Questions on how we spend our money and our time - consumer goods and services, home and vehicle, leisure and recreational activities
Topic Author
DTalos
Posts: 155
Joined: Wed Apr 10, 2013 7:59 pm

I own a 1992 Honda Accord with 47,000 original miles and despite it being a good looking car and in excellent mechanical shape, it's kind of a slow car and only gets around 21mpg in city driving. With high fuel prices, the price of used hybrids is high and they seem to hold their value as well. Would it be wise to sell my Accord and spend \$20,000 to buy a 3 year old Toyota Prius that gets 50mpg? It seems like if fuel prices are going to remain high that the depreciation on the Prius would be small.

People mention the payback of hybrids take years compared to a traditional car but that's comparing only the increase in sticker price compared to the regular gas engine car. It doesn't factor depreciation. One person responded with the following formula to suggest I should keep my old Honda.

Here's the analysis.
Basic assumptions: Your '92 has 47k miles on it, meaning you average 2500 miles a year driving. This is a key assumption.

Assume fuel is \$5 per gallon.
Assume 21MPG current, 45MPG if you get a used Prius

Current cost of fuel per year: \$5 X 2500/21 = \$600
Cost of fuel per year w/Prius: \$5 X 2500/45 = \$280.

Annual savings = \$320

Cost to change cars: \$20,000 - \$2000 (trade-in) = \$18,000.

Years to pay back expense: \$18,000/\$320 = 56 years

It's a good analysis, but suppose I sell the Prius 3 years from now for \$18,000. Would it be a break even then?

Since fuel prices are so high, why aren't people abandoning traditional cars and buying hybrids in droves? Am I missing something?

Is an older car with very low miles most always the best choice?

bottlecap
Posts: 5972
Joined: Tue Mar 06, 2007 11:21 pm
Location: Tennessee

If you can find a new Prius for \$20k out the door, go for it.

JT

coolguy954
Posts: 120
Joined: Fri Mar 08, 2013 6:47 am

DTalos wrote:I own a 1992 Honda Accord with 47,000 original miles and despite it being a good looking car and in excellent mechanical shape, it's kind of a slow car and only gets around 21mpg in city driving. With high fuel prices, the price of used hybrids is high and they seem to hold their value as well. Would it be wise to sell my Accord and spend \$20,000 to buy a 3 year old Toyota Prius that gets 50mpg? It seems like if fuel prices are going to remain high that the depreciation on the Prius would be small.

People mention the payback of hybrids take years compared to a traditional car but that's comparing only the increase in sticker price compared to the regular gas engine car. It doesn't factor depreciation. One person responded with the following formula to suggest I should keep my old Honda.

Here's the analysis.
Basic assumptions: Your '92 has 47k miles on it, meaning you average 2500 miles a year driving. This is a key assumption.

Assume fuel is \$5 per gallon.
Assume 21MPG current, 45MPG if you get a used Prius

Current cost of fuel per year: \$5 X 2500/21 = \$600
Cost of fuel per year w/Prius: \$5 X 2500/45 = \$280.

Annual savings = \$320

Cost to change cars: \$20,000 - \$2000 (trade-in) = \$18,000.

Years to pay back expense: \$18,000/\$320 = 56 years

It's a good analysis, but suppose I sell the Prius 3 years from now for \$18,000. Would it be a break even then?

Since fuel prices are so high, why aren't people abandoning traditional cars and buying hybrids in droves? Am I missing something?

Is an older car with very low miles most always the best choice?
are you going to have the car for 56 years..if not then don't buy it. There was a article a while back showing that most hybrids vs non hybrid will not give you savings in regards to gas unless you have that car for at least 6 years..

http://blogs.cars.com/kickingtires/2011 ... y-off.html

jda
Posts: 150
Joined: Sun Nov 21, 2010 4:03 am

If you want a new, better car go for it but if you are doing it to save money on fuel then don't do it.

The amount you save on gas wont even cover 50% of the depreciation.

Epsilon Delta
Posts: 7788
Joined: Thu Apr 28, 2011 7:00 pm

DTalos wrote:I own a 1992 Honda Accord with 47,000 original miles and despite it being a good looking car and in excellent mechanical shape, it's kind of a slow car and only gets around 21mpg in city driving. With high fuel prices, the price of used hybrids is high and they seem to hold their value as well. Would it be wise to sell my Accord and spend \$20,000 to buy a 3 year old Toyota Prius that gets 50mpg? It seems like if fuel prices are going to remain high that the depreciation on the Prius would be small.

