New car every 5 years vs 10

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gator1
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Re: New car every 5 years vs 10

Post by gator1 » Thu Dec 26, 2013 2:52 pm

To us brand new cars are a silly purchase. We actually think they are one of the worst purchases you can ever make.

Why buy something that depreciates like crazy and it's hardest hitting depreciating is during the first 5 years of ownership? I guess it seems like the best time to buy a car is in year 5. We will never ever buy a car less than a few years old. It's just not smart.

For us, funding a vehicle that is around 5 years old with low miles, and that was well maintained with all proper documentation is the right purchase. Especially getting it at an awesome deal. If you don't put an insane amount of miles on it then in 5 years you won't lose much to deprecation.

It's also not smart to spend a lot of money on a car because of sales tax & registration fees(for ones that go off value of vehicle) and personal property tax(see before), and even crazier to buy cars on a regular basis(sales tax).

A lot of our friends have $600/mo car payments. WHY? They also have multiple cars. WHY? You can only drive one at a time. Goodness. Our neighbor has 8 cars and there's only 2 people living there. WHY? I wouldn't buy a brand new vehicle that isn't fully loaded when you could wait 5 years and buy the fully loaded version for way cheaper.

There is 2 of us and we have 2 cars(paid with cash) and we might downsize to 1 car since we work the same hours and spend a lot of time together.

The good news about buying a car with cash and that's used is for one it won't depreciate much and for two when you sell it every penny of it is yours. When you buy a brand new vehicle w/ a loan you are out whatever it has depreciated plus whatever you owe on it. Not much of it is yours.

I would be a 5 year old vehicle, keep it to 10 years, then rinse and repeat.

Dave76
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Re: New car every 5 years vs 10

Post by Dave76 » Thu Dec 26, 2013 3:00 pm

sambb wrote: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


Too many of today's automobile designs have large blind spots, which has made these monitoring devices necessary.

simpsonlang
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Re: New car every 5 years vs 10

Post by simpsonlang » Thu Dec 26, 2013 3:27 pm

Dave76 wrote:
sambb wrote: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


Too many of today's automobile designs have large blind spots, which has made these monitoring devices necessary.


Those little hotspot mirrors you can add to existing mirrors are great. If you have a large vehicle like a van or suv replacing the mirrors with the larger tow versions give great visibility. I check instinctively by turning my body when changing lanes but the large mirrors plus hotspots helped me spot someone in my blindspot numerous times. A truck with a topper and service VANs have the worst blindspots.

sambb
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Re: New car every 5 years vs 10

Post by sambb » Thu Dec 26, 2013 3:33 pm

My point about the safety advances, is that it is worth it financially for me to get a car with them to have maximal chance of accident avoidance. For this reason, I don't mind trading a car earlier. I cannot imagine, once having them, living without them in a 10 year old car..

On the other hand, I don't think you have to buy an European expensive car (>50k) to get them. They can be had in cars in the ~25-35k range, which may be slightly above the US average.

I would like to mitigate risks to my financial portfolio from liability. I look at a car purchase in this regard. Same reason I have Bluetooth in the car.

Of course, there are those who never need them because of environment or driving habits. I love ABS brakes, blind spot monitors, Bluetooth. etc. My habits won't change, so why not have them.

simpsonlang
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Re: New car every 5 years vs 10

Post by simpsonlang » Thu Dec 26, 2013 3:37 pm

sambb wrote:My point about the safety advances, is that it is worth it financially for me to get a car with them to have maximal chance of accident avoidance. For this reason, I don't mind trading a car earlier. I cannot imagine, once having them, living without them in a 10 year old car..

On the other hand, I don't think you have to buy an European expensive car (>50k) to get them. They can be had in cars in the ~25-35k range, which may be slightly above the US average.

I would like to mitigate risks to my financial portfolio from liability. I look at a car purchase in this regard. Same reason I have Bluetooth in the car.

Of course, there are those who never need them because of environment or driving habits. I love ABS brakes, blind spot monitors, Bluetooth. etc. My habits won't change, so why not have them.


I wonder how well the smartphone apps work as a cheap stopgap measure?

http://www.motorauthority.com/news/1060941_ionroad-app-brings-collision-avoidance-to-your-smartphone-video

inbox788
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Re: New car every 5 years vs 10

Post by inbox788 » Thu Dec 26, 2013 4:43 pm

BrandonBogle wrote: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.

