Car Downsizing – How I Got a Free Corolla by Savings $700+ a year on gas!
I read about people downsizing their home all the time to save money. Maybe the kids have grown up and moved out, or maybe you’re just looking to reduce your monthly expenses by getting into something smaller.
But what about car downsizing to save money? Here’s how I went from a Camry to a Corolla and ended up saving more than $750 a year while getting a model that was 10 years newer!
Money Saving Breakdown – Car Downsizing to a Corolla
- Difficulty (Super Easy/Easy/Medium/Hard/Expert): Hard
- Average Savings per Year ($/year): 1,043
- Time Required (mins): 1,200
- Savings for your time ($/hr): 52
The Method – Use the Frugal Guide for Buying a Used Car
Well, my current car is ~16 years old, and I figured it was time for a change. There are a couple of cosmetic things wrong with it that will prevent it from passing inspection (cracked windshield on worn tires). I figured now would be a good time to switch into a vehicle that gets much better gas mileage. My current 1997 Toyota Camry V6 gets about 21mpg on the average. If determined that if I could switch to a Corolla I’d save ~$750 a year in gas.
If you’ve been following along with my monthly reports, you’ll know that I’ve been looking for a used Corolla since May 2013. Finding a good used car at a decent price is a real challenge. I estimate that it’s taken about 20 hours of my time. There definitely isn’t anything easy about this process. After looking at four cars and scouring hundreds of Craislist posts, I finally ran across one and made the jump to purchase it (shown in pics above and below)!
I followed much of the advice that I put into the Frugal Guide for Buying a Used Car that I developed a while back. I was able to find a great deal on a car and eventually bargained to get it at $2,200 less than Kelley Blue Book ($9,100 – $6,900)! Here are a couple of interesting points on the car/negotiation:
- The 2007 Corolla car had been in two low speed accidents. Because of this, the seller posted the price at $7,600. I knew this info from Craigslist going in – I really appreciated that the seller was honest about this and priced the car appropriately. There is absolutely no cosmetic damage, and the repairs used all new parts – so that is in some ways a bonus.
- The seller put this in the posting: “Moving and must sell this week.” This was a huge flag that they were motivated to sell, and I could get a good deal.
- The seller also added this: ‘Asking $7600, negotiable.” Again, another clue that they were open to accepting a lower offer.
- The front tires needed to be replaced. I used this to help get a lower price.
- I used other negotiating tactics such as asking what is the lowest price they would be willing to accept, pointing out the shortcomings of the car, and using plain-old silence at key points to get the better deal on this car downsizing project.
Car Downsizing – The Detailed Calculations
Here is a detailed table on how car downsizing can save you a ton of money! Here are the assumptions I made when preparing this cost/savings table:
- The Camry repairs would total $490 to pass inspection (cracked windshield, worn windshield wipers, new tires, replace two internal door handles).
- The price of the 2007 Corolla was $6,900 + $190 for new front tires.
- I can sell the Camry for $1,000 on Craigslist. I subtracted this from the Corolla price ($6,900 + $190 – $1,000 = $6,090).
- Prices for Camry repairs would be $100 over and above the Corolla for first five years, then repairs would be $200 over and above the Corolla for years 6-11.
- Assume price of gas is $3.30 and increases 3% each year.
- Assume that I get $250 deductible comprehensive/collision car insurance for the first 5 years and that the price goes up 3% each year.
- Assume Camry gets 21mpg on average and the Corolla gets 31mpg on average.
- Assume I drive 16,000 miles a year. This means I’ll get to 250,000 (assumed life of vehicle) with the Corolla in ~11 years.
