I got a text message from a friend asking for advice on an interesting situation. The husband and wife have one newish car and one oldish car.
The husband only needs to drive about 10-15 miles a day, while the wife drives 60 miles a day to and from work.
Which car should they use for each of their commutes?
First, we have to make a few assumptions:
- The old car only has at most, another 45,000 miles on it. You never know when a car will die, but the expectation is that it won’t live longer than that.
- The husband is in medical school and once he graduates in 3-4 years, their income will increase.
Drive The Older Car Long Distances
If they drive the older car 60 miles a day, or around 15,000 miles, a year, they would likely need to replace the car in the next few years.
Their plan is to drive their cars into the ground until they become unreasonable to maintain. They’ll put in some money for basic maintenance if it means keeping the vehicles up and running, but significant maintenance would force them to discuss whether it’s worth it to pay to have it fixed (and hope that it lasts long enough for the repair to be worth it) or to sell it for whatever it’s worth and buy a new (or more likely, a used car).
One pro of going this route is that if the old car dies in the next few years, they’d be able to get a car, which everyone likes the feeling of.
Drive The Newer Car Long Distances
By driving the newer car 60 miles a day, the couple can ensure that they won’t need to replace the older car for the next several years. In fact, by only driving it 15 miles a day, it would last through medical school and then some (depending on how the husband’s commute changes over the years).
However, the downside here is that the car will quickly become not that new. You’ll have one old and one with normal use that will by that time, be outside of its warranty period.
Calculating Total Worth
One way of looking at this is from a purely mathematical standpoint. Let’s say the new one is worth $15,000 and the old one is worth $5,000 right now.
If the new car gets driven 45,000 more miles over the next 3 years, it would be worth about $8,000, while the older one would be worth maybe $3,500, so the total loss of value would be $8,500 over 3 years.
If the old car gets driven 45,000 miles over the next 3 years, it would be nearly worth maybe $1,000. If the new one drove the short commute, it would be worth $13,000 after the same time period. The total loss of value in this situation is $6,000.
From this standpoint, it makes more sense to drive the old car first because driving 45,000 on the old car reduces the total value of the car less than putting 45,000 on the newer car would.
I recommended that for their situation, they should drive the new car more because they’ll be in a significantly better financial situation once the husband graduates medical school, and having to shell out thousands of dollars for a new or used car won’t affect their finances as much as if they had to replace a car in the next few years.
Ultimately, they made the same decision. Whether it’s because of the argument I made or because the wife was the one with the long commute and wanted her way, we’ll never know.
What would you do in this situation?