I have automatic temperature control, but most of the time, I'm still fiddling with the dials. It's never cold enough on a warm day, or it's too loud or it's coming out of the wrong vents, or it's fogging up the windshield, etc. Maybe luxury or newer automatic controls are smarter, but it's no mind reader.

As far as new car vs 5 year old car, on average, the new car will cost a little more, but it's a new car and i worth a little more. The actual costs for the new car are fairly stable and predictable, whereas the used car will have higher variability in costs. Depending on what assumptions and estimates you use for those variable, you'll wind up with little difference, some difference or big difference. You can think of a used car as higher risk, higher reward (value).

About a year ago, I ran some numbers on edmunds TMV, and actually found their assumptions put repair and maintenance costs on a used car (2010 crv) higher than depreciation on a new car (2013 crv). Insurance on the used car was going to be higher, and because mileage improved on the new model, so was gas costs. In reality, my insurance cost is less than half their estimate, and no repair costs, minimal maintenance costs. Assuming the depreciation estimate was fairly accurate, it was the major cost, and everything else was fairly low and equal. Had actuals been closer to their estimates, it would paid off on an annual basis to have bought the new car and in the end, I'd have a 3 year old car vs. a 6 year old car worth less.

sport
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Re: New car every 5 years vs 10

Post by sport » Thu Dec 26, 2013 5:38 pm

When comparing the costs of new vs. used cars, you should consider the make and desirability of that brand. For Toyotas and Hondas, there is so much demand for used ones, that the high prices leave little savings compared to new ones. For less desirable makes such as (fill in the blank), you can realize substantial savings by buying a used model. However, the prices are lower for good reasons. The vehicle you get that way will be less desirable. It may turn out to be a good purchase, but then again it may not.
Jeff

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Leesbro63
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Re: New car every 5 years vs 10

Post by Leesbro63 » Fri Dec 27, 2013 3:50 am

jsl11 wrote:When comparing the costs of new vs. used cars, you should consider the make and desirability of that brand. For Toyotas and Hondas, there is so much demand for used ones, that the high prices leave little savings compared to new ones. For less desirable makes such as (fill in the blank), you can realize substantial savings by buying a used model. However, the prices are lower for good reasons. The vehicle you get that way will be less desirable. It may turn out to be a good purchase, but then again it may not.
Jeff


+1

Valuethinker
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Re: New car every 5 years vs 10

Post by Valuethinker » Fri Dec 27, 2013 5:41 am

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.


Over 40 years.

You buy a new car every 5 years. It costs $30k in today's money (constant). So you spend $240k on cars.

You buy a new car every 10 years. That costs $120k.

Now from that $120k difference you deduct:

- higher maintenance costs for keeping your car longer (perhaps $15k? 3 x $5k?)
- add in insurance savings on an older car
- higher trade in values on a 5 year old car

But the big difference is what happens when you invest that $30k saved every 10 years for say 5% pa. The first $30k is c. 4x as much in 28 years time. Ignoring taxes.

Depreciation is irrelevant in this. All that matters is how much cash you fork out, and the timing of those cash flows. Depreciation is just an accounting concept.

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Re: New car every 5 years vs 10

Post by JoeJohnson » Fri Dec 27, 2013 11:00 pm

Valuethinker wrote:
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.


Over 40 years.

You buy a new car every 5 years. It costs $30k in today's money (constant). So you spend $240k on cars.

You buy a new car every 10 years. That costs $120k.

Now from that $120k difference you deduct:

- higher maintenance costs for keeping your car longer (perhaps $15k? 3 x $5k?)
- add in insurance savings on an older car
- higher trade in values on a 5 year old car

But the big difference is what happens when you invest that $30k saved every 10 years for say 5% pa. The first $30k is c. 4x as much in 28 years time. Ignoring taxes.

Depreciation is irrelevant in this. All that matters is how much cash you fork out, and the timing of those cash flows. Depreciation is just an accounting concept.


Depreciation is certainly relevant as it determines the cash inflow when you trade the car. Nobody was calculating depreciation, but we use the concept of depreciation when determining trade-in value. To say it's irrelevant is like saying getting new tires is irrelevant.

You're also assuming cash payments at time of purchase, which may or may not be the case. At year 10, two new cars you maybe have $10k more ($2k/yr) in them than one car. I think $2k/yr is actually on the high side as people greatly underestimate their maintenance costs in yrs 3-10. New cars come with new tires/fluids/etc that won't need to be replaced.

