it too. Hey, if you know it’s going to cost you $0.45 per mile to make that 100 mile trip, you’d make sure that trip was necessary. That’s $45 of hard-earned money to an Optimizer, while most of the U.S. population would just consider it $15 in gas money.