Dividend Growth Bunny: 8 Reasons to Drive a Beater Car

Thursday, October 10, 2019

8 Reasons to Drive a Beater Car

First of all, before I start writing this article, let me explain what a beater car is. A Beater Car is a car that is generally more than ten years old and one that is typically cheap to be purchase. Many people believe that driving a used old car such as a beater car is embarrassing and shows a symbol that you are not successful in life. Used cars are usually not as comfortable as brand new cars that are out in the market. A person tends to want to drive a vehicle that is new and have up to date equipment system that comes along with it. I personally like new cars that out there available in the market. However, owning a new car can cost you to slow down your journey to financial freedom and early retirement since vehicles are assets that depreciate over time. 

I am driving a beater car at the moment. The brand and model of the vehicle is Mitsubishi Pajero 2009, and it was first purchased by my dad for my brother to use in the year 2009 when my brother returned from the United States. When I came back from my education in the United States in the year 2013, my brother gave me the car and decided to purchase a new car himself. The car which he gave me to use is currently ten years old and is considered to be a beater car. The mileage on my car is approximately 85,120 mileages (137,000 kilometers), which shows that the vehicle has been driven a lot. However, I'm still driving it to this day and planning to stick with it for another 5 to 10 years. I have seen many of my friends have newer and nicer cars than mine, but I'm still content with the car my brother gave me. Despite the vehicle for being old, I feel this beater car is the right car for me to use while walking the journey to my financial goal. It is interesting to note that the reasons for and benefits of driving a beater car.

1. You'll Have More Fun Driving It (Freedom).
I know a beater car can be an embarrassing experience to own since people might think you are poor and can't afford a decently nice car. But despite its old age, a beater car is fun to drive. You don't have to worry about the car as much as if you purchase a brand new car. Anyone who has spent much money buying a beautiful brand new car tends to worry if the vehicle is damaged or gets into an accident. Since I'm driving a car that is considered a beater car, I don't have these worries of driving it. I don't have to care about the potholes or clipping curbs that are on the road.

Moreover, I don't have to worry about people resenting me from having a nice car since my car is not expensive and old. They won't get jealous because my car is better than theirs. Furthermore, I'm able to park my car anywhere in the parking lot since the car is old. If I'm driving an expensive new car, I have to park the car far away from other vehicles so that there are fewer cars around that can potentially damage my vehicle. I have to worry about the nice expensive vehicle from getting damage.

Furthermore, if my car were a brand new exotic one, it would be painful for me to get a little scratch or totaled. I don't even care when my current car was scratched since I already know the car is old and doesn't have much value to it. But of course, I will still take care of my beater car, even its old and outdated. I love that car since it provides the function that I needed, such as commuting to work or purchase something from the local mall.


2. Let You Save for Something More Desirable.
Owning a beater car can give you the advantage of saving for something more desirable in the future. When you purchase your first car that is a beater, you can use the spare money to be invested in income-generating assets such as dividend growth stocks. I sometimes feel embarrassed to drive my car since I'm not able to impress girls with my old car. However, sticking with my beater car, let me able to invest my money and have it compounded so that I will be able to purchase my dream car in the future. Remember that as time pass by, there will always be newer and more beautiful model cars out there. 

Your dream car might change since there will always be something better in the future. For instance, my dream car when I was studying in America was a Porsche 911. The vehicle was costly at that time, and I was about to spend $100,000 to purchase one that's a few years old. Luckily, I didn't spend the money and had the money invested instead. I'm glad that my delay gratification pays off because not only that Porsche 911 car model is outdated now, but there is so many newer and nicer car that is coming out in the market. 

To illustrate this, I recently found out a beautiful sports car that is coming in the year 2020, and the car brand model is called the Corvette C8. I have placed a picture below of how the car looks. The car looks so beautiful that it has mid-engine technology, just like many other supercars such as Lamborghinis or Ferraris. The interior looks advance and give an image of luxury. It has a powerful V8 engine that enables the car to go zero to sixty miles per hour in 3 seconds. But that's not the reason why I like this car so much. It's because the starting price range for this car is less than $60,000 MSRP for a brand new one. For the value of the car provides, it is actually worth it to purchase one. Many new sports cars that don't even have the same performance a Corvette C8 gives. However, I'm not purchasing the car in the year 2020 when it is just going to be released. Instead, I am going to wait till 2025 when the car's original cost has depreciated before purchasing it. By the time I'm going to purchase the car, it probably has a market value of $30,000. That price range is for sure affordable and ready for me to purchase one. I think the Corvette C8 will be a nice car to ride when I'm going for my vacation in the United States. And of course, I will let my best friend drive it. You know who you are if you are reading this article!


3. Your Beater Car Won't Depreciate any Further.
Since your beater car is already old in age, the market value for the car won't depreciate any further. Everyone knows that a new car depreciates its value just second you drive it out the dealership. The great thing about buying a rubbish car for dirt cheap is that it'll probably never be worth much less than you purchase it. Buying a car that's ten years or older has gone through the worst of the depreciation curve, which can save you from facing the depreciation cost. 

