Want to trade car for Small SUV: Financially good, bad, wash

Questions on how we spend our money and our time - consumer goods and services, home and vehicle, leisure and recreational activities
Post Reply
Topic Author
countofmc
Posts: 512
Joined: Tue Dec 11, 2012 11:03 am

Want to trade car for Small SUV: Financially good, bad, wash

Post by countofmc »

We have 2 cars, one of them is a 2008 BMW 3-series with about 40,000 miles on it. We are at a different point in our lives with a more "suburban" lifestyle, and kind of desire the utility of a small SUV. Plus my wife is quite short, so she likes the higher ride height as it helps her see.

So I'm considering trading the BMW for a new Honda CR-V or the like (Rav4, Forester, etc). Should all be around the same price point, probably $25kish OTD. Not considering any used cars or non-SUVs, otherwise we'd just keep the BMW.

I'm wondering if this makes much financial sense? Generally it makes more sense to drive a car into the ground, but what if it's a BMW? TBF, my car has been very reliable so far and has cost very little out of warranty. And a car like the CR-V has a reputation for being pretty cheap to own, and it's fuel economy is pretty good for a small SUV as well.

I'm just wondering from a financial standpoint this is a bad idea, or if it might actually be a good idea considering the BMW might start costing me a lot to operate, or it might just be a wash.
Jack FFR1846
Posts: 18502
Joined: Tue Dec 31, 2013 6:05 am
Location: 26 miles, 385 yards west of Copley Square

Re: Want to trade car for Small SUV: Financially good, bad,

Post by Jack FFR1846 »

Consumer reports consistantly rates cars better for cost and reliability. However, BMW isn't exactly cheap to maintain (I've had a few of them).

Smaller SUVs, crossovers and "tall cars" are all melding together. One that's new in 2013 is the Subaru Crosstrek. We bought one to replace an Outback and I'll tell you that if you live in snow country, it'll outperform them all in snow with good snow tires. More clearance than a Jeep Cherokee. We get over 30 mpg with it, it's taller to see over cars like any SUV and in the limited version has a lot of good options like leather heated seats, backup camera etc.
Bogle: Smart Beta is stupid
Topic Author
countofmc
Posts: 512
Joined: Tue Dec 11, 2012 11:03 am

Re: Want to trade car for Small SUV: Financially good, bad,

Post by countofmc »

Jack FFR1846 wrote:Consumer reports consistantly rates cars better for cost and reliability. However, BMW isn't exactly cheap to maintain (I've had a few of them).

Smaller SUVs, crossovers and "tall cars" are all melding together. One that's new in 2013 is the Subaru Crosstrek. We bought one to replace an Outback and I'll tell you that if you live in snow country, it'll outperform them all in snow with good snow tires. More clearance than a Jeep Cherokee. We get over 30 mpg with it, it's taller to see over cars like any SUV and in the limited version has a lot of good options like leather heated seats, backup camera etc.
Thanks, cool looking car, but we live in sunny California, so probably don't need 4x4
Drelk3
Posts: 33
Joined: Sat May 28, 2011 8:27 pm

Re: Want to trade car for Small SUV: Financially good, bad,

Post by Drelk3 »

Average wholesale for a 2008 328XI is about 15,000 in above average condition. Figure 25-30,000 for a replacement. My friend, who is a car dealer, says it's almost always cheaper to fix used than buy new. You need to decide how badly you want the suv and if it's worth the expense.
dpc
Posts: 456
Joined: Sat Aug 27, 2011 1:41 pm

Re: Want to trade car for Small SUV: Financially good, bad,

Post by dpc »

Every analysis I've ever seen says it is cheaper to keep your old car than buy a new one and always cheaper overall to buy a used car rather than a new car. That's the financial side. But a happy spouse is worth a lot as well. If everyone was totally rational about automobiles, the car industry would be in trouble.
"Worrying is like paying interest on a debt that you might never owe" -- Will Rogers
Valuethinker
Posts: 49038
Joined: Fri May 11, 2007 11:07 am

Re: Want to trade car for Small SUV: Financially good, bad,

Post by Valuethinker »

countofmc wrote:We have 2 cars, one of them is a 2008 BMW 3-series with about 40,000 miles on it. We are at a different point in our lives with a more "suburban" lifestyle, and kind of desire the utility of a small SUV. Plus my wife is quite short, so she likes the higher ride height as it helps her see.

