New car every 5 years vs 10

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sunnyday
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New car every 5 years vs 10

Post by sunnyday » Sat Dec 21, 2013 9:26 pm

Like many on here, I'm a fan of keeping cars for a while but I was just running some numbers and the savings between buying every 5 years vs every 10 years seems minimal for < $30k cars.
I'm looking at the edmunds tco and kbb values for a Subaru outback limited. The difference in depreciation between years 0-5 and 6-10 is about $4k and the difference in taxes is about $700.
You may save a small amount on insurance for years 6-10 but this probably won't offset additional repair costs.
So by buying every 10 years instead of 5 you'll save less than $5k over 10 years. Is there something else I should be factoring in?

Considering the new car will likely be safer, get slightly better gas mileage and be under warranty I think buying new every 5 years is the better option.

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yatesd
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Re: New car every 5 years vs 10

Post by yatesd » Sat Dec 21, 2013 9:43 pm

Did you include the acquisition cost of the car?

For example, take $30K/5 vs. $30K/10 years. $6,000 per year vs. $3,000 in acquisition costs.

Or viewed another way. The first 5 years cost $30K and the second 5 years are practically free (just need to account for additional repair costs (say $1,000 per year).

sport
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Re: New car every 5 years vs 10

Post by sport » Sat Dec 21, 2013 10:02 pm

It is important to consider the number of miles driven per year. For example, if you drive only 10K per year, then keeping a car 10 years is feasible. However, if you drive 40K per year, and reliability is important, it is an entirely different situation.
Jeff

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BrandonBogle
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Re: New car every 5 years vs 10

Post by BrandonBogle » Sat Dec 21, 2013 10:09 pm

I bought my 2006 4Runner Sport 4WD brand new in 9/2006 and thus far, I've only spent on the following:
- lifetime alignment
- oil changes ($25-$30)
- tire rotation ($10 2x/year)
- one set of tires in 2010 (just under $1k) - these have lifetime rotation with them, so above $20/year stops
- new brake pads and resurfaced rotors in 2013 ($75/axle = $150)
- $20 for brake fluid flush and replace in 2013
- windshield washer fluid
- full exterior detail with waxing 1x/year ($120)

Equipped with power seats, power windows, power door locks, leather seats, tow hitch, roof rack, running boards, spoiler, fog lights, fender flares, factory alarm, automatic transmission for an out-the-door price of $31,750 (2006 dollars). Given the low cost of repairs, I have no intention of getting rid of the car. I bought a bluetooth speaker and bluetooth aux adapter for my phone and only "miss" having heated seats (which are not needed that much where I live). I would say my cost annually is less than $5k ($4k when it easily makes it to 9/2014). I should note however, it only has 67k miles on it.

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Steelersfan
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Re: New car every 5 years vs 10

Post by Steelersfan » Sat Dec 21, 2013 10:19 pm

jsl11 wrote:It is important to consider the number of miles driven per year. For example, if you drive only 10K per year, then keeping a car 10 years is feasible. However, if you drive 40K per year, and reliability is important, it is an entirely different situation.
Jeff


+1

I think mileage is more important than years.

I kept the car I just traded in for 17 years, but it only had 88,000 miles on it. It was still reliable, but the groaning from the body on every bump and turn made the decision for me.

I'm still adjusting to the new technology in the car, like remote door locks, blue tooth and automatic temperature control. :)

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BrandonBogle
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Re: New car every 5 years vs 10

Post by BrandonBogle » Sat Dec 21, 2013 10:26 pm

Steelersfan wrote:I'm still adjusting to the new technology in the car, like remote door locks, blue tooth and automatic temperature control. :)


I LOVE my automatic temperature control. Much better than constantly fiddling with the dials to reach my comfort level!! On Toyotas and Lexuses, acc (automatic climate control) also controls fan speed and it's smart enough not to blow before the engine warms up if it's trying to output heat.

For remote door locks, I NEVER use my key to lock my doors, always the buttons. This is convenient, but also makes sure I never lock my keys in the car.

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Steelersfan
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Re: New car every 5 years vs 10

Post by Steelersfan » Sat Dec 21, 2013 10:43 pm

BrandonBogle wrote:
Steelersfan wrote:I'm still adjusting to the new technology in the car, like remote door locks, blue tooth and automatic temperature control. :)


I LOVE my automatic temperature control. Much better than constantly fiddling with the dials to reach my comfort level!! On Toyotas and Lexuses, acc (automatic climate control) also controls fan speed and it's smart enough not to blow before the engine warms up if it's trying to output heat.

