WHY I DRIVE A $200,000 CAMRY

I drive a $200,000 car and it’s the shittiest car on the street.

Let me explain.

We bought our Toyota Camry from a second hand dealer in 2011 – it was pre-loved and already 12 years old. Our next child was on the way and we wanted a reliable family car without a loan. 

Our Toyota cost us $8,000. 

Twelve years later with more than 350,000 kilometres on the clock, our Camry has had better days. It’s mechanically safe but riddled with dents and scratches. We joke that in a few years we might be able to apply for ‘special interest plates’ as it’s nearing 30 years old (although I’m not sure the local Vintage Motor Club would be happy with us joining their Sunday drive!)

But I’m thankful for our crappy car, dents and all, because it represents our desire to live intentionally. We desire to make space. We desire to live simply and within our means. And by my estimates, our decision to buy a cheaper car will leave us $200,000 richer!

HOW WE ARE TURNING OUR 1999 CAMRY INTO A STASH OF CASH

A few years ago, my children started questioning why we had such an old car, and rightly so.

“Why can’t we get a good car like everyone else? Why do we have the oldest car in the school? Why can’t we buy something new?” These are reasonable questions and I started to question whether we should upgrade.

Then I did the maths and the outcome was surprising.

While most of our friends purchased mid-range cars, we purchased an $8,000 vehicle. Rather than owning a $20,000 car loan – with $3,000 of interest over 6 years – we ended up debt free. That’s a $23,000 saving. 

We continued to save money by driving the same car for 12 years (while most of our friends upgraded their cars at least once). So that’s another $17,000 saved (inclusive of interest repayments) by not upgrading earlier.

Add on an additional $5,000 for reduced insurance premiums and stamp duty costs, and the accumulated benefit is $45,000 over 12 years.

But this is only one side of the equation – it’s the money we saved by not entering debt. What if we consider the opportunity of being able to use these savings to build wealth.

By saving $300 per month in car-loan repayments and redirecting this to our mortgage, we saved an additional $12,000 on home-loan interest repayments over 12 years.

So now our old Camry has given us an extra $57,000.

This extra money allowed us to pay off our home loan a few years earlier – whereas if we drove a better car, we would still owe the bank $50,000, or $850 per month for 5 years (accounting for interest).

This is where things get interesting.

Look what happens, hypothetically, if we were to invest this $850 per month over 5 years into the stock market. With returns at historical rates it would create $78,000 of wealth.

Now take this money and invest it as a lump sum for another decade and it leaves a share portfolio of approximately $200,000.

Therefore, by buying a cheap car twelve years ago, resisting the urge to upgrade and making these savings work for us, we might hypothetically be able to give our children a house deposit when they need a head start.

That’s why we like our 1999 Camry – it’s worth $200,000 and is the shittiest car in the street.

WEALTH IS WHAT YOU DON’T SEE

Morgan Housel in The Psychology of Money states that: “Wealth is what you don’t see.” I couldn’t agree more.

There is an illusion to wealth. When we see others with large houses, amazing clothes and lots of overseas experiences, we don’t see the debt that lies behind these lifestyle choices. Conversely, no one sees the slow accumulation of wealth that accompanies more frugal lifestyles. Rather than driving a better car, we paid off our house. But no one sees that. All they see is a rundown bomb with dented panels.

I’m not saying that there’s anything wrong with owning a good car, eating at amazing restaurants, or taking trips overseas. In fact, there’s a tremendous lack of wisdom in delaying gratification to the point where you become sick and infirm, unable to enjoy the wealth you have accumulated for way too long. What I am saying is that it’s worth thinking deeply about the choices we make and why we make them.

Small decisions add up over time and bear interest in our lives.

How can we make space for what really matters – whether that be the car we buy, the job we pursue, the plastics we purchase, or the way in which we spend our time. What are the longer-term consequences of our short-term choices? How can we make small, simple decisions today to create a better future tomorrow?

BETTER TO BE RICH…

After many years as a one-car family we recently bought our second car. Our kids don’t like it as much because they have to keep it clean and can’t leave food on the seats. 

Last week, I overheard my son talking to one of his friends about why he prefers our old car to our new one. He said this; “Well, it’s better to be rich than to look rich.”

Spot on son!