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Bhoot Nath posted on July 5, 2008, 5:15 pm
being born to families who stressed hard work and education and as a
result, we both have good careers, and have become financially
comfortable, without any inheritance :) Spouse was able to switch to
1/2 time, as one child started kindergarten last year, and seocnd will
start next year.
One of the elements of frugal planning is that, until we got quite
secure, we only buy what we needed, not what is advertised. So we
stayed, 1 car family, from 1996 thorugh 2004. During this time, the
1996 model Honda civic was driven an average of 25K miles/year. In
2004 we got another car (smallest SUV), and since then the 1996 civic
has been driven about 4K/year.
I have done every scheduled maintenance, without fail, and oil changes
all along, so the car runs (and has always run) without any issues,
and the emissions are very low, always only 2% to 5% of the levels
required for SMOG. So that's not at issue.
Now the civic paint is peeling, and a cheap repainting at Maaco is
estimated at $800. The car will hit 180K miles in a few weeks, and is
due for the major maintenance + the timing belt + water pump stuff
that is done at every 90K miles. All of this is estimated to be about
$1500. I estimate tires and brakes also, probably within a year, for
another $700 or more. So, within a year, it will add up to
$800+1500+700 = about $3000.
The car is probbaly worth 3500 due to mileage + usual wear and tear
after 14 years (& some dings), but no mechanical problem. We would
like to keep this car (we are not itching for a new car smell), but
does it make sense to put $3000 into a $3500 car? How critical is to
replace timing belt and water pump stuff every 90K?
We can afford a new car, without loan, and it won't impact our other
savings, yada, yada, but I feel crummey having to "throw-away" a
perfectly good car...
I would appreciate how prudent people who post on this newsgroup make
such decisions...
Thanks.
Bhoot Nath
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joeDOTweinsteinATgmailDOTcom posted on
Re: Economics of retaining an older car, versus a buying a new car
My '93 Dodge Caravan is still going strong with good maintenance and
replacement of wear parts. Do you really need to get it painted
professionally?
If your wife is picky/embarrassed than maybe, but after the 15th year,
I just
do a bit of hand-sanding and paint away any peeling with a spray can.
If your timing belt breaks, your motor may self-destruct. Stay safe
and
stay frugal. When it's time to replace it, buy a fairly late-model
second-hand
car. The previous owner has already paid for the most depreciation.
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Mark Bole posted on
Re: Economics of retaining an older car, versus a buying a new car
No. Just try to sell it "as is" for $3K, someone will buy it for their
teenager, or perhaps a retiree who doesn't drive much (I've had personal
experience with both).
Pretty critical, you don't want to stall out on a bridge, in a tunnel,
or outside of easy urban access. There are two types of engines when it
comes to timing belts, one kind self-destructs and the other just stops
working, you can do an Internet search to find more. Having stalled
out myself one morning, with a broken timing belt, on one of the busiest
bridges in the country, I can tell you it's no fun.
Let's not go to extremes. Unless you are on financial life support, buy
a newer used car when the annual cost of repairs to the old car exceeds
50% or more of the car's resale value. And don't forget to drop
collision insurance well before that time.
It's not just the finances, but the personal safety issue of avoiding
mechanical failures while driving in commute traffic, or being pulled
over because your car looks poorly maintained on top of some other minor
violation, plus the image of reliability and sensibility you project to
your neighbors and co-workers (unless you are lucky enough not to have any!)
-Mark Bole
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Douglas Johnson posted on
Re: Economics of retaining an older car, versus a buying a new car
Let me suggest that the resale value of the car is relevant only if you are
going to resell it. If you are going to keep driving it, then the issue is the
cost of repairs vs. the net cost of buying another car.
Reliability and safety are real issues, but are hard to quantify. That makes it
easy to justify an unnecessary trade-in.
Or lucky enough to have neighbors and co-workers that don't judge people by
their cars. "Those that matter don't mind, those that mind don't matter."
-- Doug
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Ron Peterson posted on
Re: Economics of retaining an older car, versus a buying a new car
If your car is totaled, the insurance will only pay approximately the
resale value. Collision insurance is reduced for older cars, so it
makes sense to keep it.
--
Ron
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Daniel T. posted on
Re: Economics of retaining an older car, versus a buying a new car
And if your car is never totaled (which is *far* more likely,) then that
insurance has been an albatross on your finances for years.
The OP has made it clear that he would not be financially devastated if
this car disappeared tomorrow, so insurance (beyond what is legally
required,) is a waste of money for it.