People mention the payback of hybrids take years compared to a traditional car but that's comparing only the increase in sticker price compared to the regular gas engine car. It doesn't factor depreciation. One person responded with the following formula to suggest I should keep my old Honda.

Here's the analysis.
Basic assumptions: Your '92 has 47k miles on it, meaning you average 2500 miles a year driving. This is a key assumption.

Assume fuel is \$5 per gallon.
Assume 21MPG current, 45MPG if you get a used Prius

Current cost of fuel per year: \$5 X 2500/21 = \$600
Cost of fuel per year w/Prius: \$5 X 2500/45 = \$280.

Annual savings = \$320

Cost to change cars: \$20,000 - \$2000 (trade-in) = \$18,000.

Years to pay back expense: \$18,000/\$320 = 56 years

It's a good analysis, but suppose I sell the Prius 3 years from now for \$18,000. Would it be a break even then?
If you keep the 92 Accord and sell it in 3 years it will still be worth \$2000, so you'd still be about \$1000 ahead keeping the Accord.

Watty
Posts: 15216
Joined: Wed Oct 10, 2007 3:55 pm

Since fuel prices are so high, why aren't people abandoning traditional cars and buying hybrids in droves? Am I missing something?
When I looked at new cars three years ago the numbers for a Hybrid were not compelling. I ended up buying a new Honda Fit and I am happy with it. I get about 29-30 in suburban driving and about 40 when I drive on the highway.

I would doubt that any 1992 car would have many of the standard safety features of a newer car so your safety is a factor too. If it is within your budget you might want to get a newer car just for the better safety features. I don't know how dependable a 21 year old airbag, or other safety feature, would be so that is a concern too.

Fuel efficient used cars will cost you a premium price. With as few miles as you drive it is likely that getting a greatly discounted lower MPG car would be a more economical choice since you will never use enough gas to make of the thousands of dollars that you could save on the purchase price.

strafe
Posts: 866
Joined: Sat Mar 03, 2007 12:49 pm

Hybrids depreciate just as fast (if not faster) than conventional counterparts. I don't have the source handy (you may be able to locate it on google) but found this to be true also in my independent analysis. The high resale value of the Prius reflects that it is a Toyota not a hybrid. Look at used Camry hybrids or Lexus rx hybrids, for example, and you'll see that they sell used for about the same % of MSRP as the regular gas counterparts. The gain in resale from fuel economy is offset by increases mechanical complexity and potential repairs once the power train warranty ends (e.g. Inverter failure).

Resale values on diesels seem to hold up a bit better.

THY4373
Posts: 875
Joined: Thu Mar 22, 2012 3:17 pm

strafe wrote:Hybrids depreciate just as fast (if not faster) than conventional counterparts. I don't have the source handy (you may be able to locate it on google) but found this to be true also in my independent analysis. The high resale value of the Prius reflects that it is a Toyota not a hybrid. Look at used Camry hybrids or Lexus rx hybrids, for example, and you'll see that they sell used for about the same % of MSRP as the regular gas counterparts. The gain in resale from fuel economy is offset by increases mechanical complexity and potential repairs once the power train warranty ends (e.g. Inverter failure).

Resale values on diesels seem to hold up a bit better.
I haven't looked a couple of years and I haven't looked at the two particular models you mention but everything I saw when looking at new and used hybrids in 2010 was they held their value better than their normal counterparts but maybe something has changed in the last two years. Also while you are right that hybrids are inherently more complex they are also more reliable on average. While there is a lot of discussion of expensive repairs (battery replacement or inverter or whatever) it just hasn't happened for most hybrids. Hybrids are regularly going north of 160-200k miles with no major replacement to any of their hybrid components. As an example the Department of Engergy tests here: http://www1.eere.energy.gov/vehiclesand ... ports.html. Consumer Reports regularly reports hybrids as being some of the most reliable vehicles out there: http://wheels.blogs.nytimes.com/2012/10 ... ty-survey/ . My Ford Fusion Hybrid was the most reliable car made by Ford the year I bought it. The only hybrid that seems to have significant issues are the Civic Hybrids because of a known battery issue. I would avoid those for sure unless you did your research and knew what you were getting. There are plenty of reasons to not get a hybrid but I wouldn't let reliability concerns be one of them.

