
Are SUVs Ruining Retirement Savings? - edward
http://awealthofcommonsense.com/2018/07/are-suvs-ruining-retirement-savings/
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hn_throwaway_99
This was my favorite paragraph:

> Personal finance experts love to discuss how much money you can save by
> avoiding that daily Starbucks habit or packing a brown bag lunch every day
> at the office. While I guess you could add to your bottom line somewhat by
> cutting back on the little things (a) this stuff doesn’t move the needle all
> that much, (b) it’s the little things in life that can give you small joys
> on a daily basis and (c) the large purchases will have a much greater impact
> on your bottom line.

This is also a big difference I've noticed between a "rich dad, poor dad"
mindset. Sweating the small stuff doesn't make much of the difference in the
end, it's the much less frequent but more impactful decisions (where you live,
who you marry, the car you buy) that determines your overall financial well-
being.

~~~
chrisseaton
> packing a brown bag lunch

What's the significance of a lunch bag being brown in the US?

~~~
xeromal
There's no significance really. It's just a stereotypical lunch bag. I think
most people use coolers these days, but back in the day you'd pack your
sandwhich, chips, and drink in a brown paper bag to take to work.

Something like this.

[https://images-na.ssl-images-
amazon.com/images/I/41wfQvGOWFL...](https://images-na.ssl-images-
amazon.com/images/I/41wfQvGOWFL._SL500_AC_SS350_.jpg)

~~~
pmcjones
Except a Thermos bottle instead of a plastic water bottle.

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throwaway66666
This reminds me of a silly joke. 2 friends are talking, one of them has just
lit a cigarette.

-"Dude, how much do you smoke? And do you like porsche cars?" -"Around a pack a day. And yeah mate, I love em!" -"Dude a pack per day costs $12. If you stop smoking, you can buy a porsche in under 10 years just from the savings from cigarettes alone..." -"Oh damn, never thought of that. Do you smoke?" -"No, never!" -"So, where is your porsche parked?"

\-----

Now jokes aside. Unless you work towards a goal (eg new laptop at the end of
the year), and you actively keep track of the extra savings it's very easy to
blow the $4 saved per day on a whim, without even realizing. Your mindset
changes to "I can buy drinks for my friends, I 've been saving this week it's
cool", and you end up where you started. And that's fine, there is happiness
to be had over buying your friends a drink.

------
amalag
A lease is a depreciation financing program. It only makes sense if you want
to change your car every 3 years.

I think if they called it a Deprecation Financing Program they wouldn't get so
many customers.

~~~
ellisv
I think they'd have about the same number of customers -- most people I know
who lease their car just want to drive something new and not put much effort
in to maintaining it. They don't really car about the long term financial
downside.

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s5fs
Sheesh, you can buy three new cars or a starter home (in some places), that's
how expensive new cars are these days.

Auto loans also require you to carry full coverage insurance, which can be the
same or more than your car payment if the loan is less than $20,000.

Personally, I can't stomach the idea of paying $500-700/mo for a used vehicle.

My current daily is a 2005 Chevy Aveo, I've owned it about 6 years and my
total monthly cost (car, insurance, fuel, maintenance) is under $200/mo. It's
a budget box, no frills, and I do all my own repairs and maintenance, and you
can too! Youtube is a great resource and cheap hand tools can be found at
Harbor Freight. Anyone who tells you that modern vehicles can't be maintained
at home is mistaken, most maintenance tasks require no special tools and many
repairs are attainable with limited skill and experience.

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octorian
I think my favorite part of the article is this quote: "Personal finance
experts love to discuss how much money you can save by avoiding that daily
Starbucks habit or packing a brown bag lunch every day at the office."
followed by "this stuff doesn’t move the needle all that much"

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ellisv
I think that buying SUVs are more of a symptom of the problem than the cause.
Sure they're expensive to buy, insure, and maintain - but most drivers I see
are the only one in their vehicle. People aren't doing what is practical,
they're doing what makes comfortable _now_.

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siberianbear
I found this article interesting because I couldn't for the life of me
understand why so many people spend so much money on their cars. For me, a car
was just a convenient way to get to where I wanted to go. My ego wasn't tied
up in at all. I didn't own a car as a way to show off my status. I drove a
series of "beaters" and often did my own maintenance and repair of relatively
simple issues. I finally bought exactly one new car for cash, and drove it for
twelve years.

I never carried collision or comprehensive insurance, having the opinion that
dealing with insurance is always a pain in the ass. The insurance premium is
simply a markup on the expected value of what the insurance company would pay
out. My "inner mathematician" couldn't permit it.

Because of this, my total cost of ownership of cars was really low. I piled
all the money I saved into investing, and came out far ahead.

I sold my last car when I retired. Now, I walk everywhere: to the supermarket,
to the park, to the gym, to restaurants, to the downtown bars. I'm so glad not
to own a car.

~~~
cstejerean
What other types of insurance did your inner mathematician prevent you from
getting? Did you also skip out on health insurance because the premiums are a
markup on the expected value of your health care costs?

