My Vehicle Costs How Much a Year?!
I was reading a post the other week about someone who sold their vehicle and switched to a bike. While this is an extreme measure and a big life change, it got me thinking about my own vehicle, a 2007 full size truck.
I feel like I need a truck. I own my own house and need to haul mulch, help friends move furniture from time to time, pick up materials and furnishings for my short term vacation rentals, etc. I also needed a big enough truck to haul the family to short term rentals and new enough that it won’t be prone to breaking down. Two years ago I purchased a full size 2007 Silverado. I financed 100% at around $13k. Payments are $277/monthly. I purchased this under my real estate business and can write off most of the expenses. When I did the math and figured how much it actually cost annually, I changed my mind:
$3,324 in payments
$300 in oil changes
$500 general maintenance (tires, battery, issues, etc)
$650 property tax
$500 insurance
This is $5,274 a year, assuming nothing major happens. This also doesn’t account for the fuel at 14 miles per gallon. I can rent a full size truck locally for $63/day with unlimited miles. Plus, if someone hits me, the rental breaks down, etc, it’s not my problem to deal with. I probably only really need a truck 15 days a year. That’s only $945, of which I can also write off for tax time.
Now let’s look at the opportunity cost. $5,274 cost of keeping the truck invested in my preferred investment, real estate, will give me at least an 18% return, or $949.32 annually. Do you see what happened here? By not keeping the truck and investing that money, I just payed for renting a truck when needed for FREE.
Let’s recap: Keeping the truck (a depreciating liability) will cost me $5,274 annually. The older it gets, the more maintenance it will need. Selling the truck and eliminating the money leaving my pocket will put me in a position to take that money and invest it into real estate (an appreciating asset) that will fully pay for a truck rental. I can write off the money spent to rent a truck, as well as write off expenses related to the real estate I purchase. Plus, I can write off the depreciation of the real estate. PLUS, think of the time I’m saving not getting oil changes, troubleshooting maintenance issues, inspections, etc. I’ve made more money and freed up time that I can now spend with my family and seeking out more investments.
Do you have a vehicle or another depreciating liability in your life that is keeping you from reaching long term goals of financial independence?