My state taxes purchase price at 5%, but when you trade-in a vehicle you're only taxed at the net amount e.g. $30k car - $15k trade-in = taxed on $15k. The outflow is up front if paying cash, which does have a slight time value of money benefit. Yearly registration is my state is based on weight of vehicle and is the same amount each year until year 7, so not a lot of benefit there.

I think it's a lot closer argument than most believe. It's all about what you value. A lot people value having a nice car and technology.

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Re: New car every 5 years vs 10

Post by Dave76 » Fri Dec 27, 2013 11:16 pm

JoeJohnson wrote:
I think it's a lot closer argument than most believe. It's all about what you value. A lot people value having a nice car and technology.


When you consider the fact that the average lifespan of a Trabant was 28 years, modern technology seems overrated.
Last edited by Dave76 on Fri Dec 27, 2013 11:28 pm, edited 1 time in total.

john94549
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Re: New car every 5 years vs 10

Post by john94549 » Fri Dec 27, 2013 11:19 pm

As the driver of a proud 1994 Buick, which gets me there and back, it's not a big issue. I have a relative out scouting for a "slightly-used" Chrysler 200, but I'm in no hurry.

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Re: New car every 5 years vs 10

Post by Valuethinker » Sat Dec 28, 2013 4:19 am

JoeJohnson wrote:
Valuethinker wrote:- higher trade in values on a 5 year old car

But the big difference is what happens when you invest that $30k saved every 10 years for say 5% pa. The first $30k is c. 4x as much in 28 years time. Ignoring taxes.

Depreciation is irrelevant in this. All that matters is how much cash you fork out, and the timing of those cash flows. Depreciation is just an accounting concept.


Depreciation is certainly relevant as it determines the cash inflow when you trade the car. Nobody was calculating depreciation, but we use the concept of depreciation when determining trade-in value. To say it's irrelevant is like saying getting new tires is irrelevant.


I allowed for that in the cash inflow, above. Not sure about your tires analogy?

Note that depreciation pa = (cost - residual value)/ years life. The purchase cash outflow is the asset cost. In cash flow terms the disposal (ie the residual value) is treated as a cash inflow. In practice cars don't depreciate straight line, it's more of a curve (higher depreciation expense in the early years).

I find these discussions often go off into depreciation like it's a real cost, but it's not. It's simply a spreading of the cost of an asset over its lifetime. The cash outflow is at the beginning. I agree the residual value of the asset matters-- that's the disposal value.

You're also assuming cash payments at time of purchase, which may or may not be the case. At year 10, two new cars you maybe have $10k more ($2k/yr) in them than one car.


I am not sure what you are getting at, I explicitly assumed constant real price for car (ie a real dollars analysis). That you never buy a car that costs anything other than $30k (in today's money).

I think $2k/yr is actually on the high side as people greatly underestimate their maintenance costs in yrs 3-10. New cars come with new tires/fluids/etc that won't need to be replaced.


I had a cash outflow of $15k -- one major overhaul per car in years 5-10. Maybe that is too low.

My state taxes purchase price at 5%, but when you trade-in a vehicle you're only taxed at the net amount e.g. $30k car - $15k trade-in = taxed on $15k. The outflow is up front if paying cash, which does have a slight time value of money benefit. Yearly registration is my state is based on weight of vehicle and is the same amount each year until year 7, so not a lot of benefit there.

I think it's a lot closer argument than most believe. It's all about what you value. A lot people value having a nice car and technology.


Sales tax point is, I guess, specific. What you are saying is you get a rebate? Ie pay $1500 sales tax for a new car, and then get $750 rebate when you trade it in?

What I was reacting to was the original calculation which didn't seem to fully factor in the costs of buying a new car every 5 years v. buying every 10. The 'value' point is subjective and can be used to weight the argument either way-- so it doesn't help us here. It is specific to the person.

As long as one thinks about it in terms of cash outflows, one can think about the problem clearly.

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tadamsmar
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Re: New car every 5 years vs 10

Post by tadamsmar » Sat Dec 28, 2013 5:05 am

sunnyday wrote: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.


History indicates that safety can increase a lot or a little over a 5-10 year period depending on the advances that are in the pipe. The collapsible steering column, the seat belt, and electronic stability control are the biggies and every other specific advance was ten times less important at reducing fatalities. And seat belts were retrofittable, so there have been really only 2 biggies. Of course, the relatively minor advances can accumulate over time.

