A lot of people dream about owning that one special car…you know the one I’m talking about:  when you see it on the road, you can’t help but take a second look; and you can easily imagine yourself behind the wheel, zooming along some quiet, twisty mountain road.

For me, that “dream” car was a BMW Z3 roadster.  I bought it in April of 1997 for $33,100.  Ten years and nine months later, I sold it for $11,750.    On a monthly basis, the depreciation on the car cost me $165.50, which is about a third less than what it would currently cost to lease a new Honda Accord.  Not bad for what some consider to be a high-end automobile.

In a world where a “reasonable” loan payment on a new car might run $300-400, owning the Z3 was pretty cost-effective.  Let’s look at some of the factors that helped me keep the cost of ownership low on my dream car:

• Length of ownership – Simply put, the amount of time I owned the Z3 was what made it so economical.  As most people will point out, the depreciation is greatest in the first year and gradually abates over time.  And by the time I sold it the month-to-month depreciation was quite low.  Selling the car after 3 or 5 years would have increased my monthly cost of ownership substantially.
• Passionate enjoyment – After a few years of ownership, some people find that they’re “bored” with their current car and begin the process of looking around for a replacement vehicle.  This is an emotional response that you can work to overcome by purchasing only vehicles that you genuinely enjoy.  Even after 10 years, I found myself sneaking off on Sunday afternoons for quick jaunts through the Hill-Country; and had mixed feelings about selling the car, even though I knew from a rational perspective that it was for the best, given the rising potential for major mechanical problems.
• Matched to your lifestyle – Consider your life goals over the next few years before buying a car.  Having to trade out a convertible after two or three years because you’ve got a baby on the way can be a costly mistake.  Likewise, buying a Suburban when you’re about to become an empty-nester might not be the best choice.  By matching the car with your planned lifestyle, you can minimize the risk of having to make costly trades before it’s needed.
• Reliability – Cars can be difficult and costly if maintenance issues crop up on a frequent basis.  Before making a purchase decision based upon a passionate desire, take some time to rationally determine if the car will likely be trouble-free and easy to own.
• Keep it simple – When purchasing the car, steer clear of upgrades that may become maintenance issues later on down the road.  Upgraded tires can be costly to replace; and that $1500 DVD system will be useless to you if it breaks.
• Stay on top of maintenance – Once you buy the car, take care of it.  Staying on top of routine maintenance such as oil changes and brake-pad replacement will help prevent more costly repairs.  Likewise, keep the car clean and in good condition, as it will aid in resale value later on down the road.

And finally, you can apply these principals to any car to help keep your cost of ownership low.  I employed these same tactics on a little Nissan pickup that I purchased right out of college.  After more than 10 years of ownership, my cost of depreciation was less than $75 a month. 

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