THY4373
Posts: 875
Joined: Thu Mar 22, 2012 3:17 pm

Watty wrote:
Since fuel prices are so high, why aren't people abandoning traditional cars and buying hybrids in droves? Am I missing something?
When I looked at new cars three years ago the numbers for a Hybrid were not compelling. I ended up buying a new Honda Fit and I am happy with it. I get about 29-30 in suburban driving and about 40 when I drive on the highway.
I will just point out it somewhat depends on your point of comparison. A Honda Fit is nice but it is smaller than a Prius so it really depends on what you are looking for. I too considered a Honda Fit but with a family the back seat was just too small. Fine for now but my son at 9 is already nearly 5' tall. In a few more years he is not going to fit well in the back of a compact or sub-compact. Hence why I ended up buying a mid-sized hybrid that gave me the fuel economy of a compact car but with a reasonable back seat. If you can work with a smaller car then you are totally correct. Also in my case it only made sense because my comparison was to a fully loaded (the Fusion Hybrid is basically full loaded) Fusion vs. Fusion Hybrid. That combined with the fact I was getting a damn good deal from a rural dealer (hybrid seem to go a lot cheaper in rural area) that just wanted to unload last years model meant I was paying about \$1500 more for the hybrid vs. a fully loaded 4 cylinder Fusion. My payback will pretty much happen this year sometime (about 2.5 years later). Since I keep my cars forever (the Fusion replaced an 18 year old Crown Vic). I expect a very good payback over the next 13 years or so.
Last edited by THY4373 on Thu Apr 11, 2013 7:47 am, edited 1 time in total.

THY4373
Posts: 875
Joined: Thu Mar 22, 2012 3:17 pm

OP in my opinion it makes no sense for you to buy a hybrid with your annual mileage. In general my take is that it is rarely worth upgrading stuff for improved efficiency alone where the cost of acquisition is near to or greater than the cost of energy usage over time. For example, it totally makes sense to pull out an 100 watt incandescent on the grounds of energy efficiency and replace it with a CFL because the cost of the equipment is MUCH less than the energy cost that is consumed. For something expensive like a car the lifetime gas usage of the car is on the order of the cost of acquisition when new. Therefore the payback is either very late or never.

The best time to consider energy efficiency is when you are replacing for other reasons (car is totaled or not worth repairing or whatever). I bought a hybrid to replace an 18 year old Crown Vic in 2011 largely because the clear coat failure made the car look awful and because of the safety improvements over the last 18 years. To me the safety improvements would be the best argument to upgrade to something newer though again with your mileage I'd say even that benefit it is probably low.

Dave76
Posts: 564
Joined: Sat Mar 03, 2012 9:05 pm

Bogleheads think that old cars are people killers. Well, new cars are wealth killers. I would continue to run the '92 Honda to the ground. If it works, why buy new? Your car probably has ABS, and you can probably replace the airbag for a few hundred dollars. If you have deep pockets, then buy a new car.

kitteh
Posts: 194
Joined: Fri Mar 15, 2013 12:13 pm

Dave76 wrote:Bogleheads think that old cars are people killers. Well, new cars are wealth killers. I would continue to run the '92 Honda to the ground. If it works, why buy new? Your car probably has ABS, and you can probably replace the airbag for a few hundred dollars. If you have deep pockets, then buy a new car.
I have a 1992 Buick. It survived a hydroplaning accident on a freeway. What can I say, it's a Buick.

JupiterJones
Posts: 2721
Joined: Tue Aug 24, 2010 3:25 pm
Location: Nashville, TN

strafe wrote:Hybrids depreciate just as fast (if not faster) than conventional counterparts.
Plus, the technology is still in a state of innovation and flux. All it takes is for some new, breakthrough tech to come out (be it Hybrid, or all-electric, or alternative fuel, or whatever) and your car suddenly because old news a lousy resale value. A Walkman in a world of iPods.

JJ
Stay on target...

Topic Author
DTalos
Posts: 155
Joined: Wed Apr 10, 2013 7:59 pm

I appreciate all your comments about the impracticality money wise of spending \$20,000 on a used Prius or similar hybrid in order to reap fuel savings.