For remote door locks, I NEVER use my key to lock my doors, always the buttons. This is convenient, but also makes sure I never lock my keys in the car.


I'm getting there. :happy

What impresses me the most is that I got a better car, with more features and 50% better gas mileage, for less money than I paid 17 years ago.

Life's very good.

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Watty
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Re: New car every 5 years vs 10

Post by Watty » Sun Dec 22, 2013 1:03 am

I'm looking at the edmunds tco and kbb values for a Subaru outback limited. The difference in depreciation between years 0-5 and 6-10 is about $4k and the difference in taxes is about $700.


Don't forget inflation. With just 2% inflation when you buy a $30K car in five years it will cost more than $3K more to upgrade to the current version of the same car.

There may be sales tax too. A few years ago I was looking at this with the idea of buying new a Corolla or Civic then selling it a few months before the 3 year/36K warrantee ended because it would still get top dollar then. The numbers seemed to give a pretty reasonable monthly cost of ownership since I am pretty good at getting good prices both when I buy and sell a car. The thing that killed this though was I would have to pay sales tax each time I bought the car and that was too much extra cost to make the numbers work out.


Whenever I buy a car it also takes me many hours of research and shopping so your time is worth something too.

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yatesd
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Re: New car every 5 years vs 10

Post by yatesd » Sun Dec 22, 2013 8:03 am

I agree that every situation has variables, although I know keeping a car for a long time makes financial sense, there are other considerations:

    Length of commute
    Safety
    Reliability
    How much you like cars?
    How much do you like driving?
    Professional Considerations?
    Financial Situation?

I am in sales and need a "professional" car appropriate for taking clients along occasionally. I drive across multiple states weekly and don't have the flexibility for too many surprises. I love cars and spend a large percentage of time in my vehicle. Since I work from home, my car is almost like a second office. I almost need bluetooth. And finally, based on mileage considerations I probably can't get a full 10 years.

That being said, I am trying to extend the life of my car for the financial benefits longer than I have in the past. YMMV

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jeffyscott
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Re: New car every 5 years vs 10

Post by jeffyscott » Sun Dec 22, 2013 8:56 am

Used car prices are high, so depreciation is low.

The supply of used vehicles available is lower due to low sales in 2009, etc. Total new vehicle sales and leases went from about 20 million in 2007 to 13 million in 2009. In 2008-10 period the total sales and leases are about 17 million less than in 2005-07.

http://www.rita.dot.gov/bts/sites/rita. ... 01_17.html

Also at the bottom of that table it shows the increased average price of used cars and pretty much no change in the average new car price in recent years.
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YttriumNitrate
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Re: New car every 5 years vs 10

Post by YttriumNitrate » Sun Dec 22, 2013 9:55 am

Doing a quick check, I got the following numbers from KBB and Truecar:

2014 Subaru Outback Limited (Truecar.com + 7% Tax): $28,362
2009 Subaru Outback Limited (50k miles, good condition): $16,919
2004 Subaru Outback Limited (100k miles, fair condition): $6,758

The average yearly cost of depreciation for the first 5 years would be $2,288 ($11,443/5) while the average yearly depreciation cost of the next 5 years would be $2,032.

Of course, not all cars as the same and doing the same test for a Mercedes C300 shows the average depreciation in the first five years is more than double that of the next 5 years.

2014 Mercedes C300 Sports Sedan (Truecar.com + 7% tax): $41,224
2009 Mercedes C300 Sports Sedan (50k miles, good condition): $17,683
2004 Mercedes C320 Sports Sedan (100k miles, fair condition): $6,622

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jeffyscott
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Re: New car every 5 years vs 10

Post by jeffyscott » Sun Dec 22, 2013 10:20 am

YttriumNitrate wrote:Doing a quick check, I got the following numbers from KBB and Truecar:

2014 Subaru Outback Limited (Truecar.com + 7% Tax): $28,362
2009 Subaru Outback Limited (50k miles, good condition): $16,919
2004 Subaru Outback Limited (100k miles, fair condition): $6,758

The average yearly cost of depreciation for the first 5 years would be $2,288 ($11,443/5) while the average yearly depreciation cost of the next 5 years would be $2,032.


Are you basing that on trade in values or private party sales? If it is private party, I think selling a 5 year old car myself every 5 years would be far more hassle than selling a 10 year old car every 10 years.