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Re: New car every 5 years vs 10

Post by jlawrence01 » Sat Dec 28, 2013 7:27 am

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Last edited by jlawrence01 on Sat Dec 28, 2013 7:31 am, edited 1 time in total.

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Re: New car every 5 years vs 10

Post by jlawrence01 » Sat Dec 28, 2013 7:30 am

jsl11 wrote:When comparing the costs of new vs. used cars, you should consider the make and desirability of that brand. For Toyotas and Hondas, there is so much demand for used ones, that the high prices leave little savings compared to new ones. For less desirable makes such as (fill in the blank), you can realize substantial savings by buying a used model. However, the prices are lower for good reasons. The vehicle you get that way will be less desirable. It may turn out to be a good purchase, but then again it may not.
Jeff



There is a lot of truth to that. In 2007 when I was last shopping for a Toyota Corolla, I was offered three 2005-2007 Toyota Corollas (by private parties) for the same or more than the cost of a NEW 2007 Corolla at the dealer. At that point, why bother?

=========================================================

I saw an interesting statistic from the Missouri DOT yesterday while driving down I-44. 62% of the 700 people killed on Missouri roads were not wearing seat belts.

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Re: New car every 5 years vs 10

Post by Valuethinker » Sat Dec 28, 2013 7:52 am

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.


Here are your cash flows

Scenario 1

But 1 car for $30k. Keep for 10 years

-30,000 Yr 0
yrs1-5 same cash flows so cancels out
-7000 Yrs 6-10 for repairs less lower insurance
+5,000 resale value

PV at a 0% discount rate = -32,000

Scenario 2

-30,000 Yr 0
Yrs 1-5 as above
+10,000 resale value

-30,000 yr 5
Yrs 6-10 as above
+10,000 resale value

PV at a 0% discount rate -40,000

I modelled this as an NPV at a 6% discount rate. Assuming $1500 additional expenditures pa for years 6-10, the NPV of the cash flows are:

-$56,113 for the 2 car option

-$48,681 for the second car option

So the difference in PV terms is about $8,000

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Re: New car every 5 years vs 10

Post by Valuethinker » Sat Dec 28, 2013 8:09 am

jlawrence01 wrote:
=========================================================

I saw an interesting statistic from the Missouri DOT yesterday while driving down I-44. 62% of the 700 people killed on Missouri roads were not wearing seat belts.


In other words, without your seatbelt, all the other safety features in the world (including air bags) don't save you. (we'd have to look at how many of those killed had air bags, to definitively concluded that).

But at first glance, the real delta is your seatbelt. I can remember when compliance was as low as 20-30%.

http://gladwell.com/wrong-turn/

In 1959, Moynihan wrote an enormously influential article, articulating Haddon’s principles, called “Epidemic on the Highways.” In 1965, Nader wrote his own homage to the Haddon philosophy, “Unsafe at Any Speed,” which became a best-seller, and in 1966 the Haddon crusade swept Washington. In the House and the Senate, there were packed hearings on legislation to create a federal regulatory agency for traffic safety. Moynihan and Haddon testified, as did a liability lawyer from South Carolina, in white shoes and a white suit, and a Teamsters official, Jimmy Hoffa, whom Claybrook remembers as a “fabulous” witness. It used to be that, during a frontal crash, steering columns in cars were pushed back through the passenger compartment, potentially impaling the driver. The advocates argued that columns should collapse inward on impact. Instrument panels ought to be padded, they said, and knobs shouldn’t stick out, where they might cause injury. Doors ought to have strengthened side-impact beams. Roofs should be strong enough to withstand a rollover. Seats should have head restraints to protect against neck injuries. Windshields ought to be glazed, so that if you hit them with your head at high speed your face wasn’t cut to ribbons. The bill sailed through both houses of Congress, and a regulatory body, which eventually became the National Highway Traffic Safety Administration, was established. Haddon was made its commissioner, Claybrook his special assistant. “I remember a Senate hearing we had with Warren Magnuson,” Nader recalls. “He was listening to a pediatrician who was one of our allies, Seymour Charles, from New Jersey, and Charles was showing how there were two cars that collided, and one had a collapsible steering column and one didn’t, and one driver walked away, the other was killed. And, just like that, Magnuson caught on. ‘You mean,’ he said, ‘you can have had a crash without an injury?’ That’s it! A crash without an injury. That idea was very powerful.”