Would even spending \$10,000 on a 10 year old non hybrid car with low miles that gets 40mpg be unwise from a financial standpoint? What about spending \$10,000 on a luxury sedan with the same current miles as my Accord that gets the same mpg as my Accord? For example, my neighbor recently purchased a 2002 Toyota Avalon with 50,000 miles for \$10,000. It gets the same mpg as my Accord with a luxury ride and V6 power.

I've read that to get the most out of a car that you should drive it until the wheels fall off or until a repair costs more than the value of the car, but are there exceptions to this? With the amount of miles I drive, I'm probably set for life with this Accord. It's aged well. Do you all know folks who have 20+ year old cars with high miles as their daily drivers?

THY4373
Posts: 875
Joined: Thu Mar 22, 2012 3:17 pm

DTalos wrote:I appreciate all your comments about the impracticality money wise of spending \$20,000 on a used Prius or similar hybrid in order to reap fuel savings.

Would even spending \$10,000 on a 10 year old non hybrid car with low miles that gets 40mpg be unwise from a financial standpoint? What about spending \$10,000 on a luxury sedan with the same current miles as my Accord that gets the same mpg as my Accord? For example, my neighbor recently purchased a 2002 Toyota Avalon with 50,000 miles for \$10,000. It gets the same mpg as my Accord with a luxury ride and V6 power.

I've read that to get the most out of a car that you should drive it until the wheels fall off or until a repair costs more than the value of the car, but are there exceptions to this? With the amount of miles I drive, I'm probably set for life with this Accord. It's aged well. Do you all know folks who have 20+ year old cars with high miles as their daily drivers?
From a purely financial perspective it almost always makes more sense to drive an older car (clunker or not) than replace it with a newer one. Now there are plenty of non-financial reasons to upgrade such as safety, comfort, etc. It sounds like you want a new(er) car. There is nothing wrong with that if you can afford it. When I got rid of my 18 year old Crown Vic it was not a financial decision it was more just I was tired of it after 15 years of ownership (it was 3 years old when I bought it) and it was looking real sad with the clear coat failure. So I bought a new car for wife (the Fusion Hybrid) paying cash and took her 10 year old wagon as my daily driver. It did not make financial sense but it was "worth it" to me and her for a variety of reasons.

protagonist
Posts: 5516
Joined: Sun Dec 26, 2010 12:47 pm

DTalos wrote:I own a 1992 Honda Accord with 47,000 original miles and despite it being a good looking car and in excellent mechanical shape, it's kind of a slow car and only gets around 21mpg in city driving. With high fuel prices, the price of used hybrids is high and they seem to hold their value as well. Would it be wise to sell my Accord and spend \$20,000 to buy a 3 year old Toyota Prius that gets 50mpg? It seems like if fuel prices are going to remain high that the depreciation on the Prius would be small.

People mention the payback of hybrids take years compared to a traditional car but that's comparing only the increase in sticker price compared to the regular gas engine car. It doesn't factor depreciation. One person responded with the following formula to suggest I should keep my old Honda.

Here's the analysis.
Basic assumptions: Your '92 has 47k miles on it, meaning you average 2500 miles a year driving. This is a key assumption.

Assume fuel is \$5 per gallon.
Assume 21MPG current, 45MPG if you get a used Prius

Current cost of fuel per year: \$5 X 2500/21 = \$600
Cost of fuel per year w/Prius: \$5 X 2500/45 = \$280.

Annual savings = \$320

Cost to change cars: \$20,000 - \$2000 (trade-in) = \$18,000.

Years to pay back expense: \$18,000/\$320 = 56 years

It's a good analysis, but suppose I sell the Prius 3 years from now for \$18,000. Would it be a break even then?

Since fuel prices are so high, why aren't people abandoning traditional cars and buying hybrids in droves? Am I missing something?

Is an older car with very low miles most always the best choice?
IMHO, you are over-thinking. These are horses of two different colors.
If you would rather have a Prius, and it's worth it to you, and you can afford it, buy it (and sell the Honda to my friend *giggle*). If you don't care, and you are happy with the Honda, keep the Honda . Period.
BTW, my 4-cyl. 1988 Accord got gas mileage in the mid-30s. I wonder why yours does not. Maybe it is a 6-cylinder...maybe they got way heavier by '92.....still that is a huge difference.

