By Dennis Miller
For many a car lover, retiring rich requires the end of a lifelong love affair. I empathize with them all; I’ve had my own romance over the last 50-plus years.
Cars have a special resonance for people of my generation. George Lucas’ classic coming of age film American Graffiti is proof positive of that. As teens we flocked to auto dealers when new models came out and fantasized about actually being able to own our favorite. And let’s face it: cool cars were chick magnets. In our 20s and 30s, with the help of a friendly finance company, those dreams became reality, and every few years we’d get the new car itch again.
As children left the nest, many of us upgraded to the luxury brands befitting our positions in life. My first luxury car was a Cadillac, though a friend told me I was too young to drive one.
When my parents moved into a senior community in Sarasota, Florida, I asked Dad, “Do all retired people drive white Buicks?”
Dad grinned and said, “No, some drive Toyotas, Chevys, and Fords—practical cars. But yes, most are white.”
My niece calls these cars “geriatric cruisers.” And I should confess to agreeing with that stigma for quite some time. At 74, I’m not quite ready to throw in the towel and buy a geezer-mobile. Nonetheless, our children were horrified when we traded in our Lexus and bought a Toyota Sienna. There’s nothing cool about a minivan.
Let’s face it: for many of us, our car is strongly linked to our self-image. But with age comes wisdom (hopefully). Unless your portfolio is exceptionally flush, retirement is a good time to break up with luxury cars and use some logic. Cars are for transportation, and they are very expensive.
The Real Price of the Crown Jewel of Geriatric Cruisers
A nicely equipped 2014 Buick Regal—the crown jewel of geriatric cruisers in our part of the world—should cost around $40,855 out the door. Let’s put that in perspective for a retiree: If you have a $1,000,000 portfolio earning 5%, you have $50,000 in income. After paying taxes on your investment income, that Buick Regal will wipe out your net income for the year.
Then there’s the cost of operating the vehicle: gas, oil, maintenance, insurance, licensing, and other fees. The biggest ongoing cost, however, is depreciation. Although no one writes a “depreciation check” each month, it’s still eating away at your net worth.
Depreciation is the reduction in an asset’s value over time. For automobiles, the first hit comes in a matter of minutes. Drive the car around the block, and it’s no longer a new car; it’s used.
The average first-year depreciation for a car is [Continue reading]