This is a huge advantage since you can sell the beater car years later when you want to purchase another car without losing a lot of money. To show you what I mean, let me share a story of a beater car that was profited by my best friend when sold. When my mom, brother, and I moved to the United States in the year 2002, my mom purchased a brand new Honda Civic EX for $18,000. It was a car that was given to my brother to use later when he was able to drive. After my brother moved back to Indonesia to help in my dad's company, the car was eventually given to me. I drove the car from the year 2008 all the way to the end of the year 2012 before selling the car to my best friend for $2,000. My friend was lucky to be able to purchase that beater car from me since he ended using it for a few years before upgrading to his dream car. What's funny was when he sold the car; it was three years later in the year of 2015. He was able to sell the car for $2,500 even after he has used the car for a few years. 

This story shows that a beater car can not only save you money from depreciation cost of owning the car but to profit from one by purchasing one that is under the market value. I'm glad that my best friend was able to drive that Honda Civic EX 2002 and still make additional money when he sells it. The car has a lot of good memories, even when the vehicle is considered to be a beater car now. It reminds me of the good times I had when I was still living in the United States.


4. No Car Payment & Cheap to Buy a Beater.
Purchasing a beater car usually cost very little, you won't have to worry about getting a loan to purchase one. You can easily save up enough money to buy a beater car in a couple of months. Just like my friend who purchased the beater car I was driving when I was still in the United States, he was able to quickly pay cash for it since it only cost $2000. Without having to take a loan to purchase a new car, you won't have a monthly car payment that can be used to be invested in your financial freedom. 

I know I'm driving a vehicle that is considered a beater car now, but I don't have to worry about monthly car payments. Instead, I can use the money saved to be invested in my dividend growth portfolio. With the power of compound interest, I am able to get a more beautiful and better car in the future, just like the Corvette C8 that I mentioned earlier. I feel that I can always enjoy having a nice car when I'm financially secure and stable. And when the time comes, I can enjoy the ride without any financial worries since I would have enough passive income coming in using the dividend growth investing strategy.


5. Lower Car Taxes and Lower Expenses.
Driving a car that is old like the beater car has lower car taxes and other expenses such as insurance. If you live in a country that requires you to pay tax on your car, a good beater car can have a lower tax since the car value is already low from the start. You can reduce your tax bill and insurance expense with a low valued car such as a beater car compared to a newer car that probably worth more. Since I'm driving a beater car at the current moment, my annual tax on the car is low. The annual tax expense is lesser than the amount that my brother had to pay for his newer car. 

I'm happy that I can save more money for not having to pay high annual tax and other expenses on the car I own. Beware if you are trying to get out of debt, purchasing a new car on loan require you to have you pay taxes and other expenses on it. Not only you have to worry about paying the monthly expense on the new car, but you'll have to worry about maintenance. With many of these expenses, it can slow down your process of getting out of debt or even worse to be trap in the debt cycle. It's better to drive a beater car if you want to get out of debt and meet your financial goal in life since it can save you much money from owning and driving one before you are financially ready. 


6. Cheaper Parts.
Older model cars usually have parts that are easily accessible and affordable as long it's not too old. I'm talking about cars that are in their 90s and early 2000s, as this article is written in the year 2019. These car parts are still easy to find, and in fact, more abundant compared to the newer cars in junkyards. You can easily find these parts for a really low price in the junkyards, and you're much more likely to find the parts if your car model is older compared to newer cars. 

This is true facts because I encounter this problem before. Since my current vehicle is old, it's effortless for me to find parts for it if the car goes through some problems. My brother, who bought a car that is newer than mine, had trouble finding the parts for his car when he got into an accident recently. He needed to have the part imported from another country to get his car fix. It was troublesome and costly. My brother had to borrow my dad's car for over a month because of this reason. So always take into account parts for the vehicle before purchasing one. Make sure it's affordable and accessible for you to purchase.


7. You Can Let a Newbie Drive It.
I think this is a good reason why a beater car is a good starter car. If you or your loved ones recently just got their driving license and started driving, a beater car is a way to go. Since a beater car has very little cost value, you don't have to worry about damaging it. If you have children that just got their driving license, don't let them drive the expensive new car! Your kids probably don't have enough experience to drive yet even if they pass their driving licenses test. It's better to gain more experience driving and getting the feel of driving. 

When I started driving, my parents didn't buy me a brand new car. Instead, they let me drive the car that is passed down to my brother. Even when if you drive carefully, there is a high chance of you getting into an accident if you are still a newbie. As proof, I got into some minor accidents that scratch the car, but since the car is old, it didn't bother me as much. After all, the car is already cheap. 

