owning more cars a cost-saving measure?

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freebeer
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owning more cars a cost-saving measure?

Post by freebeer » Sat May 24, 2014 10:05 am

Being a cheapskate and having been lucky to live in walkable areas our household has had one car off and on. We've been at two cars for a while but with three drivers and a project underway I recently bought a nearly twenty-year-old pickup truck, intending to keep it only 6 months. When I went to insure it I was shocked to find that (despite male age 16 being among the drivers, and a high liability cap) it only added $8/month to our insurance policy (I guess some kind of multi-car discount). It strikes me that having and occasionally driving an additional low-value car could in theory save money - because the miles put on the old beater would not subtract much from its very low value and substitute for miles on the later-model primary vehicle(s) that would cause significantly more depreciation. The savings from making more of your miles "low cost" could more than make up for the cost of registration and insurance. And repairs are more or less proportional to miles driven not just time so having more vehicles doesn't necessarily mean more repair costs. But the result - potential savings with extra cars - seems counter-intuitive since a common advice to spend less is to downsize in number of vehicles. I wondered if any other Bogleheads had analyzed this more or had thoughts about it.

Of course providing more opportunity for our 16-year-old to drive definitely is NOT a likely cost-saving measure! I'm taking that part of it out of the equation and thinking about it more in the scenario of just an adult couple or single person.

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HardKnocker
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Re: owning more cars a cost-saving measure?

Post by HardKnocker » Sat May 24, 2014 10:20 am

I don't know what insurance company or coverage you have but adding any car to my policy is a jump of about $700-$800 and that with no collision.

On top of that my umbrella policy premium will go up about $200.
“Gold gets dug out of the ground, then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility.”--Warren Buffett

mlipps
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Re: owning more cars a cost-saving measure?

Post by mlipps » Sat May 24, 2014 10:33 am

My parents have a 15 year old truck as a backup vehicle/for hauling materials for projects. My mom claims it only costs about $10/month to insure so I'm not surprised to hear the same for yours.

stoptothink
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Re: owning more cars a cost-saving measure?

Post by stoptothink » Sat May 24, 2014 10:35 am

mlipps wrote:My parents have a 15 year old truck as a backup vehicle/for hauling materials for projects. My mom claims it only costs about $10/month to insure so I'm not surprised to hear the same for yours.
Adding my wife's '99 Crown Victoria to my insurance raised my rates $13...for my 6-month premium.

freebeer
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Re: owning more cars a cost-saving measure?

Post by freebeer » Sat May 24, 2014 10:38 am

HardKnocker wrote:I don't know what insurance company or coverage you have but adding any car to my policy is a jump of about $700-$800 and that with no collision...
Yeah that's what I expected... especially with a 16-year-old drive in the household... so sub $100 a year was a very pleasant suprise and again led to my question about possibly "saving money by owning more cars"....

Quickfoot
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Re: owning more cars a cost-saving measure?

Post by Quickfoot » Sat May 24, 2014 11:10 am

Our premium went down when we added a third vehicle. We have three cars for two drivers, two new vehicles leased in the last year and a 10 year old truck. It costs us $10 a month for full coverage for the truck, truck is still valued at $11,000. One of the vehicles is a Jetta TDI and by not driving the truck the gas savings alone pays for the lease payment (get about 44-48 miles per gallon on average) so it definitely works for us. It also means we are only going to be putting 500 to 1000 miles a year on the truck so we'll dramatically extend the life of the truck.
I don't know what insurance company or coverage you have but adding any car to my policy is a jump of about $700-$800 and that with no collision...
Our total premium for 300K/300K/300K with 4K medical payments and full coverage for 2 new vehicles and a truck right around 1K a year.

I would guess $600 to $800 a year for adding a vehicle means very expensive cars, a very risky driving environment (some states / cities have much higher risk), young drivers (especially young non married males), a high risk driver (tickets and/or a crash) or a very expensive insurance company. A single $300 speeding ticket will often cost you $2000 to $3000 in higher insurance premiums over the next 5 years.

