Revisit of Usonian Debt Concept…

I did a post awhile back about how purchasing and financing a typical car could have paid for land instead. I want to revisit that concept with some real figures as I feel it is super important to teach people this lesson. My nephew was over recently and I put pen to paper to show him this concept and he was shocked what you give up to own a new car.

The average new car price in the US is around $25,000 right now. The average payment for that car is around $500/mn. The average full coverage insurance rate (which is required by the lender) is around $250/mn but this figure can be as low as $150/mn up to over $500/mn. We are talking an average here. So the average car payment for the next 5 years of the loan is $750/mn or $45,000 over the life of the loan. At the end of the loan the car’s value (accounting for 20% depreciation/year) is around $8,100 but will likely sell for half that. So at the end of 5 years of loan payments and full coverage insurance you literally burned through around $40,000.

The Tax Man commeth. OK let’s also factor in the 20% (average) of that $40K you had to pay the Government. So we are now at $48,000. There is also the sales tax on the original $25K which can be as much as say 7% or $1750. Also a full drive train policy at say $1500. OK so a grand total of around $52,000 average to drive that shiny new car.

Now let’s try this scenario. Go buy a used car (maybe even the one the guy just got rid of after throwing away $40,000) for $2500. If you think they are not out there you are wrong. Cash talks and because you saved your cash you can say a lot! You only need to carry liability insurance which averages around $100/mn. So at the end of 5 years you spent a total of $8500. Let’s also say you have to put $2000 in repairs into the car one day so we are around $10,500. Pay the tax man for income tax and sales tax on the $2500 and we are around $13,000 for 5 years of used car ownership.

You could have taken that extra $39,000 and invested it and maybe ended up around $50,000 total . Now lets move 5 years forward again. If you then invested that $50,000 in land which historically appreciates at 10% (and maybe much more into the future, will explain why in a later post)…after 10 years that $50,000 would be worth around $75000, plus you will have another $50K to add to that.

So buying used for 10 years would allow you to shove $125,000 into land that is worth more and more money as time goes on instead of a 2 new cars that are literally garbage after 5 years.

These are hard figures. They are not made up and the typical American or Canadian is literally throwing away the ability to have bought and paid for land simply because they want to drive a new car every 5 years.

The concept does not only apply to cars, it applies to everything. The second you borrow money to pay for stuff, it is the same second you are a slave to that stuff forever. It is Frank Lloyd Wright’s concept exactly (even though he did not always follow it earlier in life).

I have been watching youtube videos about a financial adviser named Dave Ramsey that will likely back up everything I have said above. He actually has a very sane plan to get you to land ownership (outright owning it…imagine the concept!) within a very short amount of time.

Here is one video that made a lot of sense to me:

Just a note I want to address about car ownership again is the misconception about owning a new car is more reliable. Some of the most expensive problems I have seen with cars happen within 2 years of ownership. Even if you put $100/mn aside for a repair fund, you would still be tremendously ahead on the reliability factor. So what if the used car breaks down. A cab and tow truck cost maybe $100. A “new” used car would be $2500. Again, so what?

The last note I wanted to make was in regard to an economical-on-gas-car versus a larger car or truck. Again these are based on hard figures made with countless studies. Some of the cheapest cost of ownership cars in the world are huge Cadillacs. I have NEVER owned a small, gas-mizer car that didn’t break down and cost a fortune to fix. I have however owned V8 trucks that yes cost more on gas but only depreciated a few dollars a month. In fact, my last truck I owned for 5 years and sold it for only $1,000 less than what I paid for it. Yes I spent maybe twice on gas over the years but I did not put one repair into it except a $100 battery. On the same token we bought a used neon, put $2500 in repairs, its been on the road for only about 2 months in the past 3 years and it is worth literally nothing. “But it was good on gas!” Bottom line, really consider the total cost of ownership, not the MPG and study this just as I did. You may be shocked what you learn.

The lesson I was trying to teach my nephew is don’t be a slave to your stuff. Really keep a goal in mind and for my wife and I, that is our Usonian Dream…I only wish I learned these lessons at his age.

2 thoughts on “Revisit of Usonian Debt Concept…

  1. Excellent post!, I’ve had my own debt struggles and wish i had learned to stay out of debt earlier in life! I am also dreaming of building my own ” wright inspired” dream home, and i wish you every success in your endeavours! Are you planning to design your own furniture to go with your usonian house? looking forward to future updates . -Langdon

  2. Hello Langdon, I’m sorry for the long reply but my spam to post ratio is around 300 to 1 these days…Yes it is a hard lesson and one I do not think anyone learns early enough in life. Yes for sure the furniture will be designed and built by us mostly before the house is even complete. I should have more updates soon as we are taking a trip to Taliesin and the plan has been refined much more. My understanding of Wright’s “grammer” and how it applies to our modern day are one of my biggest steps forward. If I had to learn it all over, I would have saved a lot of time. Let me know if you are documenting your journey as well. Best, John

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