~~~
gruez
it's not really applicable to health insurance case because getting it through
your employer is tax free, effectively saving you 25% on the cost.

~~~
hyperpape
I believe it's not just tax free, right, it's just priced into your salary.
They won't give you the employer contribution back as cash if you decline,
will they?

~~~
gruez
The money that goes towards the health insurance isn't subject to income tax,
so it's cheaper than taking the money and buying yourself.

employer provided health insurance:

    
    
        $50k salary
        $5k health insurance
        $50k taxable income
    

buy your own health insurance:

    
    
        $50k salary
        $5k in lieu of health insurance
        $55k taxable income

~~~
hyperpape
But it's better/worse than that. Because they won't pay you $55k if you
decline healthcare. Instead, you get paid $50k with the option to get
healthcare (take it or leave it).

My family's insurance healthcare isn't tax-free, which would mean saving $2k
or $3k or whatever. It's over $10k of insurance a year that I pay less than
$2k for.

------
fred_is_fred
This article is missing a huge and expensive market segment - 4 door pick-up
trucks. I was at the dealer last week and found lots of pick-ups in the 55-70k
price range. They are seemingly popular here and I get the appeal especially
if you want to just toss all your stuff in the back and hit the mountains, but
they usually get worse mileage than a SUV and cost just as much.

~~~
gascan
Depending on where you live, pick-ups are not just handy but rather a cultural
icon. Have you ever listened to country music? You're not a real country boy
if you don't have a pick-up.

The real bait-and-switch though is the disappearing low & middle end of the
pick-up market. Pops working the farm didn't drive a $70k luxury F-150. But
gone is the Ranger, 1st gen Tacoma, and the much cheaper rough-and-tumble
F-series of twenty years ago.

~~~
arprocter
Ranger will be back in 2019

~~~
vidanay
Not for $11K

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jorblumesea
> Personal finance experts love to discuss how much money you can save by
> avoiding that daily Starbucks habit or packing a brown bag lunch every day
> at the office.

I actually think the true long term cost savings is in health care costs and
general personal health. Making food yourself will cut down on excess salt,
sugar and fats which are so prevalent when eating out. This will certainly
help you stay healthy in the long run.

That being said, almost all cars are a financial loss and you'd be better off
driving a 2000s civic. I always found it ironic that Michigan was loathe to
pay for plowing but instead just bought SUVs.

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endorphone
"avoid the"..."insane initial depreciation that exists with new cars."

This is a strange statement, because of course lease pricing is nothing more
than paying for the depreciation of the vehicle. Not only are you paying for
it over the term, the risks if you want to terminate earlier, after the worst
of the depreciation, are identical if not even exaggerated with leasing.

It can be a good choice, especially for businesses because it greatly
simplifies accounting for vehicles (just an expense and nothing more), but
when people differentiate owning from leasing some strange statements are oft
made.

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dsfyu404ed
The 15+yr list has as much or more to do with buyer demographics and consumer
behavior as it does to do with actual reliability and value. It's basically a
reflection of what vehicles just wound up being popular among demographics
that are easy on equipment (the wealthy, the old, etc) 15yr ago.

It's also worth mentioning that when you own the car you need to strike a
balance between average use and peak use. Most of the people commuting in crew
cab trucks are going to use the second row once a week (same goes for sedans)
and the bed once a month. Compared to a owning a smart car and renting a nice
sedan for a road trip once a year, taking a taxi a few times a month and
paying for delivery/rental trucks it probably doesn't come out even but it's
not the massive waste of money it seems like at face value and some of that
can be attributed to people wanting luxury (sticking a fridge in the back of a
truck is easier than strapping it to a car, having two rows of seating is much
more pleasant than once bench for 3+ people). This applies to any excess
capacity, it's just most obvious with trucks. Sizing for close to peak needs
is why crossovers and SUVs are so popular. They can comfortably fit the family
and/or a bunch of stuff. You might not need to do that every week but many
people do it often enough to feel justified in springing for the luxury.

If you want to see less massive vehicles on the road then stop acting like
you're too good to cram X+1 people in a vehicle that officially seats X or
strap stuff to the roof. People buy trucks on the justification that they will
haul homeowner sized amounts of lumber or crossovers for a family with
two/three kids because they perceive putting three kids in the back seat of a
compact and sticking a Christmas tree on the roof to not be in accordance with
how someone of their income level is supposed to act.

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nulagrithom
I feel like it's a bit disingenuous to talk about this in the context of 1)
paying MSRP and 2) buying new.

He even mentions the second point, then goes on to completely ignore it:

    
    
      - Never buy new.
      - Just buy something 2-3 years old after it comes off someone else’s lease.
    