If you go another 5 years, to 150,000 miles, the depreciation would surely be less than $1000 per year and probably around $800 per year.
press on, regardless - John C. Bogle

The Wizard
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Re: New car every 5 years vs 10

Post by The Wizard » Sun Dec 22, 2013 10:26 am

I keep two vehicles in my motor pool: a pickup and a convertible. I try to use the pickup only for trucky things, or when the roads are snow covered.
The pickup will be 10 yrs old in two months, so it's ready for replacement, assuming I have the money, which I kinda don't.
The convertible is about five years old, so it has another five to go at a minimum...
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yukonjack
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Re: New car every 5 years vs 10

Post by yukonjack » Sun Dec 22, 2013 10:37 am

Another increased cost is licensing. The difference between the first and third year of ownership can be $500 or more in some states. Also for me there would be the hassle factor of having to negotiate with a dealer twice as often. If you consider that most household have more than one vehicle you have to increase the cost by a multiple of two to four times. But I do agree with earlier posts that mileage is the real consideration here.

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Re: New car every 5 years vs 10

Post by YttriumNitrate » Sun Dec 22, 2013 10:42 am

jeffyscott wrote:Are you basing that on trade in values or private party sales? If it is private party, I think selling a 5 year old car myself every 5 years would be far more hassle than selling a 10 year old car every 10 years.
I used private party values. Trade in would be $15,057 at 5 years and $5,011 at 10. That would shift the depreciation to $2,661 a year for the first five and $2010 for the next five.
jeffyscott wrote:If you go another 5 years, to 150,000 miles, the depreciation would surely be less than $1000 per year and probably around $800 per year.
Absolutely, at a certain point cars basically stop depreciating but then maintenance costs start to rise. When you buy a car for $500, as long as it's running, you can be pretty sure that you can get your $500 back anytime you want. :D

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Re: New car every 5 years vs 10

Post by BerkeleyChris » Sun Dec 22, 2013 10:43 am

I am fighting new car fever as well and am thinking about how much it would really save me to delay replacing my car. I came across this paper, Automotive Life Cycle Economics and Replacement Intervals, a few days ago:

http://www.sae.org/events/green/referen ... 202004.pdf

page 36 has a very interesting table and chart on the premium paid per mile driven due to increasingly frequent replacement intervals

The study focuses on domestics, while a study that focuses on toyota/honda/subaru would be more relevant for me, but I did find the analysis to be helpful.

The conclusion for me is that if money were the only consideration, I should keep my 6 year old Honda at least another 10 years. However, keeping past 3 or 4 more years and the savings will really start to diminish, so I shouldn't feel too guilty about trading up to get the safety/reliability/enjoyment benefits of a new car if I can pay cash for the new vehicle

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bottlecap
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Re: New car every 5 years vs 10

Post by bottlecap » Sun Dec 22, 2013 10:44 am

Buying every five years will lose money using the Outback example, but that's not the only issue. You do spend $11,000 or $12,000 every time you make that transaction. So far I guess I've saved $30,000, although it may have cost me an average of $150 a year more in gas.

JT

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midareff
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Re: New car every 5 years vs 10

Post by midareff » Sun Dec 22, 2013 10:52 am

AFAIK there is also an age factor. When I was 20 it was who cares, I can push it to a garage. By 40 you start to keep AAA and longer warranty periods look better. AT 66 it gets replaced when the warranty is up, and if something happens you call the dealer to come get it and bring U a loaner.

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Re: New car every 5 years vs 10

Post by VictoriaF » Sun Dec 22, 2013 10:54 am

The Wizard wrote:I keep two vehicles in my motor pool: a pickup and a convertible. I try to use the pickup only for trucky things, or when the roads are snow covered.
The pickup will be 10 yrs old in two months, so it's ready for replacement, assuming I have the money, which I kinda don't.
The convertible is about five years old, so it has another five to go at a minimum...


You can use the convertible for pickups {grin},

Victoria
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sambb
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Re: New car every 5 years vs 10

Post by sambb » Sun Dec 22, 2013 10:57 am

I drive a regular toyota now, but i have owned all the pricey european brands. For those, I find the best thing to do is buy them 1-2 years old, and the depreciation is much more manageable. I plan on upgrading my current car every 3-5 years for safety reasons and amenities. Much cheaper to do that with a toyota than with a BMW. If i bought a new expensive german car, then i would be inclined to keep it until it is not reliable.

