Can you have both cars and money?

As it came around the corner in Featherston, the Falcon died. Even after I drove over and jump-started the car to get my wife and kids back on the road home, it only managed another 100 metres or so – pulling to a halt directly across from the Mobil station. And there it stayed.

A week later I was marvelling at how much it took to rebuild the car’s alternator ($471) when a wise, weathered mechanic pointed out an honest truth: “Well, you can’t have cars and money at the same time,” he said matter-of-factly.

Can’t you? Well, certainly not as much money as you could have if you didn’t need one, that’s for sure.

When people typically list their assets and liabilities, their cars tend to wind up in the asset column, since cars are something they own that can be sold for cash. But if you look at a more basic definition of assets and liabilities – assets put money in your pocket, liabilities take money out – cars definitely belong in the liability bucket. Big time.

As you make a plan for your money, it’s challenging to work out how much driving really costs. Here’s a list of the main items we shell out for:  

• Paying for the car itself (and the GST that comes with it)
• Financing that cost, including interest and fees (if you’re borrowing)
• Losing the car’s drop in value over time (its depreciation)
• Obtaining its warrant of fitness
• Licencing it
• Insuring it
• Filling it
• Maintaining it (tyres, oil changes, etc.)
• Repairing it

Other than the initial price tag of course, the largest single cost of owning a car is depreciation. As you first pull out of the car yard and the salesperson is waving goodbye in your rear-view mirror, your new car's value has just plummeted unbelievably.

For example, a new Toyota Camry costing $45,000 would drop 35% just in its first year, then drop 15% each year in the five years that follow and be worth $12,000 (based on trademe.co.nz and turners.co.nz car prices). Smaller, less expensive cars tend to depreciate less – a new Mazda Demio costing $25,000 would drop 25% in the first year, then like the Toyota lose close to 15% in each of the five years following, eventually being worth $9,000.

If you are looking for a new set of wheels, you may want to consider one that’s been around the traps slightly longer – you’ll dodge that dizzying fall in value that new cars have.

Borrowing to buy a car can also have a big impact on your finances, so it’s best to know your options, find the best interest rates and check how much in fees you’ll be paying.  Here are some of our top tips for managing car loans.

If you’re already carrying debt from a car loan, shrinking it faster can save you hundreds of dollars. The car loan tab in Sorted’s debt calculator will show you exactly how much interest you could avoid if you adjust your payments.

According to consumer.org.nz, regular trade-ups of relatively new cars used to be the smart way to keep on the road without paying too many maintenance costs. Yet now surveys show cars are lasting way longer than they used to before big repair bills hit.

Yet hit they do. A car fund can go a long way to covering both running costs and unexpected repair bills.

It wasn’t long before the Falcon got replaced by a Passat wagon that was rolling along nicely – until a tiny yellow airbag light went off on the dashboard.

This meant the car couldn’t receive its warrant of fitness until whatever was wrong was fixed. The auto electricians narrowed it down to which seat had the problem, but then I had to bring the seat over to the auto upholsterer just to take it apart for the electricians to work on! Back at the electricians, the verdict came in: the side curtain airbag would have to be brought in from Germany, at a cost of over $1,000. Ouch.

Happily, Kiwi ingenuity can also be applied to car repair. A couple of phone calls later, I had found a wreck that had an entire seat with a working airbag for $300.

What car cost-cutting tricks have you picked up along the way?