Cheapest way to own and operate a car

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sunnyday
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Cheapest way to own and operate a car

Post by sunnyday » Mon Oct 21, 2013 6:33 pm

I have a friend who struggles making good financial decisions, especially when it comes to cars. Her current car has had a number of problems and is no longer running. It seems like used cars have gone up quite a bit in the last couple years but are there still decent buys for under $2,000? Also, what sort of monthly budget should be expected to pay for maintenance & repairs, gas, insurance, etc?

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Taylor Larimore
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Re: Cheapest way to own and operate a car

Post by Taylor Larimore » Mon Oct 21, 2013 6:42 pm

sunnyday wrote:I have a friend who struggles making good financial decisions, especially when it comes to cars. Her current car has had a number of problems and is no longer running. It seems like used cars have gone up quite a bit in the last couple years but are there still decent buys for under $2,000? Also, what sort of monthly budget should be expected to pay for maintenance & repairs, gas, insurance, etc?

Sunnyday:

A good source of information about car costs is Edmunds, Inc. Tell you friend to use this link:

TRUE COST TO OWN

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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EternalOptimist
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Re: Cheapest way to own and operate a car

Post by EternalOptimist » Mon Oct 21, 2013 6:53 pm

Not sure if you are open to leasing. You can get a nice little car for around $150-200/month. I've been leasing for a number of years and have grown to like it. Virtually no maintenance costs, always new, latest safety features, good gas mileage, not buying a depreciating asset. I have a 2012 Honda Civic that gets 30+ miles /gallon and oil changes and inspections are free. Good luck.
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john94549
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Re: Cheapest way to own and operate a car

Post by john94549 » Mon Oct 21, 2013 7:01 pm

Here in the SF Bay Area, we have what is in effect a "put" on older cars. The Bay Area Air Quality Management District has a standing offer to purchase any older vehicle (1994 or earlier model) for $1000. While there are some restrictions, one could conceivably purchase an older vehicle, operate it for a few years (until it qualifies for the surrender value), then collect the "put". The State of California has a similar program, but I do not know if it is adequately funded at this time.

Dave76
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Re: Cheapest way to own and operate a car

Post by Dave76 » Mon Oct 21, 2013 7:21 pm

john94549 wrote:Here in the SF Bay Area, we have what is in effect a "put" on older cars. The Bay Area Air Quality Management District has a standing offer to purchase any older vehicle (1994 or earlier model) for $1000. While there are some restrictions, one could conceivably purchase an older vehicle, operate it for a few years (until it qualifies for the surrender value), then collect the "put". The State of California has a similar program, but I do not know if it is adequately funded at this time.


What are they doing with these cars?

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RyeWhiskey
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Re: Cheapest way to own and operate a car

Post by RyeWhiskey » Mon Oct 21, 2013 7:28 pm

sunnyday wrote:I have a friend who struggles making good financial decisions, especially when it comes to cars. Her current car has had a number of problems and is no longer running. It seems like used cars have gone up quite a bit in the last couple years but are there still decent buys for under $2,000? Also, what sort of monthly budget should be expected to pay for maintenance & repairs, gas, insurance, etc?


Obviously everything depends upon what kind of car he gets and what the previous owner(s) did to it. If he can find a good Honda/Toyota/Nissan which had regular oil changes and repairs (such as timing belts, brakes, etc...) and has decent mileage (under 200k), he can probably get a pretty good price on it. There are definitely good deals out there but you need to be thorough when you're looking. I usually use Craigslist and always do my research as best as possible. :beer
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lindisfarne
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Re: Cheapest way to own and operate a car

Post by lindisfarne » Mon Oct 21, 2013 7:33 pm

Fixing a car one currently owns can be a good decision - although it depends on the make of the car & what the statistics say about how long that specific car typically lasts. You have to have a good mechanic who will adequately assess what other systems on the car might go bad in the next few years, & give you estimated costs for fixing them (plus an estimate on how likely the problem is - but there are no guarantees here), plus the estimated cost for what's currently wrong.

Then, you have to assess the risks & decide whether to fix it.