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Re: New car every 5 years vs 10

Post by freebeer » Sun Dec 22, 2013 11:11 am

Many people mentioned safety and that's a key factor, especially for a family. An older car is simply not going to be as safe as a new car, all other things being equal (size, etc.). This is a constant but innovation in autos seems to be lumpy - huge jump when from just seatbelts to having airbags, smaller incremental improvements since. At the moment our 5+ year old 2008 Prius doesn't seem to be "lacking" anything major vs. a brand new car: it has side curtain airbags, stability control, anti-lock brakes, rear camera.

But the new thing coming down the pike is huge: self-driving cars, which are expected to be commercially available in ~6 years. I'm not sure we'll want to be driving a 13-year-old Prius then but I would not buy a new car now expecting to keep it 10 years and there will likely be a drop-off in used car values as self-driving moves from luxury/novelty to mainstream (albeit that will maybe be more like 10 years from now)... similar to the drop-off in no-airbag cars but even more drastic because the difference in both safety and convenience will be enormous, the biggest change in the car experience in a century.

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Re: New car every 5 years vs 10

Post by jeffyscott » Sun Dec 22, 2013 11:30 am

Another factor that has changed is the opportunity cost. Having an additional $10,000 tied up in your car used to mean losing $600 per year or so in interest, now it's more like maybe $90.

This was one reason I bought a cheap used car back around 2000. It was about $4K for the used or $14K for same car new, I figured the $600 per year in interest, plus savings on insurance would cover the repair bills.
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deanbrew
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Re: New car every 5 years vs 10

Post by deanbrew » Sun Dec 22, 2013 11:34 am

I tend to keep my cars for 6 to 8 years, and I have found that the annual depreciation is around $2k to $3k per year. Yes, I could save more money by delaying replacement, but I simply don't want to drive a 10 year old car. Not only do maintenance costs go up and reliability decline, cars get looser with age, rattling and driving more sloppily. For me, weighing out financial and non financial factors, seven years seems to be my sweet spot.
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Mike Scott
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Re: New car every 5 years vs 10

Post by Mike Scott » Sun Dec 22, 2013 11:42 am

Sales tax, personal property tax and insurance costs are big hits on new cars for me. But then nobody cares what I drive including me (as along as it is reasonably reliable and gets good gas mileage).

Bidwell
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Re: New car every 5 years vs 10

Post by Bidwell » Sun Dec 22, 2013 11:45 am

Buying every 5 years (given normal mileage and use) insures you are driving "new" for those 60 months given today's technology. Buying new every 10 years insures that you will receive full value for your purchase. Cars n trucks can do 10 years today easily given attention to realistic but careful maintenance which doesn't suggest running into the dealer for check ups. Synthetic oil, changing filters and the like can extend those 10 years to even longer intervals. There is a dicotomy between factory, dealer greed for your service dollar and what your car actually requires.

The thrill of new, bunches of improved technology and need for change drive many to a 3 to 5 year buy cycle. If you go 6 or 8 years there is always new one waiting if you can't do 10. We have a 2014, 2008, 1997, 1931 and a 1930 all getting different but realistic service according to their needs. There is no quantifying the feel and enjoyment of driving an old but faithful car.

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LowER
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Re: New car every 5 years vs 10

Post by LowER » Sun Dec 22, 2013 11:53 am

And yet another factor is registration fees, which for my truck started out over $600 in 2004 and are now less than $200, for the same vehicle which is now entering it's tenth year. And then there are all those pesky taxes when you go new. So the difference, very roughly for me and based on just those 2 factors, between owning for 5 versus 10, would be close to $2K in registration fees over those 5 years, and ~7% in taxes as a one-time hit, or another $3,000, bringing the total to close to $5,000 in tax and registration alone. With only 120K miles on it so far, it's just getting broken in.

If I remember correctly, registration for passenger vehicles is more reasonable than for large trucks, so that may not be such a big factor for most folks.

On the other hand, I have had several expensive repairs since the warranty expired 5 years ago which cost me quite a bit more than the differences noted in my wandering paragraph above.

Because I am saving so aggressively for college educations and retirement, my current plan I is to drive it until all the wheels fall, fix it, and drive it some more. Time will tell if that is the right decision.

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Re: New car every 5 years vs 10

Post by VictoriaF » Sun Dec 22, 2013 12:02 pm

deanbrew wrote:I tend to keep my cars for 6 to 8 years, and I have found that the annual depreciation is around $2k to $3k per year. Yes, I could save more money by delaying replacement, but I simply don't want to drive a 10 year old car. Not only do maintenance costs go up and reliability decline, cars get looser with age, rattling and driving more sloppily. For me, weighing out financial and non financial factors, seven years seems to be my sweet spot.