DFWinvestor
Posts: 202
Joined: Mon Mar 19, 2012 2:05 pm

Just curious, if I'm reading this correctly, where do you live where you are only driving a couple hundred miles every month? Would it be possible in your area to not have a vehicle at all? As little as you drive it seems it would be difficult to justify having a car if you could avoid it. Particularly if you are in a big city and have to pay monthly parking fees.

If you really want/need a vehicle I'd consider it a reasonable purchase to get a new Prius, even if you spend a little extra every month as long as it fits in your budget. I kept my last vehicle until it became a safety hazard, and as soon as I upgraded I felt like I had been cheating myself in waiting so long. I could easily afford the new vehicle, it had a lot of modern comforts my previous car didn't, and I no longer had to worry about being left stranded on the side of the road.

mike143
Posts: 1332
Joined: Thu Feb 02, 2012 8:55 pm

I am constantly trying to justify a new or different car but pure monetary calculations keep me in my 04 Accord with 167k.
Nothing is free, someone pays...You can't spend your way to financial freedom.

thewizzer
Posts: 281
Joined: Sun Aug 19, 2012 10:11 pm

I'm wondering why you would spend 20k on a 3 year old Prius? I just traded in an '06 Prius in January for a new 2012 model. 0% financing for 60 months and talked them down to 23k.

If you want a Prius, get a new one for that small price difference.

My 2 cents.

Valuethinker
Posts: 37254
Joined: Fri May 11, 2007 11:07 am

DTalos wrote:I own a 1992 Honda Accord with 47,000 original miles and despite it being a good looking car and in excellent mechanical shape, it's kind of a slow car and only gets around 21mpg in city driving. With high fuel prices, the price of used hybrids is high and they seem to hold their value as well. Would it be wise to sell my Accord and spend \$20,000 to buy a 3 year old Toyota Prius that gets 50mpg? It seems like if fuel prices are going to remain high that the depreciation on the Prius would be small.

People mention the payback of hybrids take years compared to a traditional car but that's comparing only the increase in sticker price compared to the regular gas engine car. It doesn't factor depreciation. One person responded with the following formula to suggest I should keep my old Honda.

Here's the analysis.
Basic assumptions: Your '92 has 47k miles on it, meaning you average 2500 miles a year driving. This is a key assumption.

Assume fuel is \$5 per gallon.
Assume 21MPG current, 45MPG if you get a used Prius

Current cost of fuel per year: \$5 X 2500/21 = \$600
Cost of fuel per year w/Prius: \$5 X 2500/45 = \$280.

Annual savings = \$320

Cost to change cars: \$20,000 - \$2000 (trade-in) = \$18,000.

Years to pay back expense: \$18,000/\$320 = 56 years

It's a good analysis, but suppose I sell the Prius 3 years from now for \$18,000. Would it be a break even then?

Since fuel prices are so high, why aren't people abandoning traditional cars and buying hybrids in droves? Am I missing something?

Is an older car with very low miles most always the best choice?
You should not consider depreciation.

Depreciation is just an accounting concept, spreading the cost of an asset over its useful life.

You should consider *cash*.

The choice is:

- keep Honda Accord

Spend x pa on maintenance
Spend y pa on gasoline
Replace car in z year (2? 3? 5?)

- buy a new (to you) used car

spend a pa on maintenance
spend b pa on gasoline

(I have simplified because even in the second option you eventually replace the car, you should take this calculation out for the next 30 or 40 years that you will own a car, but for practical purposes my split gives you close enough).

This gives you two sets of cash flows. The discounting formula is year of cash flow x ( (1/(1+discount rate)^year) = present value of the cash flow

Best way to do this is on an Excel spreadsheet

first row is year (0 for now, 1 for year 1 etc.)
second row is cash flow as a negative (purchase or maintenance or gas) pa
third row is discount factor (1/(1+disct rate)^year ie first row)
4th row is 2nd row x 3rd row = PV of the cash flow for that year

You then add up the 2 sets of present values to compare which one is cheaper (the one which is less negative). I would argue your discount rate should be around 5% pa. (so divide by ((1.05) to the power of the year).

If you want to do this as payback you set discount rate = 0 (ie just add up the cash flows for the 2 options).

You will almost certainly get a conclusion that says wait. It's almost never worth replacing early (fridges, oddly enough, are an exception, because a 1985 fridge uses 4 times the electricity of a 2013 fridge).

Thing in MPG for a moment, drive 10k miles pa.