So I'm considering trading the BMW for a new Honda CR-V or the like (Rav4, Forester, etc). Should all be around the same price point, probably $25kish OTD. Not considering any used cars or non-SUVs, otherwise we'd just keep the BMW.

I'm wondering if this makes much financial sense? Generally it makes more sense to drive a car into the ground, but what if it's a BMW? TBF, my car has been very reliable so far and has cost very little out of warranty. And a car like the CR-V has a reputation for being pretty cheap to own, and it's fuel economy is pretty good for a small SUV as well.

I'm just wondering from a financial standpoint this is a bad idea, or if it might actually be a good idea considering the BMW might start costing me a lot to operate, or it might just be a wash.
you need an SUV for your wife. That's the first, and main point.

A new SUV for a used BMW? The SUV will have lower maintenance bills, and if it's the Honda, OK gas bills.

Yes you take a depreciation hit on selling the BMer. But they are not cheap to own long term (expensive repairs). And you get a new car out of the trade. You are in effect trading 'down' (across really, but BMers are expensive).

I'd make sure I got an economical, reliable SUV (like the Honda) and go for it.
User avatar
ryuns
Posts: 3511
Joined: Tue Aug 07, 2007 6:07 pm
Location: Sacramento, CA

Re: Want to trade car for Small SUV: Financially good, bad,

Post by ryuns »

Long term, I'll call it a wash. Way less maintenance cost for a more reliable car under warranty will be far less than BMW (repairs, oil changes, everything). You'll also probably save a decent amount on gas. Mileage might be equal or better on the SUV, and you won't need premium. I think it's close enough that if it makes sense for your lifestyle to have the extra space, you should do it.
An inconvenience is only an adventure wrongly considered; an adventure is an inconvenience rightly considered. -- GK Chesterton
sambb
Posts: 3257
Joined: Sun Mar 10, 2013 3:31 pm

Re: Want to trade car for Small SUV: Financially good, bad,

Post by sambb »

After owning several BMWs, i will say that owning one out of warranty is a often a very expensive option. On the other hand, I have gotten lucky as well. My advice is to get the honda.
User avatar
deanbrew
Posts: 1500
Joined: Wed Jul 21, 2010 12:05 pm
Location: The Keystone State

Re: Want to trade car for Small SUV: Financially good, bad,

Post by deanbrew »

"A happy wife..." and all of that. Your BMW is six years old, and though it only has 40k miles, I would bet on some significant maintenance expenses. New car warranty, better MPG and little or no maintenance for several years. No, you won't come out ahead on a strictly financial basis, but you'll have a much newer car and make out OK.

I have nothing against Honda or a CRV, but I would be sure to check out all options in that segment, including Kia, Hyundai, Subaru, Mazda, Ford, etc. in addition to Honda and Toyota.
"The course of history shows that as the government grows, liberty decreases." Thomas Jefferson
Topic Author
countofmc
Posts: 512
Joined: Tue Dec 11, 2012 11:03 am

Re: Want to trade car for Small SUV: Financially good, bad,

Post by countofmc »

deanbrew wrote:"A happy wife..." and all of that. Your BMW is six years old, and though it only has 40k miles, I would bet on some significant maintenance expenses. New car warranty, better MPG and little or no maintenance for several years. No, you won't come out ahead on a strictly financial basis, but you'll have a much newer car and make out OK.

I have nothing against Honda or a CRV, but I would be sure to check out all options in that segment, including Kia, Hyundai, Subaru, Mazda, Ford, etc. in addition to Honda and Toyota.
Thanks, we'll be sure to do that but the CR-V seems like the Goldilocks of this segment. It doesn't seem truly outstanding at anything, but also doesn't seem like it has any weaknesses either. When I checked it out the cargo room seemed really good for a car that size, and I also like that the powertrain is an older design - that 4-cylinder 5 speed auto combo is basically identical to an Accord we had in the past, and that car was very reliable. Honda seems to know how to do 4-cylinder engines.
User avatar
janiebegood
Posts: 97
Joined: Mon Feb 03, 2014 7:35 am

Re: Want to trade car for Small SUV: Financially good, bad,

Post by janiebegood »

I'm on my third Honda CR-V. I got a new one in 2000, traded it in 2002 to get McPherson strut suspension and ABS on the new model, and then decided eleven years and 88K miles later that I wanted a car with a rearview camera and a USB charger.