For someone for whom money is really tight, I'd suggest looking into busing, biking, and walking as options. I lived in Southern CA & when I moved there, everyone said I had to buy a car - but I didn't. I managed, & saved a lot of money by not owning a car. I did spend some time waiting for buses, and if you bike, be extra-careful. I did rent cars occasionally.

I now own a 2000 Corolla, purchased in 2007 for $1000, with a known problem due to the previous owner letting the oil go dry (due to Toyota's problem with bad rings in 8th generation Corollas). My brother purchased a re-built engine, put it in (also got a new tranny because somehow that was damaged in the process). Spent about $2500 total for engine, tranny, & parts, including my brother's labor (I should give him more $, however!).

I have had virtually no mechanical problems since - just a few issues of less than $500 total. Tires have cost me more. Of course, other maintenance items have been done: brakes, oil changes, etc. I now have a fantastic local mechanic who I trust implicitly.

Buying a used car of a make that's known to last & fixing it up can be the best decision ever. My brother, however, told me not to look at anything other than Hondas (he had been a Honda mechanic at one time) or Toyotas because they were the only used cars he felt were worth fixing up.

If your friend makes bad financial decisions, that friend may also not be taking care of the car adequately. Ongoing, timely maintenance is crucial to making a car last.

Good used cars are pretty pricey these days, partially due to the stimulus deal where there was a tax credit for buying a new car, but your old car had to be destroyed. My brother-in-law has a 1998 honda civic & resale value on that is about $3-3.5K.
Last edited by lindisfarne on Mon Oct 21, 2013 7:36 pm, edited 1 time in total.

Dave76
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Re: Cheapest way to own and operate a car

Post by Dave76 » Mon Oct 21, 2013 7:36 pm

RyeWhiskey wrote:
sunnyday wrote:I have a friend who struggles making good financial decisions, especially when it comes to cars. Her current car has had a number of problems and is no longer running. It seems like used cars have gone up quite a bit in the last couple years but are there still decent buys for under $2,000? Also, what sort of monthly budget should be expected to pay for maintenance & repairs, gas, insurance, etc?


Obviously everything depends upon what kind of car he gets and what the previous owner(s) did to it. If he can find a good Honda/Toyota/Nissan which had regular oil changes and repairs (such as timing belts, brakes, etc...) and has decent mileage (under 200k), he can probably get a pretty good price on it. There are definitely good deals out there but you need to be thorough when you're looking. I usually use Craigslist and always do my research as best as possible. :beer


Parts, repair costs, insurance costs, and resale value of Japanese cars are high. My Toyota was costlier to maintain than my Chrysler K-car. And the Toyota was a well-maintained and dependable car.

tim1999
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Re: Cheapest way to own and operate a car

Post by tim1999 » Mon Oct 21, 2013 8:14 pm

These days, most of what is available to purchase for $2,000 will likely be a problematic pile of junk in short order unless you are getting a crazy lowball deal from a friend/relative or are a mechanic yourself. In my opinion, if funds are limited, might as well just lease a new Civic for $200/month or whatever they are going for now, where it will be under warranty and your maintenance expenses are basically limited to $30 oil changes a couple of times per year. At least you will know roughly what the maximum monthly cost will be, as there will be few if any surprises.

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Watty
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Re: Cheapest way to own and operate a car

Post by Watty » Mon Oct 21, 2013 8:28 pm

If you can work on the car yourself or have a great inexpensive mechanic , like your brother, then keeping a well maintained old car can save a lot of money but safety features and gas millage have improved a lot in the last 20 years so there are some downsides to that.

I do not have the skills to do many car repairs myself and I have not had any luck with car mechanics either.

What to do really depends on your budget. If you are on a very tight budget(I’ve been there and done that!) then learning to do some car repairs yourself and getting by with an old car is about your only choice. Taking a car repair class is well worth the time and money. You can also find videos on how repair your car that often show the same model as yours and seeing the video of how to do it can really help.

If you have at least moderate means then there may be another alternative. It has been a while since I since I have seen lots of good deals on late model used cars so what I have been doing is;

1) Buy new base model cars with high resale values like Hondas or Toyotas when you can get a good deal on them when like yearend closeouts or other big promotions.