10 mpg truck - 1000 gallons a year
15 mpg SUV - 666 gallons a year
20 mpg car - 500 gallons a year
30 mpg car - 333 gallons pa
40 mpg car - 250 gallons a year

By doubling your MPG from 10 to 20 you saved 500 gallons pa (\$2k pa?). Doubling it again (say Honda Accord to Prius) you only save another 250 gallons, say \$1000 pa?

So unless you do really high mileage pa, it's not a big savings over the cost of a car.

Remember in 3 years time when you replace the Honda Accord, there will be more and better fuel efficient cars out there to buy. So waiting has 'option value' on those 2 or 3 year old used cars, manufactured in 2013, that you will buy in 2015-16.

Valuethinker
Posts: 37254
Joined: Fri May 11, 2007 11:07 am

mike143 wrote:I am constantly trying to justify a new or different car but pure monetary calculations keep me in my 04 Accord with 167k.
And that will be true until you hit big maintenance bills on the Honda. Note there have been more reliability issues with more recent Hondas and Toyotas.

Because the big factor in the Total Cost of Ownership of a car is not gas, but depreciation (or rather, the cash flow up front to buy it) you are almost always better off deferring (exception, if you ditch a 15mpg SUV for a 35 mpg car, there might be something in it).

Think of it as option value-- by waiting you improve your choices.. In 3 years time, you will have much more interesting cars to buy than what is currently available. If you look at where the advanced car manufacturers are going (BMW say) that stuff will be much more standard in 3 years time.

Valuethinker
Posts: 37254
Joined: Fri May 11, 2007 11:07 am

DTalos wrote:
Current cost of fuel per year: \$5 X 2500/21 = \$600
Cost of fuel per year w/Prius: \$5 X 2500/45 = \$280.

Annual savings = \$320

Since fuel prices are so high, why aren't people abandoning traditional cars and buying hybrids in droves? Am I missing something?

Is an older car with very low miles most always the best choice?
I didn't focus in on your specific numbers in my answer, probably should have.

The reason people aren't rushing to change cars is 1). gas prices may go back down (not long ago in memory, US gas prices were say \$2-2.50) 2). unless you drive absolutely huge mileage or have a real fuel hog of a car (and then you may need the pickup or SUV because of how much you carry), gas is just not a big cost relative to the cash cost of a new or new used vehicle (which we then call 'depreciation' and spread over the life of the car, but in fact it is cash up front).

So people just don't change cars, particularly as car leases aren't probably as generous as they were 6 years ago, say. At the bottom, the average North American was replacing their car every 21 years (sales/ cars out there)-- that's not sustainable, the average car actually lasts, through all owners, 12-13 years.

The biggest costs of car ownership are 1. depreciation 2. probably insurance (depending on age of driver and location) 3). gas (depending on mileage) 4). maintenance (depending on age of car). In that order.

protagonist
Posts: 5516
Joined: Sun Dec 26, 2010 12:47 pm

Valuethinker wrote:The reason people aren't rushing to change cars is 1). gas prices may go back down (not long ago in memory, US gas prices were say \$2-2.50)
I recall 98.9 cents in MA towards the end of the halcyon Clinton era. Still our gas prices are half or less those in most of the developed world, resources become scarcer, demand increases, and the long-term general trend of gas prices seems to be upward, so if I had to bet on a scenario it would be up rather than down.
Valuethinker wrote:So people just don't change cars, particularly as car leases aren't probably as generous as they were 6 years ago, say.
I think people are changing cars less often mainly because of the soft economy, high unemployment rate, and uncertainty about the future.

The gas savings based on 5000 miles/year are trivial. There are much better reasons for wanting a new Prius vs the OP's old car than the dubious reason of saving money (pure pleasure, less maintenance hassles, environmental concerns, etc), and,with all due respect.... My gut feeling, reading between the lines, is that the OP would like the new car....I think the OP is likely splitting hairs to justify the purchase financially. The OP is probably one who would keep the new car for a very long time, and the old Accord will not last forever. The poster who suggested that his limited driving does not financially justify car ownership is probably right...but maybe the expense is worth it to him to have his own vehicle. Given his driving habits, any car he purchases will probably last a very long time, and based on prior history, he will probably keep it a very long time...beyond the limits where depreciation rate is a major factor.