| Year | Camry Repairs | Camry Fuel | Total Camry | Corolla Purchase | Corolla Fuel | Addn. Insurance | Total Corolla | Yearly Savings |
| 0 | $490.00 | $490.00 | $6,090.00 | $6,090.00 | $(5,600.00) | |||
| 1 | $100.00 | $2,589.71 | $2,689.71 | $1,754.32 | $173.04 | $1,927.36 | $762.35 | |
| 2 | $100.00 | $2,667.41 | $2,767.41 | $1,806.95 | $178.23 | $1,985.18 | $782.22 | |
| 3 | $100.00 | $2,747.43 | $2,847.43 | $1,861.16 | $183.58 | $2,044.74 | $802.69 | |
| 4 | $100.00 | $2,829.85 | $2,929.85 | $1,917.00 | $189.09 | $2,106.08 | $823.77 | |
| 5 | $100.00 | $2,914.75 | $3,014.75 | $1,974.51 | $194.76 | $2,169.26 | $845.48 | |
| 6 | $200.00 | $3,002.19 | $3,202.19 | $2,033.74 | $- | $2,033.74 | $1,168.45 | |
| 7 | $200.00 | $3,092.25 | $3,292.25 | $2,094.75 | $- | $2,094.75 | $1,197.50 | |
| 8 | $200.00 | $3,185.02 | $3,385.02 | $2,157.60 | $- | $2,157.60 | $1,227.43 | |
| 9 | $200.00 | $3,280.57 | $3,480.57 | $2,222.32 | $- | $2,222.32 | $1,258.25 | |
| 10 | $200.00 | $3,378.99 | $3,578.99 | $2,288.99 | $- | $2,288.99 | $1,290.00 | |
| 11 | $200.00 | $3,480.36 | $3,680.36 | $2,357.66 | $- | $2,357.66 | $1,322.70 |
At the end of the 11 years, I’ll come out having an additional $5,880.83 in my pocket! This basically means that I get the Corolla for free and stash an extra fifty eight hundred dollars over the next 11 years. Put another way, I’m getting a 12.6% rate of return on my money for no risk! Not too shabby!
I calculated that the cash investment to upgrade to the Corolla is costing me ~$547 a year. Because I’m saving $750+ a year on gas, it’s like I’m getting paid to drive a nicer, newer car 🙂 I’m not sure why I ever waited this long to explore car downsizing, but I’m glad I finally made the switch.
Final Thoughts
If it’s nearing the time for you to get a new vehicle or if you’re driving around town in something that doesn’t get 30+mpg, you should really consider car downsizing! You can save yourself a ton of money over the long run, and it’s better for the environment 🙂 Has anyone here taken the car downsizing leap?? If not, what are you waiting for?
Nice post. Agree it’s been hard to find a good used car at a decent price these days. Used car values kinda went crazy during the financial crisis and are just now starting to come down.
Yeah – the whole cash for clunkers thing was one of the biggest wastes possibly imaginable! Thankfully, if you stay at it long enough a good deal should eventually come your way.
i love this post
Gisela recently posted…Tips to Eliminate Bad Habits at the Office
Thanks Gisela!
Nice ride! and nice analysis. Now if gas prices rise even higher than you assumed, you’ll be comforted by the knowledge that you’re saving even more vs. the Camry!
Kurt @ Money Counselor recently posted…Save Energy This Winter
Kurt, thanks for the compliments. I hope gas prices don’t go up, but as you point out, it’s great to know that I’m relatively shielded from any large increases 🙂
Sounds like a nice deal to me…seems like a really nice ride in red!
Downsizing does indeed enable savings if one does their homework and negotiate diligently (“plain old silence at key points!”). At the end of the day, the savings you will make are worth the effort and you have a wide margin of safety if gas prices go up in the near future.
Simon @ Modest Money recently posted…EverBank Review – Exclusive Review of EverBank Online Banking
Simon, thanks! I hope it will last me 11-15 years or so. My son (6 year old) already asked if he could have it when he is able to drive 🙂
It will be interesting to see where gas prices are 5-10 years from now… As you mentioned, this should make a good insurance policy if/when prices rise.
Interesting way to look at a car purchase. I did the same thing with comparing fuel costs when I have to buy a new to me used car.
EL @ MoneyWatch101 recently posted…The 4 Principles of Personal Finance
EL, thanks! What I didn’t realize before I got started was that if you’re making a switch to something used with 10+ mpg, you’ll get the car basically for free after a couple of years. After that it’s pure savings!
Hey Derek!
This is such a great post. Thank you very much for sharing. Nice analysis! And also, I like that car you posted here.
-Eric
Thanks Eric!