For me, it's the opposite. I am used to my car with its rattling and other quirks. Much of my driving is automatic, I expect and get customary responses. I actually prefer driving my old car to newer and smoother rental cars.

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Re: New car every 5 years vs 10

Post by wander » Sun Dec 22, 2013 12:40 pm

sunnyday wrote:Considering the new car will likely be safer

Didn't you hear about millions of new cars get recalled for being unsafe? I heard people talked a lot about "latest and greatest". Well, it's not always the case.

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Re: New car every 5 years vs 10

Post by YttriumNitrate » Sun Dec 22, 2013 12:47 pm

freebeer wrote:But the new thing coming down the pike is huge: self-driving cars, which are expected to be commercially available in ~6 years.

Don't forget that there can be a big difference between commercially available and readily available. An all electric car was commercially available 17 years ago, but only now are we seeing them readily available.

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Re: New car every 5 years vs 10

Post by VictoriaF » Sun Dec 22, 2013 12:48 pm

YttriumNitrate wrote:
freebeer wrote:But the new thing coming down the pike is huge: self-driving cars, which are expected to be commercially available in ~6 years.

Don't forget that there can be a big difference between commercially available and readily available. An all electric car was commercially available 17 years ago, but only now are we seeing them readily available.


Self-driving cars are readily available. They are called trains and buses.

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Re: New car every 5 years vs 10

Post by travellight » Sun Dec 22, 2013 1:20 pm

It seems like it would be an analysis of annual depreciation versus annual repair and maintenance cost. I usually buy mine 2-3 years old after they have taken the biggest depreciation hit, about 50-70% (or 40K) in my personal history. I have found some expensive luxury vehicles have the steepest initial years depreciation curve.

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Re: New car every 5 years vs 10

Post by JoeJohnson » Sun Dec 22, 2013 3:46 pm

travellight wrote:It seems like it would be an analysis of annual depreciation versus annual repair and maintenance cost. I usually buy mine 2-3 years old after they have taken the biggest depreciation hit, about 50-70% (or 40K) in my personal history. I have found some expensive luxury vehicles have the steepest initial years depreciation curve.


It would be an analysis of annual depreciation plus repair and maintenance not covered by warranty versus repair and maintenance cost AND depreciation. Cars that are paid off depreciate too and I think that's something a lot of people fail to think about overall. Total cost to own is all that matters. Trading around year 5 shortly before required expenditures such as brakes/tires/fluids isn't horrible.

I agree w/ OP that it's not that much more of a premium to replace a car at 5 yrs vs 10 yrs. You definitely pay a premium, but not a lot. To me, the small premium is worth having a newer car with the latest amenities and I basically have no worry about the car being in the shop.

The value in keeping cars is when you run them in to the ground and they're essentially not depreciating at all. A car still depreciates a signifcant amount from year 5-10.

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Re: New car every 5 years vs 10

Post by blevine » Sun Dec 22, 2013 5:15 pm

You need to also factor in the quality of the car.
Just got rid of a 15 year old Toyota minivan.
Engine ran like new, did not need to put much money into the car as it got older,
just normal items like belts, tires, etc, nothing major. Can't say that about every car.

I sold because a minivan no longer met my needs, mechanically and cost wise, could have
kept it longer.

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Re: New car every 5 years vs 10

Post by tibbitts » Sun Dec 22, 2013 5:28 pm

blevine wrote:You need to also factor in the quality of the car.
Just got rid of a 15 year old Toyota minivan.
Engine ran like new, did not need to put much money into the car as it got older,
just normal items like belts, tires, etc, nothing major. Can't say that about every car.

I sold because a minivan no longer met my needs, mechanically and cost wise, could have
kept it longer.

You certainly can't say that about every Toyota minivan, either. The engine might have fallen out the day after you traded it for all you know. I once traded a car and the salesman drove it back from my house for me. He made it 3 blocks before the clutch failed catastrophically, and had to call the dealership for a tow. It had given zero indication of failure previously.

Quality might buy you better odds, but that's all. Remember that some of the highest quality makes have had problematic components - like transmissions - that have only become obvious after a model has been out for several years.

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Re: New car every 5 years vs 10

Post by Dave76 » Sun Dec 22, 2013 5:31 pm

YttriumNitrate wrote:
freebeer wrote:But the new thing coming down the pike is huge: self-driving cars, which are expected to be commercially available in ~6 years.