So last year, I researched and test drove every small SUV out there, and a couple of bigger ones, too, to see if there was anything I liked better than the CR-V. In the end, even after a two-day flirtation with a 2010 Lexus RX 350, I decided on a new CR-V.

There are more powerful SUVs out there (I'm looking at you, Acura MDX), and cushier SUVs out there (I did enjoy those two days with that RX 350), but the CR-V is a great choice.
yosh99
Posts: 240
Joined: Thu Apr 19, 2012 8:44 pm

Re: Want to trade car for Small SUV: Financially good, bad,

Post by yosh99 »

I just traded my 2006 BMW 325xi with 95,000 miles for a 2014 Jeep Cherokee a month ago. We had two sedans and I wanted one vehicle with some carrying capacity. I looked at all the small and mid-sized crossovers and in the end decided that if I was going this route, I would go all the way and get a trail rated Jeep. I live in Minnesota after all and this last winter has been brutal. This is the first new vehicle I've bought since my 1976 Honda Civic but it was an emotional decision, not financial. If I was going to give up all the fun aspects of the BMW I wanted to at least replace the sportiness with all the technology and comfort accessories of the new Cherokee. I think if I'd switched from a BMW to a Honda SUV I would have felt a big loss. With the move from BMW to the Cherokee, it's an even emotional trade in my mind.
chicks
Posts: 17
Joined: Fri Mar 28, 2014 1:30 pm

Re: Want to trade car for Small SUV: Financially good, bad,

Post by chicks »

I drive a 2005 CR-V (bought new), currently has 135,000 miles on it. I've been told several times that they can hit 250,000 miles, and believe it, as I often see older models on the road. It's definitely not a "driver's car" like your Bimmer, but it's extremely versatile. Love the view, wish it had better armrests. I imagine the newer models do.
Leeraar
Posts: 4109
Joined: Tue Dec 10, 2013 7:41 pm
Location: Nowhere

Re: Want to trade car for Small SUV: Financially good, bad,

Post by Leeraar »

I don't know where you live, but take a look in your Sunday newspaper.

You can probably lease a Chevy Equinox for 36 months for zero down and $220 a month. Maintenance (oil changes and tire rotations) included. It's a nice vehicle, I got one a couple of months ago.

Why people put tens of thousands of dollars as capital investments into their vehicles just astounds me.

L.
You can get what you want, or you can just get old. (Billy Joel, "Vienna")
The Wizard
Posts: 13356
Joined: Tue Mar 23, 2010 1:45 pm
Location: Reading, MA

Re: Want to trade car for Small SUV: Financially good, bad,

Post by The Wizard »

Leeraar wrote:I don't know where you live, but take a look in your Sunday newspaper.

You can probably lease a Chevy Equinox for 36 months for zero down and $220 a month. Maintenance (oil changes and tire rotations) included. It's a nice vehicle, I got one a couple of months ago.

Why people put tens of thousands of dollars as capital investments into their vehicles just astounds me.

L.
I think of it as a capital expenditure over ten years or so, not an investment. But there's no question that a 7-10 year old vehicle isn't quite as shiny or dependable as one that's less than three years old.
So you have to decide where to throw your money...
Attempted new signature...
Dan999
Posts: 412
Joined: Mon May 24, 2010 1:23 pm

Re: Want to trade car for Small SUV: Financially good, bad,

Post by Dan999 »

Many years ago my wife and I were looking at a Volvo to either buy or lease. We keep our cars about 8 years +/-.
After discussing it with the dealer, my wife and I went to lunch and she had me explain the lease program.

She said "So you pay them money every month for 3 years and then at the end you give them the car back? What do you have to show for all the money you gave them?" Sometimes common sense from the wife makes life simpler.
We bought the car.