2) I pay cash then start saving up for my next car by making my “car payment” into my savings.

3) I keep them until they are about ten years old or have 150,000 miles.

4) A ten year old Honda or Toyota that is in good condition will sell for a lot more than you might expect. My last Camry sold for about a third of what it cost when it was new when it was nine years old and had 130K miles.

I do take my time and get very good prices both when I buy and sell the cars which helps.

This typically allows me to have very few non-routine car repairs. The cost for the car excluding routine maintenance, gas, insurance, etc has been running me about $125 a month when you add up the purchase price less the sales price and non-routine maintenance. $125 a month for 120 months(ten years) is $15,000.

This is admittedly not the least expensive way to own a car but this has given me very reliable cars at a reasonable cost.

Dave76
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Re: Cheapest way to own and operate a car

Post by Dave76 » Mon Oct 21, 2013 8:30 pm

Cherokee8215 wrote:These days, most of what is available to purchase for $2,000 will likely be a problematic pile of junk in short order unless you are getting a crazy lowball deal from a friend/relative or are a mechanic yourself. In my opinion, if funds are limited, might as well just lease a new Civic for $200/month or whatever they are going for now, where it will be under warranty and your maintenance expenses are basically limited to $30 oil changes a couple of times per year. At least you will know roughly what the maximum monthly cost will be, as there will be few if any surprises.


The customer still has to put money down on it (thousands). 2-3 years down the road, he/she has two choices -- buy it or give it back. If the customer gives it back, he/she will lose the car and all the equity in the car.

If this woman leases a car and doesn't have the cash to buy it at the end of the lease term, she will have to finance it. If she gives the car back, it's back to square one. This is why leasing is a big money pit.

john94549
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Re: Cheapest way to own and operate a car

Post by john94549 » Mon Oct 21, 2013 8:53 pm

Dave76 wrote:
john94549 wrote:Here in the SF Bay Area, we have what is in effect a "put" on older cars. The Bay Area Air Quality Management District has a standing offer to purchase any older vehicle (1994 or earlier model) for $1000. While there are some restrictions, one could conceivably purchase an older vehicle, operate it for a few years (until it qualifies for the surrender value), then collect the "put". The State of California has a similar program, but I do not know if it is adequately funded at this time.


What are they doing with these cars?


According to the website, it's pretty efficient. The cars are surrendered to auto dismantlers, who salvage non-motive parts (windshields, windows, and the like), and re-cycle what's left. If you've ever priced a windshield (broken by a rock) or side-window, I suspect it's reasonably profitable for the dismantlers. I saw a recent show on the Science Channel which suggested the scrap value alone (for re-cycled metal) on these older cars exceeds $350.

tim1999
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Re: Cheapest way to own and operate a car

Post by tim1999 » Tue Oct 22, 2013 6:12 am

Dave76 wrote:The customer still has to put money down on it (thousands). 2-3 years down the road, he/she has two choices -- buy it or give it back. If the customer gives it back, he/she will lose the car and all the equity in the car.

If this woman leases a car and doesn't have the cash to buy it at the end of the lease term, she will have to finance it. If she gives the car back, it's back to square one. This is why leasing is a big money pit.


The Civic lease (which they seem to have been running for years) is actually below $200 per month, but once you spread out the down payment and fees over 36 months of the lease, it comes out to around $200 per month. If you run the course of a 36 month lease, at the end you have not lost any equity in the car. You never had any, you were paying only for the amount of the car that you planned on using. My point in mentioning this lease deal is that the cost is steady over the course of the lease with no unexpected maintenance expenses. Someone with shaky finances/cash flow and a $2,000 car could face a series of $500 repairs in a short period of time. Or the whole thing could self destruct and then you suddenly need $2,000 for another car. Obviously I am advocating the lease of an inexpensive car and not a BMW for someone in these shoes.

lightheir
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Re: Cheapest way to own and operate a car

Post by lightheir » Tue Oct 22, 2013 6:22 am

Just be sure you are clear on terms of the lease.