There is no question that the improvements in auto design which Haddon and his disciples pushed for saved countless lives. They changed the way cars were built, and put safety on the national agenda. What they did not do, however, is make American highways the safest in the world. In fact–and this is the puzzling thing about the Haddon crusade–the opposite happened. United States auto-fatality rates were the lowest in the world before Haddon came along. But, since the late nineteen-seventies, just as the original set of N.H.T.S.A. safety standards were having their biggest impact, America’s safety record has fallen to eleventh place. According to calculations by Leonard Evans, a longtime General Motors researcher and one of the world’s leading experts on traffic safety, if American traffic fatalities had declined at the same rate as Canada’s or Australia’s between 1979 and 1997, there would have been somewhere in the vicinity of a hundred and sixty thousand fewer traffic deaths in that span.
...

Would Capoferri have lived without an air bag? Probably. He would have stretched his seat belt so far that his head would have hit the steering wheel. But his belts would have slowed him down enough that he might only have broken his nose or cut his forehead or suffered a mild concussion. The other way around, however, with an air bag but not a seat belt, his fate would have been much more uncertain. In the absence of seat belts, air bags work best when one car hits another squarely, so that the driver pitches forward directly into the path of the oncoming bag. But Capoferri hit Day at a slight angle. The front-passenger side of the Aerostar sustained more damage than the driver’s side, which means that without his belts holding him in place he would have been thrown away from the air bag off to the side, toward the rearview mirror or perhaps even the front-passenger “A” pillar. Capoferri’s air bag protected him only because he was wearing his seat belt. Car-crash statistics show this to be the rule. Wearing a seat belt cuts your chances of dying in an accident by forty-three per cent. If you add the protection of an air bag, your fatality risk is cut by forty-seven per cent. But an air bag by itself reduces the risk of dying in an accident by just thirteen per cent.

That the effectiveness of an air bag depended on the use of a seat belt was a concept that the Haddonites, in those early days, never properly understood. They wanted the air bag to replace the seat belt when in fact it was capable only of supplementing it, and they clung to that belief, even in the face of mounting evidence to the contrary.

......

In the early nineteen-seventies, just at the moment when Haddon and Claybrook were pushing hardest for air bags, the Australian state of Victoria passed the world’s first mandatory seat-belt legislation, and the law was an immediate success. With an aggressive public-education campaign, rates of seat-belt use jumped from twenty to eighty per cent. During the next several years, Canada, New Zealand, Germany, France, and others followed suit.

........
Even as late as 1984.... however, a coalition of medical groups finally managed to pass the country’s first mandatory seat-belt law, in New York, and the results were dramatic. One state after another soon did likewise, and public opinion about belts underwent what the pollster Gary Lawrence has called “one of the most phenomenal shifts in attitudes ever measured.” Americans, it turned out, did not have a cultural aversion to seat belts. They just needed some encouragement. “It’s not a big Freudian thing whether you buckle up or not,” says B. J. Campbell, a former safety researcher at the University of North Carolina, who was one of the veterans of the seat-belt movement. “It’s just a habit, and either you’re in the habit of doing it or you’re not.”

Today, belt-wearing rates in the United States are just over seventy per cent, and every year they inch up a little more.



For personal reasons I have an amateur interest in auto safety. Although that cannot bring back the dead.

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TomatoTomahto
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Re: New car every 5 years vs 10

Post by TomatoTomahto » Sat Dec 28, 2013 8:33 am

Seat belt use is such a habit that I put mine on if I'm moving the car 10 feet so that I can snowblow another section of the driveway.

There are many car thefts in our area, but at least a quarter of the local newspaper's police blotter reports indicate that the car was unlocked and the keys were left in the center console. I think insurance should not cover the theft in that case (which will probably only increase the rate of lying). I think something financially painful should take place when you don't wear a seatbelt.

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Re: New car every 5 years vs 10

Post by yatesd » Sat Dec 28, 2013 8:51 am

TomatoTomahto wrote:Seat belt use is such a habit that I put mine on if I'm moving the car 10 feet so that I can snowblow another section of the driveway.

There are many car thefts in our area, but at least a quarter of the local newspaper's police blotter reports indicate that the car was unlocked and the keys were left in the center console. I think insurance should not cover the theft in that case (which will probably only increase the rate of lying). I think something financially painful should take place when you don't wear a seatbelt.


Yes, but the irony of laws and opinion.

I live in PA...

- Need to wear seatbelt in car: on motorcycle no seatbelt, airbag, or helmet is required. :confused

- Can't drink and drive. However, you can't buy beer in grocery stores or convenience stores. However, in restaurants there is no issue. However, most people drive when they leave restaurants :confused

- Turn signal usage seems unenforced

- Small cars are still legal even though statistics prove you are much more likely to die

- Bicycles also require no seatbelt or airbags

The world is complicated...