Dan999
Dan999
Valuethinker
Posts: 49038
Joined: Fri May 11, 2007 11:07 am

Re: Want to trade car for Small SUV: Financially good, bad,

Post by Valuethinker »

The Wizard wrote:
Leeraar wrote:I don't know where you live, but take a look in your Sunday newspaper.

You can probably lease a Chevy Equinox for 36 months for zero down and $220 a month. Maintenance (oil changes and tire rotations) included. It's a nice vehicle, I got one a couple of months ago.

Why people put tens of thousands of dollars as capital investments into their vehicles just astounds me.

L.
I think of it as a capital expenditure over ten years or so, not an investment. But there's no question that a 7-10 year old vehicle isn't quite as shiny or dependable as one that's less than three years old.
So you have to decide where to throw your money...

Precisely the point. If you trade in your car every 5 years or less, (not sure where the breakeven point is), then a lease works out. Friends of mine who are very frugal (6 figure combined income, kids in private schools, no mortgage debt on a $1m house, large portfolio) lease their Mercedes-- it works out, financially (again, frugality, they have only 1 car, which is unusual). Last people I would have thought to 1). drive a Merc 2). lease a car. But it works out-- they have done the numbers.

If one's wife does a lot of miles and every day, then your nightmare is that she is stuck in the dark somewhere or beside a highway in a broken down car. You are going to replace your car every 5 years. Then, you should think about leasing.

If you keep your car 10 years, you are better off buying. Ditto I suspect if you do high mileage.

Depends partly on your expected return of alternative investments vs. cost of the lease.
Leeraar
Posts: 4109
Joined: Tue Dec 10, 2013 7:41 pm
Location: Nowhere

Re: Want to trade car for Small SUV: Financially good, bad,

Post by Leeraar »

Dan999 wrote:Many years ago my wife and I were looking at a Volvo to either buy or lease. We keep our cars about 8 years +/-.
After discussing it with the dealer, my wife and I went to lunch and she had me explain the lease program.

She said "So you pay them money every month for 3 years and then at the end you give them the car back? What do you have to show for all the money you gave them?" Sometimes common sense from the wife makes life simpler.
We bought the car.

Dan999
Leasing can work if you play the game correctly. Here's how it works: Let's say the price of the car is $21,000. In three years time the value is projected to be $14,000. When you lease you take out a loan for the $7,000 difference (about $200 per month). When you lease you are simply paying the depreciation. That's where the money went, and it disappears whether you buy the car or not.

At least in Michigan, you pay sales tax monthly on the depreciation when you lease. In total, you will pay 6% of $7,000 in sales tax.

If you buy the car, you will pay 6% of $21,000 up front. If you later sell the car (say, for $14,000 in three years) you get none of that tax back. And, you have $14,000 of capital tied up in the car in the meantime.

In this case, it will take 105 months (nearly 9 years) at $200 per month to pay off $21,000. Sure, it may be worth a few grand, but you are likely to have replaced tires, brakes and batteries at least twice each.

There are plenty of gotchas in getting a lease, but I simply ask one question: "Zero down, what's the lowest monthly payment?"

Whatever you do, the ads in the Sunday paper are usually loss leaders designed to draw showroom traffic. Buy or lease, try to get those particular advertised deals. Avoid the bait and switch. If you have emotions about the car you drive, they've got you.

And, if you (or anyone) happen to be interested in a GM vehicle (buy or lease), send me a PM and I'll get you a code for the employee / friends discount. The discount is on the vehicle factory invoice, so the dealer really can't mess with it.

L.
You can get what you want, or you can just get old. (Billy Joel, "Vienna")
TheOscarGuy
Posts: 1563
Joined: Sat Oct 06, 2012 1:10 pm
Location: Where I wanna be.

