Are you wondering whether it's worth it owning two cars? I used to have two cars as a car fanatic. Now, I only have one car for a family of four. Let me share whether owning two cars is worth it or not before you make your decision.
I’m a one car type of guy because I live in San Francisco, have access to cheap ridesharing options by Uber and Lyft, and know that cars are expensive. However, owning two cars may be worth it if you don't live in an urban area.
Just recently, I had to pay $750 to fix a fan on my Range Rover Sport that kept on making a funny ticking noise. Then I had to pay another $1,200 to change the brake pads, perform the 3-year service, and flush the brakes. $1,950 is a lot of money!
Owning a car is a necessity for many, but it is also one of the things that keeps us from achieving our financial independence goals. Everybody should follow the 1/10th rule for car buying, which states that you should spend no more than 10% of your gross annual income on one car.
Once you own that one car, drive it for 10+ years or until it no longer is cost effective to own.
But if you insist on owning two cars, then at least own the two cars under my 1/10th car buying rule as well. In other words, if you make $150,000 a year, you can buy a $10,000 car and a $5,000 car.
Let's look at whether it's worth owning two cars.
Owning Two Cars Is An Expensive Luxury
I don't think it's worth owning two cars, but that's also because I'm the one who mainly drives. If you have two people in your household who drives daily, that's the best reason to own two cars.
I think if you do own two cars, you should own one for Show and another for Dough.
One Car For Show
Your Show Car is your splurge car. Nobody needs more than a seven-year-old Honda Civic to get around. Your Show car might be a sports car, a classic car, a luxury car, or a higher end SUV.
You enjoy driving your Show Car around on the weekends. You like to drive your Show Car on the backroads with your buddies who also have Show Cars. Your Show Car is mainly for your personal pleasure only. You love cars and aren’t driving the car to show off.
You must not be seen in your Show Car by colleagues, competitors, school administrators, or anybody who might cost you money. Below is a sweet Porsche 911 GTS.
Another Car For Dough
Your Dough Car is your unassuming car. It is your 10-year-old Toyota Corolla with a dent in the passenger side door. Your Dough Car is a dirty old truck with ripped upholstery and a couple missing hubcaps.
You also enjoy driving your Dough Car because you don’t care what happens to it. Got a car ding while parked in the grocery store parking lot? Who cares! Someone driving too close to your side? Bring it on!
Your goal is to be seen in your Dough Car by everyone. Below is a Honda Fit, my Dough Car I drove for three years in the city before having a baby.
The Importance Of Having A Dough Car
Everybody needs a Dough Car if they plan to own two or more cars. Here are the reasons why.
1) Winning Customers
Recently, I made an appointment with a shutters and blinds saleswoman to visit my house. It was a free home design consult, with the ultimate hope that she sell me a bunch of products.
At 11 am, she roles up in a brand new BMW X5. The vehicle costs about $70,000. Upon seeing this, immediately, my heart dropped. I knew that if she was driving a BMW X5, her products would be super expensive and I wouldn’t be able to get a great deal.
She then proceeded to step out in Manolo Blahnik shoes that cost $800+ and $600 Prada shades holding back her hair. I was even more dismayed.
After about an hour of showing me various types of blinds for my eleven windows, we decided on a particular product. She told me she’d get back to me in a couple hours with a quote.
My budget was for around $5,000, or $400 – $500 per window. Instead of $5,000, she came back with a quote for $9,181!
$9,181?! That is a ridiculous amount of money for blinds! I told her we needed to change some of the options to get the price down. I then asked her to apply the special promotion I saw online.
In the end, I got the price down to $5,690. But even at $5,690, I still didn’t feel entirely satisfied because I kept thinking back to her $70,000 BMW X5 and expensive shoes. Clearly, her profit margin was huge. Thus, I decided to look for additional options.
If you want to win customers, driving up in a Show Car may be detrimental. Every savvy potential client will think that the reason why you have such a nice car is that you’ve profited too much from your customers. Unless your job is to chauffeur your client around, like a real estate agent, it’s best to show up in a Dough Car. But be careful real estate agents, driving too nice of a car may remind your clients of your high commission.