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Re: Economics of retaining an older car, versus a buying a new car
the
Sorry, I should have snipped a little more. I was suggesting the resale value
of the car is irrelevant as to whether you should repair it or not. That
decision should be based on the cost of repairing vs. the net cost of buying
another car. Yes, likelihood of further repairs, reliability, and safety play
into the decision as well. But those are often used as rationalizations for
wanting a new toy.
But since you bring it up, I tend to drop collision on a car when I can afford
to write it off. Don't forget. If the car is totaled, the insurance company
will only pay the blue book (retail, usually), less the deductible. For an
older car, that might be only a few hundred dollars.
-- Doug
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Re: Economics of retaining an older car, versus a buying a new car
True enough, at least for the high-cost status cars. I'm talking about
the other extreme, the automobile equivalent of dirty jeans with holes
and a threadbare t-shirt with something mildly obscene on it.
His 14-year old car has peeling paint, some major overdue engine
maintenance, we don't know about the interior condition or whether the
windshield is cracked but can guess.
Now, he said he only drives 4K miles/year and has another family car, so
maybe this is just the beater for weekend errands, in which case I would
recommend keeping it. Otherwise, I still recommend the "replace when
repairs are 50% of value" rule, it's easy to follow and pretty much
guarantees cash-flow payback in two years.
Speaking of clothes, I wonder how the financial advice would fall
regarding the economics of buying new clothes regularly vs. wearing used
ones well beyond when the edges start to get a tiny bit frayed. For
example, are there financial planning lessons to be learned from "What
Not To Wear" (cable TV show)? Do they clearly demonstrate a pay-off
from the $5K or so spent on clothes in each episode?
-Mark Bole
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Re: Economics of retaining an older car, versus a buying a new car
Could you show me the arithmetic on this? I still don't see how the resale
value of the car relates to the fix or replace decision.
I drive a 1995 Ford Explorer worth maybe $1500. It is very dependable and has
been averaging about $300 a year in repairs. A new replacement would be about
$26,000. Why should a $750 repair bill make me trade it?
-- Doug
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Re: Economics of retaining an older car, versus a buying a new car
Who said anything about a "new" replacement? Not me.
How many miles do you put on it? Do you rely on it for your livelihood?
Can you afford to leave it in the shop at any old unexpected time, and
be without a vehicle for a day or two?
If I am spending $750/year cash for repairs to a $1,500 car, and I
replace it with a $5,000 car and reduce my repair bills by two-thirds
for the next seven years, then I am even or ahead.
(Incidentally, I don't think your example or my sample numbers above are
anywhere close to reality for the vast majority of drivers, but I don't
have any studies to back it up. There will always be the extreme
example of the miracle car that still runs like new twenty years later.)
Let's put it in analytic terms -- if repair cost and depreciation are
strictly straight-line functions of time, then it really doesn't make
any difference how long we keep the car. But everyone seems to agree
that the rate of depreciation is high up front and then slows, and I
would argue that repair cost is the converse -- more growth on the back
end than the front end. Therefore there must be a point of diminishing
returns where the ever-decreasing benefit of holding on to the car
longer finally becomes less than the ever-increasing cost.
If you agree, where do you think the point is? I think it's a lot
closer to ten years than fifteen.
-Mark Bole
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Re: Economics of retaining an older car, versus a buying a new car
Just factor a rental into the repair estimates. But as I said, it has been very
reliable. It has had unexpected repairs only once in 13 years. Everything else
could be scheduled.
You had originally suggested 2 years.
Notice that, in your example, the value of the car only shows up as reducing the
net cost of buying the new one. It really has no effect on the fix or replace
question.
A couple of other points. One is that $5,000 Explorer is only going to be 3 or
4 years newer than my $1,500 Explorer. You're going be back on the high
maintenance curve before you've broken even.
Another is that you only do essential maintenance (including essential
preventative maintenance) on cars of this age. Once you have been presented
with a $750 repair estimate, the value of the car declines by $750 until you fix
it. The alternative is to foist it off on some unsuspecting buyer.
-- Doug
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Re: Economics of retaining an older car, versus a buying a new car
I was just repeating something I'd heard in a business setting years
earlier. Even if the math is a more complicated than I implied at
first, I still think it *sounds* like a really solid and easy rule! ;-)
the
Well, what does then? The older the car, the harder parts are to get,
and the less likely you are to find a mechanic intimately familiar with
the model and year. Some cars are so old (yet less than twenty years)
that even when operating to manufacturer specs, they don't pass modern
smog laws in some states.