A quick look on Kelley Blue Book says that $51,790 Ford Expedition drops to
$24,925 after 3 years and 55,000 miles. Using the same parameters for the loan
comes out to payments of $418 per month.

That's still a chunk, but it doesn't have quite the same shock value as the
brand-new MSRP prices presented...

Now, $418/mo is still a far cry from the $165/mo you can get out of a lowend,
3-year-old Kia Rio, for sure. I drive something similar now. But the article
still kind of rubs me the wrong way...

~~~
Retric
It's not just the extra 250$/month it's also going from 29 city / 37 highway
to 17 city / 24 highway plus higher taxes, insurance, and maintenance costs.

Compound this with a family having 2 cars and a couple could be looking at
~2,000$ / month less in retirement. Which for many people would be the
difference between comfortable and not.

~~~
loco5niner
My new car actually had lower insurance because of the safety features built
in.

~~~
Retric
We are comparing both models and ages not just one or the other.

Compare a _new_ Ford Expedition vs a 3 year old 3-year-old Kia Rio.

~~~
loco5niner
Understood. I was specifically referring to this part:

> plus higher taxes, insurance, and maintenance costs.

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orbitur
One thing that bugs me about this article is that the author chose the largest
and most expensive SUVs, not the ones that are actually popular.

The smaller and more popular RAV4, Rogue, CR-V, Escape, etc aren't mentioned
here. Comparatively, nobody buys Tahoes and Sequoias.

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bryanlarsen
Minivans aren't cheaper; the Dodge Caravan is cheaper, for both definitions of
the word.

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geebee
Just to get this out there from the start: I don't like cars much, and I view
them not just as an expense to be minimized, but a life unpleasantness to be
minimized. Cars are horrendously expensive and I don't really like parking
them, worrying about where I parked them, paying for parking for them, or not
being able to have another beer because I'm driving them.

But I do surf and my kids love to fish and ride their bmx bikes in nifty
places that are most easily accessed with a car, and I'm cool with that, so I
look to balance the lowest cost and lowest hassle way to do that. We do plenty
around the neighborhood, but can't do it all around the neighborhood. At least
not yet.

So far, the right balance, I've found, is to buy a new car with a reputation
for value and reliability. I accept that this isn't the most optimal
possibility, but I've always been suspicious of the claim that a car loses x%
of its value the moment it drives off the lot. Oh, I certainly agree that this
is the case if you want to sell it, but that's hardly just true for cars. Go
buy a thousand dollar suit and try to sell it on the street right outside the
store where you bought it. It'll lose a lot more value than the car.

But here's the thing, try to _buy_ that car (or that suit) at an x% discount
from someone who just drove it off the lot. Even if you can, you might worry
(well, I might) about what the hell is going on. It's just... weird.

Ok, so a year or two after it was bought new? Eh, I'm still not convinced. I
suppose there are good deals out there, especially around people who dump cars
after the lease, but even then, people often don't sell high quality cars that
are only 2-3 years old. They sell cars they don't want anymore, and sure, that
might be because they aren't brand new and shiny, but you often end up buying
problems.

Could just be me. I've had bad experiences buying used cars and good
experience buying new cars that I take very good care of for the life of the
car. I certainly don't sell it at 3-4 years old, that's when the car is most
valuable to me. It's a 3-4 year old car that I know is in great shape and has
been cared for properly. I don't know if that is the case with a car that
someone planned to dump at the end of the lease (or is selling cause... not
sure why). You can have a great experience buying a used car, and on average
it probably does work out to be less expensive but I don't like the
uncertainty and variance.

Beyond that, I lust for the day I no longer own a car. Kid pick ups and drop
offs still make it on the balance better to own one, but it's getting close.
Maintenance, gas, parking fees (high in SF where I work), payments (or the
lost value of the investment)... even if I buy a sensible car and take care of
it and keep it for 10-15 years (until the maintenance costs exceed the value
of the car), we're still probably looking at, what $4-6k a year, at least?
That includes my very high parking costs. For others, it would be lower. This
is when you make an effort to keep the costs down over the lifetime of the car
(buying a quality car with a focus on value not luxury and keeping it for the
usable life of the car).

I mean, seriously, you can take a lot of ride share for $5k a year. I'm
starting to see some interesting things happening - like, I read about a
surfing "club" with a monthly fee that has showers and boards and wetsuits and
a lounge near the beach. If you're happy just surfing that one break, you
could ditch the car and get a ride service, and even if you live a ways from
the beach... 5k is a hell of a lot to work with.

Still, some major limitations. But man, I seriously mean it, I drool at the
idea of getting rid of cars in my life.

------
rhapsodic
I would like to see a similar analysis applied to living and working in
Silicon Valley or San Francisco, as opposed to some metro area in the Midwest.
I have a hunch that given two similar people, one in each place, with similar
careers, financial habits, consumer habits, etc., the one in the Midwest will
be able to retire sooner and more comfortably than the one in SV/SF.