The insurance company considers #1 how risky you are, #2 how risky your environment is, #3 how many miles you are likely to drive, #4 if there's a crash how likely there is to be injuries or property damage. When you add additional vehicles but maintain the same number of drivers they know at least one of the vehicles isn't likely to be driven very often (usually you can specify) so premium impact can be minimized.

letsgobobby
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Re: owning more cars a cost-saving measure?

Post by letsgobobby » Sat May 24, 2014 11:49 am

This isn't about having many cars, this is about putting miles on an old vehicle rather than a new one. Get rid of your other cars entirely and see how much money you save.

Quickfoot
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Re: owning more cars a cost-saving measure?

Post by Quickfoot » Sat May 24, 2014 9:01 pm

The ability to do that depends on the type of car, in our case we need a truck. Many other people find a SUV or Truck a need as well, not putting unnecessary miles on it directly saves money through gas savings and indirectly through prolonging the life of the other vehicle.

In our case even after insurance is considered we are spending roughly the same, perhaps $20 a month less or $20 a month more depending on driving. Having the new car keeps us from having to buy a new truck.

In my state *everyone* has a Truck, many of the truck guys are leasing or buying high gas mileage cars to commute in because it saves them money.

inbox788
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Re: owning more cars a cost-saving measure?

Post by inbox788 » Sun May 25, 2014 11:32 pm

freebeer wrote:We've been at two cars for a while but with three drivers and a project underway I recently bought a nearly twenty-year-old pickup truck, intending to keep it only 6 months. When I went to insure it I was shocked to find that (despite male age 16 being among the drivers, and a high liability cap) it only added $8/month to our insurance policy (I guess some kind of multi-car discount). It strikes me that having and occasionally driving an additional low-value car could in theory save money - because the miles put on the old beater would not subtract much from its very low value and substitute for miles on the later-model primary vehicle(s) that would cause significantly more depreciation. The savings from making more of your miles "low cost" could more than make up for the cost of registration and insurance. And repairs are more or less proportional to miles driven not just time so having more vehicles doesn't necessarily mean more repair costs. But the result - potential savings with extra cars - seems counter-intuitive since a common advice to spend less is to downsize in number of vehicles. I wondered if any other Bogleheads had analyzed this more or had thoughts about it.

Of course providing more opportunity for our 16-year-old to drive definitely is NOT a likely cost-saving measure! I'm taking that part of it out of the equation and thinking about it more in the scenario of just an adult couple or single person.
It didn't make sense at first, but there may be a rational explanation. How much did insurance rise when you added the teen? Please provide before and after dollars, and/or percentage increase. The insurance company might have already fully taken into account 3 full time drivers despite only having 2 cars. Adding the third car, especially an older low cost car might be cheap to insure and gave you a discount on the other cars, making it appear absurdly low.

Using traditional statistics, if 3 drivers each drive one of 2 cars for 3 hours, and a random crash occurs, the cost of the car crashed is 50/50. If 3 drivers of 3 cars driven for 2 hours, and one of the cars is a lot less expensive, then the accident cost is 33/33/34, so the average expected cost could be as much as a third less.

Did you change the number of miles driven on the first 2 cars? How did the 3rd car mileage alter the mix? In any case, the insurance company may have made it's own adjustments based on its own statistics. Adding a 3rd car may have simply shifted you into a statistically lower risk category.

Jack FFR1846
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Re: owning more cars a cost-saving measure?

Post by Jack FFR1846 » Mon May 26, 2014 8:39 am

I would not be surprised to find that the insurance company did not input the correct information. When my son got his drivers license, the Mass DMV sent our insurer a note telling them that. I called the same day to ask what the hit would be and they already knew he had his license. No extra cars, the insurance on my Lotus doubled from $1200 to $2400. We later were able to lower that by having both my son and wife excluded from the car. My wife doesn't drive a manual. The penalty if either were to drive and generate a claim is that the insurance is downgraded to state minimum....$10 liability and zero collision.

We had increases in all our other cars and now that we've bought him a car and applied good student discount, low mileage discount, every discount known to man, our bill is lower, but still 25% more than before, with the added car being relatively expensive.