Typically there is a mileage limit per year and you are expected to return the car after lease in good condition meaning you will pay for any little dings or malfunctions on the way.

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dyeusdi
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Re: Cheapest way to own and operate a car

Post by dyeusdi » Tue Oct 22, 2013 6:54 am

I love that this is currently listed right under the Tesla S thread on the home page.
Dyeusdi - quietly & appreciatively reading since 2010 - Boston

sls239
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Re: Cheapest way to own and operate a car

Post by sls239 » Tue Oct 22, 2013 9:16 am

The cheapest way is to get to know your car, do your own basic maintenance, have a trusted mechanic, and be a safe driver.

I doubt there are many decent cars for $2000. But if she has decent credit, $2000 is a fine downpayment for an $8-$10K car.

And while Hondas and Toyotas are nice, resale values are high. I would suggest looking at Mazdas, which have been really reliable but don't have the same price premium, maybe Fords.

Smaller sedans and hatchbacks are cheaper to maintain than larger vehicles when it comes to things like tires and brake pads.

MnD
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Re: Cheapest way to own and operate a car

Post by MnD » Tue Oct 22, 2013 10:12 am

$2k cars are just going to be a money pit unless you are set up to do your own engine/transmission replacements and other major work (bearings, main suspension parts etc).

For the kids I buy used cars in excellent condition under 100K miles for around $7000.
By excellent I mean all service up to date including any "biggie" cost service intervals that are even close, all service records, one-owner garaged, excellent body/interior, glossy paint, everything works and any specific problem areas for the model have been corrected. It takes me a month or more of looking on-line every day to find a vehicle like this at a fair price.
Most people with these vehicles are in love with them and won't ask a fair price.

Depreciation on vehicles like this runs around $700/year for 5 years so I target a resale around $3500 assuming 150k miles at sale which always yields a quick cash sale. I'll get the vehicles completely detailed and have it parked in the garage when buyers come by. People in that price range are desperate for something that's not a hunk of ugly junk and problems. $3500 depreciation for (hopefully) 5 years of reliable operation in a decent looking vehicle is the best value in my opinion unless you or family are mechanics.

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Milano
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Re: Cheapest way to own and operate a car

Post by Milano » Tue Oct 22, 2013 11:29 am

I like cars and motorcycles, let me start by stating that I wish at 54 I knew more about investments than I do now about cars, financial knowledge is more important than mechanical knowledge.

Both cars are paid for long ago prior to the great recession,and this helped survive it. One is a '92 318is 145,000 mi the other a '00 Boxster 97,000 mi. 98% of the maintenance is done by me, what I cannot do such as replacing a clutch has been done by the same mechanic. Both cars have been to the mechanic 5 times since 1996.

This has kept costs low, the wrenching started out of curiosity since the first car in college, and has become a necessity or a necessary hobby lately to save money. I spent over 12 hours the lat two weekends on maintenance.

lindisfarne
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Re: Cheapest way to own and operate a car

Post by lindisfarne » Tue Oct 22, 2013 9:28 pm

Cherokee8215 wrote:The Civic lease (which they seem to have been running for years) is actually below $200 per month, but once you spread out the down payment and fees over 36 months of the lease, it comes out to around $200 per month. If you run the course of a 36 month lease, at the end you have not lost any equity in the car. You never had any, you were paying only for the amount of the car that you planned on using. My point in mentioning this lease deal is that the cost is steady over the course of the lease with no unexpected maintenance expenses. Someone with shaky finances/cash flow and a $2,000 car could face a series of $500 repairs in a short period of time. Or the whole thing could self destruct and then you suddenly need $2,000 for another car. Obviously I am advocating the lease of an inexpensive car and not a BMW for someone in these shoes.


With a lease, you also have to carry collision and comprehensive for the full value of the car. That can get pretty pricey. With a car that's worth < $5K, you don't carry those at all.

If it weren't for the added insurance costs, I'd agree more with you, although I've managed to own a working car for 7 years that's cost me far less than $2400/year for all maintenance & repairs.

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