Its Okay to Have an Old Car

Is it pretty? No

Does it run? ... Sometimes

Are you embarassed by it? Probably

Do you have a car payment? Nope

Alright, driving, say, a 1991 Cutlass Cruiser Station Wagon (pictured) isn't exactly the kind of ride exudes class, nor does it help in the pursuit of hot ladies or gentlemen.

But here's what a car like that can do for you- eliminate car payments! Sure, this old thing doesn't look like much, but buying one of these for $1,000 or less and having the mechanic repair it every now and then is still cheaper than paying $350 a month for a lease or car payment. In addition, in some states you can be insured as a driver, but not have your car covered. This means that if you total your car, your insurance will cover the damages for whatever you hit, but won't pay for the car damages. Consider the Kelly's Blue Book value on a baby like that one is about $500, you won't get anything if your car is totaled anyways. This will lower your insurance by a few hundred dollars every year.

Let's do the math:

If you pay $350 a month on your car payment, that works out to $4,200 per year.
Pay for insurance. Let's give a rough estimate of $500 per year. Young drivers tend to have higher premiums than our more experienced counterparts.
Pay for repairs. Even a new car needs oil changes every 3 months or so. At $50 each, you're looking at $200 in maintenance, plus more for things like new spark plugs, anitfreeze, tires or, God forbid, something substantial like a new muffler or major repairs to the engine.
Total cost: $4,900+ annually

Or

Buy a car outright for $1,000.
Pay for insurance. Driver's insurance is about $250 annually, depending on your record.
Put new tires on it, chances are the ones on there will probably be shot. $400
While you're at it, top off all fluids, change the spark plugs, get new belts, replace a light bulb or two, WD-40 the hinges, buy a new battery and get a few copies made of the keys- if you do this yourself or with minimal help, you can probably accomplish this for $500
Oil changes are still needed! $200 per year
Repairs as needed. With an older car, keep $500 kicking around in your checking account, or at least keep $500 free on your credit card. My old car usually has one decent break-down a year at the tune of $500 for repairs. Anything more than that should warrant simply buying a new old car and starting over.
One nice thing about an old car is you can usually find used, but still serviceable parts for an old car in a junk yard. Things like rims, axles, seats, steering wheels, doors, transmissions, headlights/taillights, gas tanks and more can be found on the cheap. New cars don't have the same pileup of junked cars, so chances are anything new you'll need will cost 4 times as much.
Total cost: 2,850+ annually

Assuming you can make your car last another year, it will cost you about $1,000 to keep the old bird on the road, $250 for insurance and $750 for oil changes, small repairs and maintenance. You might spend up to $1,000 in repairs, after that, scrap it and start over with a slightly newer model. Oh heck, splurge and get a Triple A membership just in case you break down. I don't have AAA, but I can't imagine it being more than $200 a year. Your maximum total would be $2,200 annually. The lease or car payments will still be $4,900 next year.

My old car, which actually IS a 1991 Cutlass Cruiser Station Wagon (like the one pictured but no wood panels and a whole lot more rust). She's broken down on me a few times, I'll give you that, and that's pretty annoying. The nice thing is my old car is expendable, cheap and easy to drive. With 250,000 miles on it, it steers like a boat and handles beautifully in the snow (very important for where I live!). Plus, I have a rumble seat that seats two people in the way, way back that faces backwards. I once fit all of my worldly possessions in it to move in and out of college dorms, and in between classes I used to crawl in the back, put all the seats down, pull out a blanket and take a nap while listening to music. I bought that old car back in high school and learned to drive on it. My dad thought it would last a year or two and then we'd junk it. Well, seven years later, she'll still going strong and I hope to break 300,000 miles on it.

So, laugh at the old beater car all you want.  Call it a jalopy, hoopty, deathtrap with wheels or demolition derby fodder. Make fun of people who rely on duct tape, bungee cords, rope and a prayer to get to work. They're still saving money. That saved money could be used to pay down the principle on your students loans and reduce the amount of interest you'll end up paying over the life of the loan.