Economics of retaining an older car, versus a buying a new car

My wife and I are planner, saver types; we also had good fortune of 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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Reply to
Bhoot Nath
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I would seriously consider keeping the car and keeping it road-worthy. 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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Reply to
joeDOTweinsteinATgmailDOTcom

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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Reply to
Mark Bole

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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Reply to
Don

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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Reply to
Ron Peterson

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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Reply to
Daniel T.

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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Reply to
Pete

On Jul 5, 5:15 pm, Bhoot Nath wrote: [snip]

[snip]

Estimate the cost per year (over its useful life) of a replacement car, and compare that to the cost per year of keeping your present car (over its useful life). If you can realize the difference (over the estimated useful life of your present car) when you sell, then the two are equal. (I think this is right!:-)

Assuming a new car will be more expensive, and just pulling an example out of the air: New - $20,000 + $10,000 repairs over 15 years = $30,000 / 15 = $2,000 per year; Old - $12,000 repairs over 8 years = $12,000 / 8 = $1,500 per year.

If you can sell for $4,000, then the alternatives are equal (the $4,000 compensates you for the $500 higher cost per year of the new car, over the 8 years, after which you would have to buy a new car anyway). You can adjust for interest on the foregone $25,000, possible higher insurance, etc.. You also want to include the availability of replacement parts on older model cars, and how reliable your mechanic is to give you that information.

The rest is personal preference.

P.S. Did you use car wax on your present car?

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Reply to
dapperdobbs

I find your numbers are probably too optimistic.

Using Edmunds

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I did a little test run. Used car pricing varies depending on many factors, including age, condition and location. I don't know your location, so I used my zip code [Brooklyn, NY]. I don't know what model you own, color, etc. So, I picked the highest line 4 door from the 96 model year. I used

175K as the mileage. Given you description of the body's condition, I chose "average" -- that is a generous description, given your peeling paint and dings, a dealer or other buyer would see your car's condition as significantly below average.

I chose "gray" as the color, with A/C, 4 speed automatic and an AM/FM cassette. The values suggested by Edmunds are significantly below what you presently think the value of the car is:

-- trade in value -- $639

-- private party sale -- $1094

-- dealer retail -- $1887

Remember, my numbers are all guesswork -- imaginary car, imaginary location. Keep in mind that you see the car as valuable because of emotional factors [it always started, never gives trouble, it got us home in that snowstorm, etc.] -- a competent buyer will consider it sans emotion.

I'd suggest that you do some further research -- use Edmunds, do a google for Kelley Blue Book, and for NADA. You will get differing numbers [markets are art, not science]. But I don't think you will get numbers as high as what you currently project -- any 12+ year old car with peeling paint and 175K mileage is likely to be difficult for a dealer to resell [and make a requisite profit from] -- and not all that easy to sell to a private party for 3.5K cash.

If my surmises are in the ballpark, what I'd consider doing is the following:

I'd take that $3000 expense money you are projecting and put it towards a newer vehicle.

Go to Consumer Reports -- read their car buying issue [in libraries, or for a small fee, you can buy a year's full access to their website -- I subscribe to both their paper edition and their website, it's quite worthwhile]. I think you will find their evaluative philosophy and criteria in line with yours. That will help you get an idea of what is out there, what is reliable in terms of used cars and new cars, what fills your needs, what to avoid, what is worth paying for, what realistic cost projections are, etc.....

I'd consider a new car, or a low-mileage used car no more than 3-4 years old. If buying a used car, unless I could buy such a car from an individual I knew, and it was a car whose history I trusted --- I'd purchase it from a reliable new car dealer. Yes, a new car dealer. The best combination of used car + new car dealer would be a new car dealer selling the same brand of used car, or a used car from/manufactured by that dealer's corporate parent manufacturer [e.g., a Mercury from a Ford dealer, a Honda from an Acura dealer, etc.].

Yes, buying such a used car would cost more than from a private party or third party dealer. But......... here's why I'd spend that extra money: As far as I know, in the real world, a dealer wants to market used cars that will not give him headaches, or sully his reputation. If he takes back a car from a lease, or gets it in some other transaction, he will tend to keep the very best for himself, and let the doubtful and clunker vehicles go to auction. If he needs used cars for inventory, he shops for inventory with other dealers he trusts and/or thru his corporate supply chain. In all cases, he is not looking of for headache vehicles. He does not want a shiny vehicle that lived thru Katrina, or was hit and reassembled by artisans, etc. So, in the case of a *reputable* dealer, what is sitting on his used car lot is likely to be prescreened in terms of quality.