Derek, you should talk to my brother. He wants to jump into a brand new Tesla to “save money” and I think it is madness, which does indeed take out the petrol costs. This is slightly myopic, since depreciation on a new vehicle is insane. (By the way, you didn’t take depreciation or NPV into account in your analysis, but it’s most likely a nit anyway). His logic makes sense perhaps 20 years from now when Tesla have been on the road for a while and you can get one on the cheap (relatively speaking). Of course, if electric vehicles are 40-60% of the total car market in 20 years (just a guess), gas prices would perhaps plummet since supply would radically outpace demand at that point. Still, your logic and analysis are sound. Now me… I’m a car guy, which means it’s like a hobby for me, so I don’t think about the costs too much. I do know how to work on them, which saves me tons of $$$. Which brings up a good suggestion for another blog for you – time spent doing it yourself vs. paying someone to do it. This would be an interesting article, IMHO. Thanks as usual!
Tim,
Yes IMHO electric cars still cost more than they save in the long term.
I know how to do the basics on cars, but I’m not really a car guy. For me, it doesn’t make sense to spend a lot in this area. But, I can really appreciate people that love cars. In their case, it most definitely would make sense to spend more if they enjoy it that much!
We paid cash for my husband’s used 2009 Prius and I personally think it’s badass. It has plenty of room for the family and still gets 50 mpg.
Holly@ClubThrifty recently posted…House vs. House: The Showdown
Holly,
It’d be interesting to compare a Prius vs. a Corolla in terms of long term ownership costs. I looked at a couple of used hybrid cars, but determined the unknown around battery replacement would be a large factor in the cost. I had the general sense that the Prius would be much harder to work on yourself, but that isn’t really based on any data – just a gut feeling. Thanks for sharing!
Interesting read and a very detailed one. Thanks for sharing this. Very useful indeed.
Marissa@Financetriggers recently posted…Saving Money on Gluten Free Products
Thanks Marissa!
Your numbers seem a little off to me. Just for one, you expect to have the Corolla for the next 11 years and not have any repair cost but you plan to have repair cost on the old car. This seems a bit unrealistic to me. Plus, to say this is like earning 12.6% interest at no risk is a bit inflated to. There is risk with a car. The car could be totaled tomorrow and the 11 year plan could go out the window.
I agree you got a good deal and you did great homework to make sure you got a good deal. I just think the numbers and article are a bit overly optimistic.
Louise recently posted…You’re invited! Introducing The Hybrid Shop System with hands-on Hybrid Training
Louise,
Thanks for your comments. Let me try and clarify a bit because I can see where the confusion is coming from.
On the first point that you raised, I meant this to mean that the repair cost would be $100 higher per year than that of the Corolla simply because it was older.
On the second point, I agree with you that owning a car has risks to it. What I meant when I said “no risk” was that there is no additional risk in switching from my older Camry to a newer Corolla. In this case, because I have chosen that I will own a car and operate it, and there is no additional risk, I consider this a “no risk” method of saving money by making the switch.
Hopefully this helps to clear up my thinking a little bit 🙂 Looking back on it now almost a year later, I’m very glad I made the change. My car is still running like a champ and saving me gas money every single month!
I bought a 2004 Lincoln Town Car with 30K miles on it in 2012 for 10K and got rid of my piece of junk bought brand new Pontiac Solstice with 98K miles (that the engine blew out of 800 miles after I got rid of it. I travel and don’t fly so I drive a LOT and I want a big comfortable car. My payments on the Pontiac were $600 a month. They are $250 on the Town Car. I have driven the TC 120K miles in the last 3 years. I’ve spent a grand total of $2200 on tires, oil, brakes and maintenance items which works out to about 1.9 cents a mile. $2 a gallon gas makes my fuel cost 10 cents a gallon so I am driving a car so durable and reliable that it’s running perfectly with 140K miles and I expect to get another 200K miles out of it. It looks brand new. It has a huge trunk and is exceptionally comfortable to drive and ride in. I’m looking for ANOTHER one when this one croaks!! I’d never buy another brand new car again!!
Teri,
Sounds like you are right on the money 🙂 There really isn’t a point to buying a new car for those of us that are smart enough to see it! Glad that your Town Car is working well for you. Here’s to another 200K miles!