So if you have a beater car and your children just got their driving license, let them drive the beater car first. That way, you won't have to yell at them for damaging the vehicle. Trust me, anyone who just got their driving license and little experience driving tends to get into an accident. It's better to start with a car that doesn't cost much, just like a beater car. Even after ten years of driving experience, I sometimes still get into minor accidents. But since I'm driving an old car, I don't mind if my car gets some minor scratches.


8. You Aren't What You Drive.
I think this is a good reason why it's fine to drive a beater car. There are studies that I encounter while reading the book "The Millionaire Next Doorby Stanley and Danko. They mention that only 23.5% of millionaires own a car from the current model year. In fact, the majority of millionaires that consist of 55% of them own a car older than two years old. Also, they noted that most doctors aren't even millionaires, and a large percentage of doctors in their 30s have a negative net worth. What I mean by negative net worth is they inquire more debt than the available assets they have. This shows that if the majority of millionaires don't drive brand new cars; why should you worry about not being able to drive a new car. Being frugal is a significant reason why members of the used vehicle-prone group are wealthy. They invest a large portion of their annual incomes into assets that generate income and appreciate in value. 

The media portrays people with brand new luxury cars as wealthy when, in reality, this is not the case. Many people were influenced by what the media portrays; believing that owning a brand new vehicle is the status of success. As a result, people try their hardest to impress others by purchasing new cars they can't even afford by taking out loans. If you don't believe what I say, consider this. Imagine a Doctor A buys a $30,000 car. He then drives it for three years, then resells it for $15,000 and repeats the process. He will also pay more in sales tax, registrations fees, insurance, possibly maintenances, and finance charges that come along with it. The cost of owning a car is approximately $7000 per year for Doctor A. Let's now compare Doctor A to Doctor B, who buys a used car for $3000. He drives it for ten years before the car eventually died out. Then he buys another one which he pays cash for it, didn't fix any of the little things, and paid a minimal amount for registrations fees and insurance. Doctor B estimated that the cost of car ownership is $800 per year. After 30 years, what is the difference between Doctor A, who spends roughly $7000 per year with Doctor B, who spends approximately $800 per year? Invest the difference, and have it invested in a low-cost index fund such as S&P500 Index that pays a conservative annual growth of 8%, you will get $702,356. Yes, you read it correctly! Is driving a new car worth more than $700,000 to you that can be used towards your retirement? Most Americans out there don't even have this amount to retire with. So remember, you are not what drive. Having a brand new nice car can symbolize success, but in reality, a person driving a used beater car can have far more net worth than a person who always purchases a brand new car every three years. 


The Bottom Line.
So remember, don't be ashamed or embarrassed if you are currently driving a beater car that is ten years or older. There is no need to worry about what others think of you just because of the vehicle you are driving. You don't need to impress people that probably don't even like you. There are many benefits of owning a beater car. Not only they are cheap and affordable, but you also won't worry as much as compared to driving a brand new expensive car. 

Moreover, they can aid you in your financial journey to early retirement. With the low annual tax and insurance cost on it and easily accessible car parts, you can save a lot of money driving a beater car. Just make sure the car is not more than twenty years old. Also, there will always be better and nicer cars available in the future, and you probably change the mind of your dream car when that newer car is possible to be purchased. So it's best to have the money invested until you are financially ready to afford one without having to worry about money. 

I like beautiful cars, but I think the beater car I'm driving right now will lead me to able to afford a car that suits my taste in the future. This reason why I think I'm going to keep driving the beater car I own right now and will continue doing so until the future (Maybe 2025). I will use my beater car as my daily car that I use to drive to work. I don't think I need to drive a nice car to my workplace since the car I'm currently driving right now provides me the functionality that I need. My dream is to own a sports car that I can drive specifically on the weekend when I really want to enjoy the luxury it provides. 

Furthermore, a beater car is always a good starter car for newbies to experience driving. You won't get hurt as much if you that the beater car got into an accident since the market value of the car is already low to start with. As long the beater car provides the safety required, you can always let your children learn to drive and gain experience driving before making them drive the expensive one. 

Finally, yet importantly, always remember that "You aren't what you drive." Having a beautiful brand new car can portray success and wealth, but in reality, that's not the truth. The majority of the millionaires out there drive vehicles that are a couple of years old. So don't get caught up trying to catch up with the Joneses. To illustrate this, let me show you the car the billionaire founder of Facebook, Mark Zuckerberg, is driving. He is driving a regular brand Acura TSX, which has a car value of around $30,000. He mentions how he likes the car that provides him safety, comfy, and, most importantly, not ostentatious. A billionaire like Mark Zuckerberg can afford any supercar that's available in the world, but he chose not to. If I were a billionaire like him, I would be tempted to purchase one of those luxury sports cars like the Lamborghinis, McLarens, and the Ferraris. Speaking of which, be comfortable with the car you are driving even if it's a beater car. Don't let the media influence you to purchase something that might be unnecessary and affect your financial goal. The most important thing is that you are financially secure and have you not to worry about money again. I think that is more important than trying to impress others with what car you are driving.    


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