mike143
Posts: 1332
Joined: Thu Feb 02, 2012 8:55 pm

Valuethinker wrote:
mike143 wrote:I am constantly trying to justify a new or different car but pure monetary calculations keep me in my 04 Accord with 167k.
And that will be true until you hit big maintenance bills on the Honda.
I do all my own maintenance and have replaced a few engines, transmission, clutches and also done a engine rebuild. When low mileage engines can be had for less then \$1k and manual trans for less than \$500 it will take a total (accident) to pry it out of my hands. It is worth about \$3k in the current condition (body damage) and about \$4k if I fixed the body damage. I can't even justify fixing the minor body damage.
Nothing is free, someone pays...You can't spend your way to financial freedom.

northstar22
Posts: 69
Joined: Mon Jul 16, 2012 8:30 pm

Ask your insurance company how much your monthly premium will go up with a new car. You can probably skip collision and comprehensive with your 92 accord but not with a new car.

protagonist
Posts: 5516
Joined: Sun Dec 26, 2010 12:47 pm

northstar22 wrote:Ask your insurance company how much your monthly premium will go up with a new car. You can probably skip collision and comprehensive with your 92 accord but not with a new car.
Contrary to popular opinion, I never buy collision/comprehensive on a new vehicle. I see insurance as I see Vegas, except for the following:

- With Vegas, the house holds a slight edge. The sane gambler is willing to pay that price for what he sees as the joy of gambling and his vacation, knowing he is sane enough to not lose too much and may even win- in which case he is even happier, having "beat the system".

- With insurance, the house holds OUTRGEOUS odds against you, and even if you "beat the system" you are miserable, because your car/body/loved one/ whatever is destroyed.

I wouldn't go to Vegas, play roulette, and put large amounts of money on black if I was getting 2:1 odds on a 10:1 occurrence, and not having a LOT of fun in the process.

So insurance only makes sense to me where the worst-case scenario loss would be devastating to my life, which compensates for the awful odds (for this reason I carry good health insurance and good liability insurance (high deductible), and (reluctantly) high-deductible home insurance. Never life insurance or collision insurance. I figure there is a much better chance that I will have more to give to my heirs without it than with it when I die.

I might feel differently if I was a bad driver and somehow the insurance co. didn't know it, if I was an alcoholic and frequently drove under the influence, or if I did most of my driving in NYC and could insure my car in rural Nebraska for a tenth of the price. But if my car is totaled tomorrow, as much as it would be a bite, I figure I could probably buy a couple of brand new cars for what I would have wasted on collision/comprehensive over the years when I was significantly poorer (if I figured in missed investment opportunity costs based on expected return rates on my portfolio I could probably buy a house!) Plus I would not risk having to fight with the insurance company and/or risk increases in my premium to make up for the payout, and that knowledge would compensate for a significant chunk of my distress over it.
Last edited by protagonist on Sat Apr 13, 2013 12:53 pm, edited 1 time in total.

stoptothink
Posts: 4844
Joined: Fri Dec 31, 2010 9:53 am

northstar22 wrote: You can probably skip collision and comprehensive with your 92 accord but not with a new car.
Why? May not be worth the risk, but collision and comprehensive are not required on a new vehicle unless you don't own it. I just bought a new car in January and stuck with the same <\$35/month liability coverage I had on the 16yr old pickup truck it replaced.

Topic Author
DTalos
Posts: 155
Joined: Wed Apr 10, 2013 7:59 pm

DFWinvestor wrote:Just curious, if I'm reading this correctly, where do you live where you are only driving a couple hundred miles every month? Would it be possible in your area to not have a vehicle at all? As little as you drive it seems it would be difficult to justify having a car if you could avoid it. Particularly if you are in a big city and have to pay monthly parking fees.

If you really want/need a vehicle I'd consider it a reasonable purchase to get a new Prius, even if you spend a little extra every month as long as it fits in your budget. I kept my last vehicle until it became a safety hazard, and as soon as I upgraded I felt like I had been cheating myself in waiting so long. I could easily afford the new vehicle, it had a lot of modern comforts my previous car didn't, and I no longer had to worry about being left stranded on the side of the road.

Yes, I only drive a few hundred miles each month and I live in tract home suburbia where there is no easy access to public transportation, so a car is a must.

Topic Author
DTalos
Posts: 155
Joined: Wed Apr 10, 2013 7:59 pm