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Ode to a Civic

Isaac Cathey

CONVENTIONAL wisdom posits that a car is a poor investment, at least from a financial standpoint. It’s extraordinarily difficult to turn a profit, especially over the long term.

According to Carfax, the owner of a new car can expect the vehicle to lose 20% of its value in the first year and 10% annually thereafter. Beyond depreciation, owning a car involves fuel and maintenance costs, insurance premiums, parking fees, registration fees, tolls, sales tax, opportunity cost and—for most people—paying loan interest.

By virtue of its negative expected return, a car is a poor investment. But it is, alas, also a necessity for many people who live outside of major urban centers. The upshot: My philosophy is to make this investment as infrequently as possible and in a dollar amount that’s as small as practical.

Enter my beautiful 2003 Honda Civic LX. Boasting a 1.7-liter engine and a five-speed manual transmission, this lovely old car has served me well for more than a dozen years. I purchased it in 2008 for $8,000, only 40% of its original sticker price. In doing so, I escaped more than half of the depreciation. It was a bit of a high mileage car when I bought it, with nearly 90,000 miles on the odometer.

In the years since, I’ve added another 150,000 miles, burning a gallon of regular unleaded gas every 36 miles or so. Given the vehicle’s low retail value, I dropped comprehensive coverage years ago, making the insurance premiums very affordable. I’ve taken road trips all over North America in the Civic, took my wife on our first date in it, brought home each of my newborn children from the hospital in it and personally performed all the maintenance on it.

Clearly, I have an emotional attachment to what ought to be nothing more than a utilitarian tool. As such, it’s with heavy heart that I’ve confronted a sad reality: It is time to bid farewell to the Civic. I recently received a new long-term work assignment overseas and can take only one vehicle. In the years since I purchased the Honda, my family has grown beyond the car’s capacity. It seems the responsible thing is to take my larger vehicle, a Toyota Highlander, so that I have enough seatbelts for the entire family.

Given that the Civic is now worth only a tiny fraction of what I paid for it, I can’t say that it was a good investment, at least not in the conventional sense. Assuming the vehicle’s fair market resale value is $1,000, it has lost almost 88% of my purchase price. While this is an annualized loss of around 16%, we’re only talking about $583 a year of depreciation. Here’s how that stacks up against the alternatives:

  • Under Carfax’s assumptions, a $30,000 new car would be worth just $7,531 after 12 years, a depreciation rate of $1,833 a year.
  • Using those same assumptions, but repeating the purchase of a $30,000 vehicle every four years, would result in an annual depreciation of $3,126, plus all the transaction costs associated with multiple purchases.
  • What if I’d leased? In that scenario, a worst-case depreciation amount would have been built into the payment, along with financing costs and taxes.

Where I really lucked out: My period of ownership coincided with an incredible bull market. From the lows of the 2009 market crash—about nine months after I bought the car—the annualized return of the S&P 500 has been more than 17%. Relative to the most favorable alternative listed above, which was a new car purchased for $30,000 and held for 12 years, the Civic saved me $1,250 a year, which I have consequently been able to invest for a gain of more than $48,000. Compared to the more “normal” example of purchasing a new vehicle every four years, my annual savings have been $2,543. Investing those savings has resulted in around $98,000 extra. This market performance is perhaps once in a lifetime, and I can’t help but attribute some of my luck to the old car.

A more holistic examination of the Civic’s total cost would certainly bolster its standing as an excellent, cost-effective means of safe, reliable transportation, especially when compared to most alternatives. Yes, as I’ve already admitted, I’m perhaps overly attached to the car. That’s usually a handicap to sound investment decision-making. But in this particular case, it’s served me well.

Isaac Cathey is a public sector employee and professional pilot. The bulk of his financial knowledge comes from books by the likes of John Bogle and JL Collins. He spends his free time running, swimming, hiking, camping, biking with his children and doing DIY projects. His previous articles were Debtors’ Prison and Crash Test.

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Daniel Cluley
Daniel Cluley
8 months ago

Yup. I did similar. Bought a 2004 Nissan Sentra in 2007 for $7500 cash. I drove that car for 13 years until I got T-boned by somebody running a redlight the first week of the pandemic shutdown (there were not too many cars on the street so she wasn’t paying attention to the signals). I got paid out $4000 for it getting totaled somewhow and turned it around into a used Toyota Corolla Hatchback for the reliable/safe car that I should get another 15 years out of. Hopefully by the time I need a new car again we will be all riding around in auto-driving electric pods. Lol.

Guest
Guest
8 months ago

Mr. Cathey-

It must be nice to drive such a “new” car. Mine is a 1993 Volvo but it still runs great.

Doug K
Doug K
8 months ago

my new car is a 2004 Ford.. replaced a 1998 Sienna minivan, which had 300 000 miles.. going to drive the Ford until it dies, then buy another fine old vehicle.

Helpful Neighbor
Helpful Neighbor
8 months ago

Had a Toyota Highlander- great car as well! Great choices!

Pete Tittl
Pete Tittl
8 months ago

I have a 2006 Toyota Prius that I bought salvage (fully repaired by a skilled mechanic) that is up to over 239,000 miles. I know the feeling.

Donny H
Donny H
8 months ago

1999 Subaru and keep it fixed and running. It does have squeaks and klunks but turn the key, it goes. BUT….always pay cash. Save and enjoy!

Roboticus Aquarius
Roboticus Aquarius
8 months ago

Even a new car can be a worthy long term purchase. We bought a Camry in 1995, base model, for a touch over $18K. Ran it 305k miles over 20 years, then gave it to charity. I was very sentimental about that car. In any case, depreciation was admittedly higher at $900 per year, but we also didn’t take the chance on possible misuse by a prior owner, and I had wanted the latest safety improvements at the time as my family was just starting out (plus, I had little time to work on it myself.) I have had issues with every used car I bought that largely offset the savings vs long-term new car purchases, despite having them pre-screened. I treat my cars gently, avoiding a lot of ‘maintenance’ that’s really needed only due to hard usage.

Anyways, after running that Camry and a Sienna for almost as many miles, we afterwards traded strategies. Bought used Venza and Lexus Rx 350, each at about 100K miles. Ten years from now we’ll be facing retirement, and likely have some new decisions to make.

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