Don't forget that there can be a big difference between commercially available and readily available. An all electric car was commercially available 17 years ago, but only now are we seeing them readily available.


An all-electric car was commercially available 100 years ago. I think it's just a fad. Only time will tell.

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Re: New car every 5 years vs 10

Post by Dave76 » Sun Dec 22, 2013 5:41 pm

freebeer wrote:
But the new thing coming down the pike is huge: self-driving cars, which are expected to be commercially available in ~6 years. I'm not sure we'll want to be driving a 13-year-old Prius then but I would not buy a new car now expecting to keep it 10 years and there will likely be a drop-off in used car values as self-driving moves from luxury/novelty to mainstream (albeit that will maybe be more like 10 years from now)... similar to the drop-off in no-airbag cars but even more drastic because the difference in both safety and convenience will be enormous, the biggest change in the car experience in a century.


I think it will be a very long time before self-driving cars become mainstream. With the way things are going now, I think most people will have very little discretionary income in the future. People will want something simple (old), that they can service themselves; and they will be scrounging around junkyards when in need of parts.

Every major socio-economic transformation has brought about desperate times. From agriculture to industrialization; from industrialization to services; and now low-wage Mcjobs.

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Re: New car every 5 years vs 10

Post by likegarden » Sun Dec 22, 2013 6:34 pm

The graphs show that old cars cost more in repairs in the average. Do not replace an older car which requires few repairs!
We just bought a new Toyota Camry. It replaced a 2002 & 110,000 miles Buick LeSabre, which suddenly required more repairs, $2,500. We usually drive cars for 10 years. I drive a 2004 Buick Century with 80,000 miles which had only a 10 year total of $500 in repairs. I am not counting the usual costs of gas, oil, tires and brakes, both new and old cars need those. Since I had only the $500 repairs I will keep that 2004 car until it needs annyal repairs of $2,000.

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Re: New car every 5 years vs 10

Post by ClevrChico » Sun Dec 22, 2013 7:27 pm

I'd wait as long as possible to eliminate acquisition costs. Every time you buy, you're paying the salesman's commission and dealership's packs. Plus sales tax and higher registration on a newer car.

ASUGrad
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Re: New car every 5 years vs 10

Post by ASUGrad » Sun Dec 22, 2013 9:53 pm

If your getting a loan there is something else to figure in.

You make payments for 5 years, the car is paid off. If you get a new car that process restarts. However if you keep making those payments into a savings account and use that same account to pay for any repairs at the end of the 10 years you will have a very large down payment or possibly even pay for the next car outright. You earn interest instead of paying it. Then you could repeat the same process and your next car would be paid for and have some additional money in the bank.


On a side note I think self driving cars have a huge thing going for them. Productivity improvement. Even if it costs 20k more than the same car to have the self driving feature executives and business owners who go to a lot of appointments will snatch them up in a heartbeat. Suddenly all that wasted time driving from one appointment/office/meeting to the next becomes productive time. You can do more prep between meetings which means you can schedule meetings closer together. That extra productive time that will more than pay back that 20k over the next 5 years for many professions. Even if you spend the whole day in the same office do all your prep for the day on your way to work and leave the house later and go home earlier. Work 45 hours instead of 50-55 and be just as productive. Yes, that feature will sell to a lot of professionals.

Apply the same rule to taxi companies. Pay a guy 30-40k(guessing here) to drive around all day, or pay a 20k premium per car to have cars that drive themselves. The employee also needs benefits and payroll taxes; the car on the other hand can be depreciated over time to lower the tax bill. Not a hard decision....

The Wizard
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Re: New car every 5 years vs 10

Post by The Wizard » Sun Dec 22, 2013 10:00 pm

ASUGrad wrote:...the car on the other hand can be depreciated over time to lower the tax bill. Not a hard decision....

Most people CANNOT depreciate a personal use car for business purposes.
In fact, even if you have a vehicle that your business uses for deliveries, etc, you can't just use it for your summer vacation to the cape and pretend that it's business as usual...
Attempted new signature...

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grabiner
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Re: New car every 5 years vs 10

Post by grabiner » Sun Dec 22, 2013 10:48 pm

The Wizard wrote:
ASUGrad wrote:...the car on the other hand can be depreciated over time to lower the tax bill. Not a hard decision....

Most people CANNOT depreciate a personal use car for business purposes.


