Car costs in retirement

The driveway holds two cars. Walt’s is eleven years old and paid off; Joan’s is four, with fourteen payments of $410 left on the loan. Between the two commutes, the errands and a long drive to see their daughter twice a year, they cover about 26,000 miles.

Their question that year was whether to clear the loan before retiring. They had the cash, and a retirement without a car payment appealed to both of them. They sat down with the loan contract and a calculator. The balance was small, and the interest left on fourteen payments was smaller still; what mattered more was keeping a cash cushion in the first year of a new income they hadn’t lived on yet. They kept paying on schedule and left the savings alone. The alternative had been reasonable too. Paying a loan off early is a real choice with real trade-offs, and theirs came down to liquidity, not interest.

The other decision they made that year cost nothing: they agreed that once both were home, one car would probably go. They didn’t sell yet. They wanted to live with the idea for six months first.

Cars

2

Miles a year

26,000

Fuel a year

$3,157

Loan left

$5,740

26,000 mi ÷ 28 mpg × $3.40 ≈ $3,157 · 14 × $410 = $5,740

Six months in, the second car had moved four times in five weeks, all of them to keep its battery alive. They sold Walt’s older car privately for $9,500 and opened a separate savings account with it, labeled “next car.” The loan on Joan’s finished in the spring.

With no commute, their miles fell to about 11,000 for the year. They called their insurer, reported the new annual mileage and that neither car was used for commuting any more, then removed the sold car from the policy. They asked whether anything else would change the price and learned that some insurers, in some states, consider a defensive-driving course for older drivers; theirs explained its own rules. We’d only say: ask, because the answer is specific to your insurer and your state.

The friction of one car turned out to be small but not zero. Twice a month or so, both of them needed it at once. Rather than pretend otherwise, they gave that friction a budget line: three rides a month at around $22 each. It felt extravagant for about a week and then it felt like a bargain, which is roughly how going down to one car tends to feel once the numbers are in front of you.

From the old car payment they built a new habit. The $410 that had left each month for the loan kept leaving, except $200 of it now went to the next-car account. The rest went back into the household budget.

Cars

1

Miles a year

11,000

Fuel a year

$1,336

Rides a year

$792

11,000 mi ÷ 28 mpg × $3.40 ≈ $1,336 · 3 × $22 × 12 = $792 · fuel saved vs. scene 1 ≈ $1,821

Joan’s car is fifteen years old now. It has been reliable in the way old cars are reliable: nothing dramatic, a steady procession of smaller jobs. Their mechanic, an independent shop they settled on years earlier, has started using the phrase “at this age” more often. The costs of a car’s later years tend to arrive as more frequent visits rather than one enormous bill.

They had set a rule for themselves back in scene two, and now it came due. If a single repair estimate went above half of what the car would sell for, they would stop and price a replacement rather than approve the work by reflex. It isn’t a universal rule; it was theirs, written down while nobody was standing in a service bay feeling pressured. This spring an estimate crossed the line.

The next-car account had received $200 a month for ten years on top of the original $9,500. Before any interest, that is $33,500. They bought a three-year-old car outright and kept a small balance in the account, which they went on funding.

The harder conversation that year had nothing to do with money, though it has a money side. They talked about how they would get around if one or both of them stopped driving someday. They didn’t settle it. They did raise the ride budget in the plan, from a small line to a real one, so that when the day comes the money for it will already be a habit rather than a shock.

Cars

1

Car age

15 → 3

Account

$33,500

Car loans

0

$9,500 + ($200 × 120 months) = $33,500, before interest