Re: Want to trade car for Small SUV: Financially good, bad,

Post by TheOscarGuy »

chicks wrote:I drive a 2005 CR-V (bought new), currently has 135,000 miles on it. I've been told several times that they can hit 250,000 miles, and believe it, as I often see older models on the road. It's definitely not a "driver's car" like your Bimmer, but it's extremely versatile. Love the view, wish it had better armrests. I imagine the newer models do.
Yes my 2014 has armrests. I really like them (something that my previous X5 did not have!).
User avatar
mojave
Posts: 393
Joined: Mon Aug 20, 2012 8:59 am

Re: Want to trade car for Small SUV: Financially good, bad,

Post by mojave »

I'm 5'0" tall. I drive a Hyundai Santa Fe, a 2007. Love that car. I can see very well and am comfortable. The warranty can't be beat. My car has been a few years out of the warranty and still runs like a charm at 101k. Have had no major issues. They were recently updated and the new design is sleek.
User avatar
munemaker
Posts: 4338
Joined: Sat Jan 18, 2014 5:14 pm

Re: Want to trade car for Small SUV: Financially good, bad,

Post by munemaker »

I own a 2009 Honda CRV Ex. I bought it used with 31,000 miles on it and it is now at 98,000 miles. Previously it was an Enterprise rental car. Unlike you, I live in a snowy area and bought the CRV because it is all wheel drive. I have been very pleased with it.

I have owned 3 Hondas, a 2000 Civic Si (sold at 145,000 miles & still in great shape), a 2005 Honda Pilot Ex (my son is driving) and the 2009 Honda CRV Ex. They have all been great vehicles, although the Pilot has had some issues (now at 150,000 miles). One thing I have found with the Hondas: You do have to add oil from time to time; in the case of the CRV, about 1 quart every 3,000 miles. With the driving I do, the "maintenance minder" (on board maintenance system) tells me to change the oil about every 12,000 miles. I believe in over maintaining my vehicles, so I change it about every 10,000 miles. Some people I know look at oil consumption as a measure of goodness of a vehicle; surprisingly though, they do not feel the same about gasoline consumption. I only mention this because I know it bothers some people.

You probably will not save any money trading from your BMW. You will find, though, that you life is simplified because the Honda seldom needs unscheduled maintenance.
Prov227
Posts: 77
Joined: Thu Apr 03, 2014 11:13 pm
Location: Milwaukee, WI

Re: Want to trade car for Small SUV: Financially good, bad,

Post by Prov227 »

The original post cites a couple reasonable points for switching car types (more suburban lifestyle, taller ride) but then flatly dismisses buying anything other than a brand new SUV. That seems weird. I think the only way to answer the "financial sense?" question with a Yes is to make the replacement SUV a used vehicle.

Say you own the BMW outright (math should work the same regardless) and we look three years out and use realistic but round numbers. You have a $15,000-ish asset today, in three years it will be worth $10,000? Assuming $5,000 total maintenance expenses over three years, you pay 5k and have an asset drop 5k, sounds like an 10k hit. The brand new SUV has no maintenance, but will cost at least an extra $10,000 up front. Financing would drive that up further. Three years out, instead of having a $25,000 asset, you have a $15,000 asset? That sounds like a 20k hit.

Am I oversimplifying or missing something? Decisions like this are rarely made on a strictly financial basis, but if that's the question... looks like a big No to me. Why not turn the $15,000 BMW into a low mileage $15,000 3-4 year old SUV and get the functional benefits without the killer financial hit? Or even spend a couple grand more on the used SUV knowing maintenance will be half as costly as the BMW?


Hmm, so I wrote the above with the conclusion already in mind. Walked away, pondered, now think my math was screwed up. Another way of looking at this...

10k in the bank
15k vehicle asset

three-year scenario 1: bank reduced to 5k due to high maintenance costs of BMW (too pessimistic?) ... 10k vehicle asset due to depreciation (too pessimistic?) ... 15k combined outcome
three-year scenario 2: bank reduced to 0k to buy new SUV on top of BMW sale ... no maintenance cost ... 15k vehicle asset due to depreciation ... 15k combined outcome

That analysis makes it seem like a wash. Can that really be correct? Being more optimistic on the BMW maintenance and depreciation while factoring in a loan cost on the new SUV could swing things by a few grand, maybe that's it -- those are really high maintenance numbers for a vehicle with 40,000 miles on it. I feel like I'm missing something. Maybe the nagging feeling is the opportunity cost of the money being burned in the new vehicle's depreciation. The smarter play would still be a 3 year old used SUV, but I can't believe the new vehicle scenario could almost even out. Must be missing something. Why am I trying to do this at 1:30 AM...
Last edited by Prov227 on Tue Apr 08, 2014 1:18 am, edited 1 time in total.
"...and the borrower is slave to the lender." -Proverbs 22:7
User avatar
White Coat Investor
Posts: 17413
Joined: Fri Mar 02, 2007 8:11 pm
Location: Greatest Snow On Earth

Re: Want to trade car for Small SUV: Financially good, bad,

Post by White Coat Investor »

I use a simple algorithm for questions like these:

Can you afford it?