If you use the IRS standard mileage rate for business expenses, that includes a depreciation allowance. This is why the mileage allowance for business is higher than the mileage allowance for medical or charity use of a car, which do not allow for depreciation. (However, you may not benefit from that standard mileage rate unless you itemize deductions and your miscellaneous deductions exceed 2% of your adjusted gross income.)

Normally, you won't break out the depreciation, but it is legally accounted for. Thus, if you drive enough miles on business, you have to pay tax on the gain if you sell the car for more than its depreciated value, and not take the depreciation allowance once the car has already been depreciated to zero.
David Grabiner

Dave76
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Re: New car every 5 years vs 10

Post by Dave76 » Sun Dec 22, 2013 11:36 pm

ASUGrad wrote:
Apply the same rule to taxi companies. Pay a guy 30-40k(guessing here) to drive around all day, or pay a 20k premium per car to have cars that drive themselves. The employee also needs benefits and payroll taxes; the car on the other hand can be depreciated over time to lower the tax bill. Not a hard decision....


:moneybag :greedy

So, you want to put more people out of work. Lovely... Bogleheads are just full of bright ideas. :|

http://www.youtube.com/watch?v=U3quruHpcuo

BobStrauss
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Re: New car every 5 years vs 10

Post by BobStrauss » Tue Dec 24, 2013 1:49 pm

IMO, the greatest advantage of self-driving cars will be improved safety (reduced human error in the aggregate) and the ability for drunk people to either a) have a safe option to have their cars carry them home on autopilot; or b) have sensors FORCE cars to carry drunks on computer control.

BobStrauss
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Re: New car every 5 years vs 10

Post by BobStrauss » Tue Dec 24, 2013 1:53 pm

BrandonBogle wrote:
Steelersfan wrote:I'm still adjusting to the new technology in the car, like remote door locks, blue tooth and automatic temperature control. :)


I LOVE my automatic temperature control. Much better than constantly fiddling with the dials to reach my comfort level!! On Toyotas and Lexuses, acc (automatic climate control) also controls fan speed and it's smart enough not to blow before the engine warms up if it's trying to output heat.


It's pretty cool! Even my sub-$20k Kia has that feature. Heated seats and Blu Tooth and GPS as well. Good car tech doesn't cost too much these days.

BobStrauss
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Re: New car every 5 years vs 10

Post by BobStrauss » Tue Dec 24, 2013 2:00 pm

wander wrote:
sunnyday wrote:Considering the new car will likely be safer

Didn't you hear about millions of new cars get recalled for being unsafe? I heard people talked a lot about "latest and greatest". Well, it's not always the case.


That's pretty anecdotal. Road safety statistics steadily improve, and much of that has to do with regular improvements in vehicle safety. This is an exaggerated example, but just look at how a new "plastic throwaway vehicle" rates compared to a tough, old steel Chevy in terms of safety: http://m.youtube.com/watch?v=joMK1WZjP7g&desktop_uri=%2Fwatch%3Fv%3DjoMK1WZjP7g

jollystomper
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Re: New car every 5 years vs 10

Post by jollystomper » Wed Dec 25, 2013 2:04 pm

I don't like the hassle of buying a car, dealing with dealers, figuring out what to do with the old car, etc. So I try to keep my cars as long as possible. I go for 10 years or more.

This year we had to replace 2 10+ years old cars, as they both had reached the point where repairs where more than the value of the car. We went for recently used (2 year old) certified cars with low mileage (<20K), as that seems to be the sweet spot for value. Also, with cars loans at 1.95%, the interest cost is minimal so just put down enough to keep the payments to a budget amount (which we will pay more on to pay the loans off early).

I'm glad there are many more places that just give a "bottom line" price instead of enticing you with a price and then trying to add on a multitude of options.
The old cars we just donate and take the tax writeoff - it is the quickest and most hassle-free way to deal with this.

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TomatoTomahto
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Re: New car every 5 years vs 10

Post by TomatoTomahto » Wed Dec 25, 2013 2:56 pm

freebeer wrote:But the new thing coming down the pike is huge: self-driving cars, which are expected to be commercially available in ~6 years. I'm not sure we'll want to be driving a 13-year-old Prius then but I would not buy a new car now expecting to keep it 10 years and there will likely be a drop-off in used car values as self-driving moves from luxury/novelty to mainstream (albeit that will maybe be more like 10 years from now)... similar to the drop-off in no-airbag cars but even more drastic because the difference in both safety and convenience will be enormous, the biggest change in the car experience in a century.