In the past, we have indeed received a letter from the insurance company (when we insured the car we bought for him) where they neglected to put him on as primary driver. It went from the original $800 a year to $1200 a year. This is for high liability and full collision with $1000 deductable in the 2nd lowest risk class town in Massachusetts.

Expect a "oops, we made a mistake, we didn't mean $8 a month, we meant $80 a month" letter.
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BigTom
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Re: owning more cars a cost-saving measure?

Post by BigTom » Mon May 26, 2014 8:55 am

If you have more cars then drivers it's very cheap to insure the oldest one . My 98 camaro only costed me $250 for the year .

You aren't going to save any money by having another older car . One repair on that beater and you are likely blowing any savings . Although it could be more convenient having the extra car .

inbox788
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Re: owning more cars a cost-saving measure?

Post by inbox788 » Mon May 26, 2014 11:53 am

BigTom wrote:If you have more cars then drivers it's very cheap to insure the oldest one . My 98 camaro only costed me $250 for the year .

You aren't going to save any money by having another older car . One repair on that beater and you are likely blowing any savings . Although it could be more convenient having the extra car .
There are situations where there are cost savings of driving a less expensive car, even including repairs, but then again, you're driving a less expensive car. For example, if you drove a new Cadillac Escalade 25k miles a year, and added an old Corolla driving 10k and reducing the annual mileage on the Cadillac to 15k, you'd probably see the savings in lower depreciation and gas costs.

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HardKnocker
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Re: owning more cars a cost-saving measure?

Post by HardKnocker » Mon May 26, 2014 12:31 pm

From what I'm reading this only works if you have more cars than drivers.

Ok.
“Gold gets dug out of the ground, then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility.”--Warren Buffett

curmudgeon
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Re: owning more cars a cost-saving measure?

Post by curmudgeon » Mon May 26, 2014 2:15 pm

My memory seems to tell me that insurance companies tend to base rates on the most expensive of the possible drivers for a given car. If you have two expensive vehicles with two adults and a teen driving, one of the expensive cars gets rated with the teen driver ($$$). If you add a third beater (liability ins only) car, you can call the teen the primary driver of that car; it gets higher rates, but the net family bill can actually go down.

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Chan_va
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Re: owning more cars a cost-saving measure?

Post by Chan_va » Mon May 26, 2014 2:30 pm

I tried this once. Had a BMW 5 series that I wanted to baby, and bought an old Miata as the fun car to drive daily. What I found is that the maintenance cost of the luxury car is not a linear function of miles driven. There is a certain base level of expense involved even if you drive 0 miles. In fact, I found I found that most luxury cars actually do better when driven often. So, you don't really save on maintenance of the luxury car, plus you end up having to maintain the daily driver. The cost and mental headache of keeping up with it all wasn't worth it to me.

BigTom
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Re: owning more cars a cost-saving measure?

Post by BigTom » Mon May 26, 2014 2:58 pm

Chan_va wrote:I tried this once. Had a BMW 5 series that I wanted to baby, and bought an old Miata as the fun car to drive daily. What I found is that the maintenance cost of the luxury car is not a linear function of miles driven. There is a certain base level of expense involved even if you drive 0 miles. In fact, I found I found that most luxury cars actually do better when driven often. So, you don't really save on maintenance of the luxury car, plus you end up having to maintain the daily driver. The cost and mental headache of keeping up with it all wasn't worth it to me.
You are right a low milage car that is driven low but average would be what you would want to get . Like a car with 5-6 per year average . If you get a 10yo car with 10k miles that car will need everything shortly after you start driving it .

All the seals dry out . The moving parts get frozen ,like calipers .

My friend got a car 20yo with 19k miles and first month had to replace the clutch master cylinder and ft calipers . Less then a year later the head gasket was leaking , among other things . It was a Toyota too .

tim1999
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Re: owning more cars a cost-saving measure?

Post by tim1999 » Mon May 26, 2014 5:11 pm

If anything, with owning multiple cars you can eliminate the "rental car" coverage from your policy, where they give you a rental car if your car is being repaired due to a collision, etc. Saved me about $30/year.

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