If yes, do you want it more than you want something else that costs the same?

If the answer is yes, then buy it.

It's a consumption decision, not an investment decision. You've got to spend your money on something and you can't take it with you. We don't save for savings sake.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
bondsr4me
Posts: 2427
Joined: Fri Oct 18, 2013 7:08 am

Re: Want to trade car for Small SUV: Financially good, bad,

Post by bondsr4me »

my wife and I are on our 2nd Honda CRV.
we both really like the CRV and dependability of Honda in general.
the CRV is HER vehicle; I drive a Honda Accord (2007).
never any problems; the local service is very good.
we looked at other vehicles, GMC, Ford, Toyota, Nissan....none had the mileage we are looking for.
on the highway, I get in the low-mid Thirties; as high as 38.
but I drive a reasonable speed; 62 highway.
good luck with your choice.

Don
User avatar
deanbrew
Posts: 1500
Joined: Wed Jul 21, 2010 12:05 pm
Location: The Keystone State

Re: Want to trade car for Small SUV: Financially good, bad,

Post by deanbrew »

three-year scenario 1: bank reduced to 5k due to high maintenance costs of BMW (too pessimistic?) ... 10k vehicle asset due to depreciation (too pessimistic?) ... 15k combined outcome
three-year scenario 2: bank reduced to 0k to buy new SUV on top of BMW sale ... no maintenance cost ... 15k vehicle asset due to depreciation ... 15k combined outcome
In scenario 1, you might be too pessimistic regarding $5,000 in maintenance and repairs over the next three years, but it's probably not a bad estimate given the anticipated need for tires, brakes, rotors and other items. I think you are close on the depreciation, though certainly not too pessimistic. $5k in depreciation over three years is only $1,667 per year, which is very low. Actual depreciation might be more like $6-8k.

In scenario 2, you will still have some maintenance for oil changes, wiper blades and the like, but probably not much else. You are assuming $10k depreciation in three years, which is probably reasonable for a new car. What you are missing, though, are the transaction costs involved with buying a new car such as registration and sales tax. But I don't think that changes much, really.

So, the numbers don't give clear guidance, which brings the other factors to the forefront: a) what your wife wants; b) having a new car that presumably is more reliable; c) having a new car warranty; and d) what your wife wants.

No, that was not a typo.
"The course of history shows that as the government grows, liberty decreases." Thomas Jefferson
Angelus359
Posts: 846
Joined: Mon Mar 03, 2014 11:56 pm

Re: Want to trade car for Small SUV: Financially good, bad,

Post by Angelus359 »

While your life is your own:

I'd like to point out, being short doesn't mean you need a SUV.

My girlfriend, she's 4 foot 5. Yeah, 7 inches shorter than 5 foot. Me at 6 foot 1, her head goes straight into my solar-plexus when she hugs me.

She likes small cars. You just have to be very particular about the car.

She has to sit so close to the steering wheel, in any vehicle, that if the air-bag went off, it'd probably suffocate her.
Systems Engineer
User avatar
deanbrew
Posts: 1500
Joined: Wed Jul 21, 2010 12:05 pm
Location: The Keystone State

Re: Want to trade car for Small SUV: Financially good, bad,

Post by deanbrew »

Angelus359 wrote:While your life is your own:

I'd like to point out, being short doesn't mean you need a SUV.
FWIW, I agree. It kind of cracks me up to see all of these small women in great big SUVs. "But I like sitting up so I can see." Well, that's because there are all of these other SUVs on the road and you can't see over, through or around them. They are a plague, and I can't stand them. And, yes, I realize a Honda CRV is not a big SUV, but it's still taller and bigger than it needs to be given the interior room.

I still like driving a car, not a SUV or CUV or crossover or whatever you want to call it. But that's my opinion, and clearly a lot of people disagree.
"The course of history shows that as the government grows, liberty decreases." Thomas Jefferson
Post Reply