I'm still claiming there must be *some* point when repair costs
accelerate for an older car. Since older cars (excluding collectibles)
are cheaper, then there would be a strong inverse correlation between
the value of the car and annual repair costs.
To tie this back to financial planning and the OP, I got three things
out of his message: older car (14 years), high mileage (180K), and
peeling paint. What we don't know, although some hints were given, is
the role this car plays in sustaining his (family's) earning capacity,
and what the condition of non-essential systems (air conditioning,
sound, safety/security, interior coverings and finishes) are. If he
lives in the snow belt, there's sure to be some rust by now.
With those conditions, I'm still advising that after ten years, let's
say fifteen max, it makes sense to buy a newer used car, say in the
five-year old range, and plan to then keep it for another ten years or
so. Others have suggested keeping it for another five years, never
selling it, and at least one other suggestion to trade in a for a newER
(not brand new) vehicle.
-Mark Bole
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Re: Economics of retaining an older car, versus a buying a new car
The first item on your list is the only viable one, and only for
vehicles that are unusual. Honda Civics, even 10-15 year old ones, are
quite common. (Almost 40% of the cars in service in the USA are over 10
years old.) It is generally easier to find a mechanic familiar with an
older car, after all most of them learn their trade on older vehicles!
As for the smog laws, older cars get grandfathered in so the laws don't
apply to them anyway.
In other words, the suggestions on this group have been all over the
map. :-)
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Chip posted on
Re: Economics of retaining an older car, versus a buying a new car
Veeerrrrry close to my daily attire now that I am retired.
Chip
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Don posted on
Re: Economics of retaining an older car, versus a buying a new car
I have been told that imported cars like Volkswagens, Toyotas, etc.
last longer and need less maintenance than the big US made-in-Detroit
vehicles. I know little and care less about cars and don't know whether
or not that is true, but it seems like this issue could make a
differences in expenses in the long run. I realize it is nice to
support the local economy, but doing so to the tune of a few thousand
in maintenance expenses might not be prudent. Maybe a US citizen can
save money by dropping patriotism (just temporarily, of course) along
with collision insurance.
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Re: Economics of retaining an older car, versus a buying a new car
Mark Bole has some good advice.
Newer cars are safer with better brakes, air bags, and stability
control.
If you are in an accident, you won't get more than the blue book
value. But, don't drop collision or uninsured motorist or you may
never be able to collect.
--
Ron
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Re: Economics of retaining an older car, versus a buying a new car
What you are saying above is that there is absolutely no reason to get
rid of the car. As such, I'm not sure why you are even asking the
question.
If they have any idea what they are doing, even a cheep paint job should
last 4+ years. That's $200 a year.
So this $1500 investment should last 90K miles, at 4K miles/year, that's
$67 per year.
All of which should last at least 40K miles or $70/year.
You are griping because the car cost $337 per year in maintenance?
Let's outline two options.
1) You invest the $3K into this car and it will be worth maybe $1600 in
5 years. Total cost $4.9K
2) You invest $10K into a very good used car which will be worth $4400
in five years. Total cost $5.6K. Or maybe you end up buying a car that
has hidden problems and it cost you even more...
I say go with the devil you know, and think about what that little Honda
would look like if you dumped the full $10K into it! It could end up on
the cover of magazines!
The timing belt and water pump could probably last another 10 years at
the rate you drive the car, but if the timing belt goes out, the car is
done for.
Well hell. If you can afford it and it won't impact your savings, then
get a new car. Instead of throwing away the old one, give it to a worthy
cause and take a tax deduction while feeling good about giving.
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Pete posted on
Re: Economics of retaining an older car, versus a buying a new car
Another reason I heard recently for hanging on to an old car, or buying a
*used* one, is that it takes the equivalent of 1,000 gallons of gas/petrol
to make a new car.
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Augustine posted on
Re: Economics of retaining an older car, versus a buying a new car
Which means absolutely nothing. The energy used to build it might
have come from solar or wind plants and it would still be equivalent
to 1000gals. of gas.
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Re: Economics of retaining an older car, versus a buying a new car
And no matter the source, 15,9375,000 BTUs of energy is 15,9375,000 BTUs
of energy. Personally, I expect that a car's construction uses
considerably more energy than that, but I don't have access to the
source data to see what they might have missed.
BTW, according to
http://www.lifeaftertheoilcrash.net/Research.html#anchor_72 a car's
construction uses over 1,000 gallons of oil, not gas.
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