2) Getting Financial Aid
On three of the preschool financial aid applications I submitted, I noticed something very interesting. These applications all asked what type of car we drove.
The obvious reason for asking this question is no school will want to provide financial aid to any parent who drives a luxury automobile. Any car over $30,000, such as a fully-loaded Honda Accord, would probably be frowned upon.
By owning a Dough Car, you increase your chances of getting financial aid. The only risk is that by owning a Dough Car, you might be perceived as too poor and too lacking in status to be admitted. I know it’s ridiculous, but that’s the BS society we live in today.
Just know that academic institutions and your employer will make some assumptions about your wealth based on the car you drive.
3) Getting Paid And Promoted
While I was in banking, I once hired a 22-year-old first-year analyst to work with me. He turned out to be a pretty cocky guy who didn’t follow instructions. It was only after he joined the firm that we discovered how truly immature he was.
He drove a $50,000 Acura MDX SUV to work. His car was more expensive than 70% of the cars in the employee parking lot. Everybody found out. Not only did everybody find out what car he drove, but everybody also learned that his parents had bought the car for him. Since he was already not well-liked for his attitude, owning an expensive car exacerbated his work standing even more.
Instead of getting a $25,000 year-end bonus, he received a $15,000 bonus. The committee decided his performance wasn’t up to par. Further, they figured that if he was already rich, he didn’t need the money. They decided to use the $10,000 to pay someone else.
The first-year analyst was pissed and didn’t come into work for three days. We fired him after his second year.
4) Not Getting Ripped Off By Contractors
My contractor told me one, “Sam, I charge you X because you live in Golden Gate Heights, but once I cross over to Pacific Heights, I charge those homeowners 100% more!”
Contractors know how much houses cost and how rich the homeowners really are. If you have a $100,000 Show Car sitting in your driveway when the contractor comes to inspect the existing infrastructure before installing some pipes or new electricity, you're screwed. But if you have a Dough Car, he won't want to rip you off as much!
Various Types Of Cars To Own By Income
Hopefully by now, you've come to realize the importance of owning at least a Dough Car if you want to own two cars or more.
Below is a great chart I put together following my 1/10th rule for car buying. The best Dough Cars start when you're earning $250,000 or less.
When I drove a Honda Fit for three years, I always felt great everywhere I went. Although I experienced a lot more car bullying on the road, it felt great blending in with my surroundings. Most of the time, my Honda Fit was also the cheapest car in the parking lot.
Now that I own a Range Rover Sport, I get a little sheepish sometimes when I drop my boy off at preschool. But at this point in my life, safety is the most important thing. I wasn't going to drive around the city with a baby in a Honda Fit. Its crumple zones were too small. So I ponied up $60,000 for my one and only car.
Owning A Nice Car Gets Better Over Time
If you've made the mistake of only owning a Show Car or have two Show Cars and no Dough Car, then your mission is to own your Show Car for as long as possible. The longer you own your Show Car, the more you will improve your financial standings and eradicate any guilt associated with owning a fine automobile.
Here are three reasons why:
1) Your car will depreciate in value every day. If you hold on to it for at least 10 years, it will eventually not be worth much at all. Check out how a vehicle loses 80% of its value after 10 years.
2) You will grow wealthier over time. As the car’s value becomes a smaller and smaller percentage of your annual income and net worth, you will stop feeling as embarrassed about owning a Show Car.
3) You will get older. Nobody cares if you drive a Range Rover Sport as a 45-year-old man with a family to lug around. If you’re in your 30s or younger, however, sometimes people will give you grief for driving a Show Car out of envy.
Let's say you have a family and need to shuttle kids around. Owning two cars is a good solution. If you live in an area with poor public transportation, owning two cars is also a good idea. However, if you want to achieve financial independence sooner, I would own just one car. It all depends on your objectives and family's needs.
Car Saving Suggestions
Lower Your Auto Insurance Costs: Check out Allstate online for some of the best plans with the lowest rates around. It’s worth spending a moment filling out a quote to see if you can save some money for free.
Car insurance is one of the largest ongoing expenses for car owners. Allstate has good driver discounts, and multi-product discounts as well. There is no obligation to sign up once you get a quote either.
For further suggestions on saving money and growing wealth, check out my Top Financial Products page.
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