It's not a self-driving car, but my son's Volvo is able to alert you when you are coming close to hitting something and is willing to put on the brakes if it deems it necessary. We're tempted to test it with a garbage can, but have not. My son is a pretty good driver, but I'm happy that he's very unlikely to hit a pedestrian. The number of pedestrian accidents in our town is shocking, and some are fatal.

The car apparently can recognize a pedestrian, and next year's model will recognize a cyclist. It's probably trivial, but I'm still enchanted with the way it "reads" the speed limit off road signs and displays it near the speedometer.

When, in a movie, a car is driven intentionally through a fence/barricade/garage door/ etc., for example in the final episode in Breaking Bad, we frequently say "____'s Volvo can't do that."

MathWizard
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Re: New car every 5 years vs 10

Post by MathWizard » Wed Dec 25, 2013 3:37 pm

jeffyscott wrote:Used car prices are high, so depreciation is low.

The supply of used vehicles available is lower due to low sales in 2009, etc. Total new vehicle sales and leases went from about 20 million in 2007 to 13 million in 2009. In 2008-10 period the total sales and leases are about 17 million less than in 2005-07.

http://www.rita.dot.gov/bts/sites/rita. ... 01_17.html

Also at the bottom of that table it shows the increased average price of used cars and pretty much no change in the average new car price in recent years.


Just bought used, and I can certainly agree that used cars are quite high right now.
I've always gotten good deals on used cars, but after looking for 3 months, I had to take the
best deal I could find, at a higher price than I had planned.

letsgobobby
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Re: New car every 5 years vs 10

Post by letsgobobby » Wed Dec 25, 2013 5:23 pm

sunnyday wrote:Like many on here, I'm a fan of keeping cars for a while but I was just running some numbers and the savings between buying every 5 years vs every 10 years seems minimal for < $30k cars.
I'm looking at the edmunds tco and kbb values for a Subaru outback limited. The difference in depreciation between years 0-5 and 6-10 is about $4k and the difference in taxes is about $700.
You may save a small amount on insurance for years 6-10 but this probably won't offset additional repair costs.
So by buying every 10 years instead of 5 you'll save less than $5k over 10 years. Is there something else I should be factoring in?

Considering the new car will likely be safer, get slightly better gas mileage and be under warranty I think buying new every 5 years is the better option.

It's hard to do direct comparisons because a new, 5 year old, and 10 year old Subaru Legacy Outback (for example) are very different vehicles. You really need to know what the actual depreciation of a single model is over 5 and 10 years.

Consumer Reports reports on 5 year total ownership costs but they don't publish the ten year data.

They report that depreciation averages 65% over the first five years, and averages 48% of total ownership costs over 5 years.

They also report that "on average, operating costs (insurance, gas, maintenance/repairs) are less than carrying costs (depreciation, interest, taxes) until a vehicle is about 5 years old."

They add that "depreciation makes up almost 60% of the cost in the first year of ownership, and is still the largest annual ownership cost for vehicles up to six years old... The sixth, seventh, and eighth years combined about equal the cost of the first year.... While maintenance and repair costs increase, even over eight years they still don't average one-sixth the cost of depreciation," and in an accompanying graph, they show that for an average car, the first year's total costs are $16,000 (of which 60% or $9400 is depreciation), whereas by year 8 the average ownership costs are $6000 (of which 43% or about $2500 is depreciation).

They conclude, "In the end it is almost always less expensive to hang on to your current car than to buy a new one. Even the most expensive repair bills for an old car can't outweigh the cost of depreciation on a new one."

http://www.consumerreports.org/cro/2012 ... tYear=2013

Naturally some cars depreciate more than others, but depreciation is likely to be the major expense of owning a car for the first five years for most vehicles. Therefore, I am not interested in turning in my car at the five year mark, since I just took it in the shorts in depreciation. If anything, I'm interesting in buying a used car at 5 years, at a 65% reduction off the sticker price (on average), and then driving it for years 6-10 and paying for any maintenance or repairs that are needed.

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Re: New car every 5 years vs 10

Post by sambb » Wed Dec 25, 2013 5:31 pm

A big threat to me financially, is the idea of doing something stupid on the road. I purchased a car with blind spot monitoring 2 yrs ago, and it was a great decision and has definitely saved me from an accident. I am considering trading in the next 2 years to get frontal collision warning as well. My last accident 15 years ago, was because I rear ended someone

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