[the above theory goes out the window if you shop with a lousy dealer]......

As for the old car, you can either sell it, or, if you do not want the aggravation, I like the suggestion that you donate it.

HTH

albert

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Reply to
albert

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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Reply to
Douglas Johnson

I am on my 8th Ford Ranger. I have always traded every 2-1/2 years as the vehicle hits 75,000 miles. That has been expensive, but I wanted to keep a nice newer truck to drive.

On my last trade in, the Ranger #7 was in near perfect condition, but I felt I gave it away in the trade. That left a bad feeling, so when Ranger #8 was due for trade in, I started doing some math. I came up with, even in a worst case, scenario, I could never outspend on maintenance what a new Ranger would cost.

Ranger #8 now has 230,000. It just passed the mark where it did the work of 3 trucks, and now is in the area of the 4th vehicle that I would have needed if I had kept to the plan of trading in at 75K.

While I haven't run the numbers recently, last time I updated my spreadsheet model, I was ahead by something like $20,000 over where I would be if I had traded. Not only that, but by doing all the maintenance, and replacing some key chassis bushings (little rubber bumpers), the Ranger still looks, drives, and handles essentially like a new vehicle.

I wouldn't hesitate to drop $3,000 into an older car. But I think that there is some criteria that you have to consider. The car has to be basically sound, it should have modern safety equipment (airbags), and both the engine and transmission need to be sound.

As far as the timing belt and water pump go, don't skip it. In this car, the timing belt drives the water pump. The water pump will run about 100K. If it seizes up, it will ruin the timing belt. If the timing belt breaks, the engine will quit. When it quits, the valves will be in a open configuration, and then the pistons will come up to top dead center, and one by one, bend each valve, and destroy you engine. This is called an interference style engine, and a water pump or timing belt issue is fatal to the engine.

BTW, don't let anyone scare you with stories about getting stranded or stuck on a bridge. That can happen to any car. In fact, and older car might be less likely to do this since it has a proven track record.

-john-

Reply to
John A. Weeks III

"Bhoot Nath" wrote Re replacing a 1996 Civic, 180k miles, original and sole owner:

Hi, original and only owner of a 91 Civic here, 204k miles. Runs like a top, but except for alignments, I personally maintain it with TLC. I recommend posting your query to rec.autos.makers.honda and alt.autos.honda. I read and post at these groups regularly. The regulars are very helpful and have great experience. For now: The $1500 estimate above is quite a bit on the high side high. Was this a Honda dealership estimate? Have the shop that did this estimate break it down for you by parts and labor. Then get an estimate from a non-dealer import repair shop for the same work.

I have been shopping for an older Honda for a friend. Everyone selling and with any smarts uses

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It is your best online resource for pricing used cars.
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prices cars much lower, for some reason. Craigs List and newspaper ad prices are consistent with KBB.Com

You know this car well and have a maintenance history on it. What I am finding with used cars is that, unless one buys from a dealership (paying more!), it is usual for used cars for sale to have multiple owners, flawed titles, and no maintenance history to turn over. E.g. odometer tampering, accidents, filthy inside and out, etc. Gosh knows how they have been maintained. If the choice is between getting a lower mileage, newer used car and keeping this one, from what I know of Hondas (read: religious belief in their reliability) I think you are far better off keeping this one.

A few other things you want to consider before making this decision: Does the car handle well? Specifically, does the suspension seem sound? If driven on salty roads etc. in winter, what people generally see is that the suspension needs rebuilding, especially replacing bushings and ball joints. Now this could add up. If not driven on salty roads and it drives well, I would not be concerned about this.

Economics wise, unless you simply like driving a newer better looking car, I would rule out looking for a used car, do the maintenance on this one, and figure it will last you

5-10 more years pretty easily.

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Reply to
Elle

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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Reply to
Ron Peterson

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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Reply to
Daniel T.

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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Reply to
Douglas Johnson
[...]

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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Reply to
Mark Bole

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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Reply to
Douglas Johnson

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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Reply to
Mark Bole

Mark Bole wrote: I'm talking about

Veeerrrrry close to my daily attire now that I am retired.

Chip

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Reply to
Chip

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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Reply to
Augustine

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