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tadamsmar
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Re: New car every 5 years vs 10

Post by tadamsmar » Sat Dec 28, 2013 9:10 am

Valuethinker wrote:In other words, without your seatbelt, all the other safety features in the world (including air bags) don't save you. (we'd have to look at how many of those killed had air bags, to definitively concluded that).


ESC is an important safety feature that works largely by preventing crashes altogether. You typically drive on without a scratch on your vehicle. Obviously, preventing the crash can save you even when seat belts and other features that increase crashworthyness or not available or not in use.

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Re: New car every 5 years vs 10

Post by jeffyscott » Sat Dec 28, 2013 9:16 am

Valuethinker wrote:So the difference in PV terms is about $8,000


The OP had made a rough estimate of $5000 over 10 years. This is not much different from your estimate, considering that the Subaru mentioned sells for $26,500 (truecar), so maybe $28,000 with sales tax and your 6% discount rate is, I think, too high with 10 year treasury at only 3% there is no safe way to earn 6%.

Anyway something like a difference of $500-1000 per year seems about right.
press on, regardless - John C. Bogle

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Re: New car every 5 years vs 10

Post by jeffyscott » Sat Dec 28, 2013 9:34 am

jlawrence01 wrote:
jsl11 wrote:When comparing the costs of new vs. used cars, you should consider the make and desirability of that brand. For Toyotas and Hondas, there is so much demand for used ones, that the high prices leave little savings compared to new ones. For less desirable makes such as (fill in the blank), you can realize substantial savings by buying a used model. However, the prices are lower for good reasons. The vehicle you get that way will be less desirable. It may turn out to be a good purchase, but then again it may not.
Jeff



There is a lot of truth to that. In 2007 when I was last shopping for a Toyota Corolla, I was offered three 2005-2007 Toyota Corollas (by private parties) for the same or more than the cost of a NEW 2007 Corolla at the dealer. At that point, why bother?


Even aside from Honda and Toyota, the deal you get on the new car is a big factor, when you end up paying $3000-4000 under "invoice" then it is unlikely that buying a newer used car is going to save much.
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Re: New car every 5 years vs 10

Post by Valuethinker » Sat Dec 28, 2013 1:46 pm

yatesd wrote:- Small cars are still legal even though statistics prove you are much more likely to die


This is getting to the reductio ad absurdum. Because larger cars are also more dangerous to other cars-- more likely to kill people in other vehicles in accidents. So we should all drive a tank? A Hummer? Most countries accept that you can have small cars. Small cars don't generally have the worst accident rates nor the highest fatalities, AFAIK-- partly, for example, because they are more likely to be driven at slower speeds on urban roads.

If we banned small cars, then medium sized cars would be the new small cars. So we'd have to ban them. And, of course, death rates would be going up (because we'd be crashing into people with our bigger cars). And so on ad infinitum.


- Bicycles also require no seatbelt or airbags


Neither does walking. So we should discourage walking? You are reasoning by false analogy. Bicycling safety equipment is mandatory in most jurisdictions. It's an open question whether cycling helmets save lives, though. Wearing a cycling helmet makes drivers drive closer, and cut you less slack, according to researchers.

It is true that we are inconsistent about risk and safety across society. In particular we are much more worried about non-discretionary risks (like radiation poisoning, or chemicals) than we are about much higher probability 'discretionary' risks (we believe we are in control of our risk on the road, but we are not to the extent we believe we are).

What's true in cars is that seatbelts (when used) seem to save lives, far and above other safety measures. It is therefore worth jurisdictions having laws to compel seatbelt usage-- because of the cost to society of serious injuries and death in auto accidents.
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Re: New car every 5 years vs 10

Post by Valuethinker » Sat Dec 28, 2013 1:53 pm

tadamsmar wrote:
Valuethinker wrote:In other words, without your seatbelt, all the other safety features in the world (including air bags) don't save you. (we'd have to look at how many of those killed had air bags, to definitively concluded that).


ESC is an important safety feature that works largely by preventing crashes altogether. You typically drive on without a scratch on your vehicle. Obviously, preventing the crash can save you even when seat belts and other features that increase crashworthyness or not available or not in use.


There is an interesting concept in traffic safety and road design 'risk budgeting'.

There's ample empirical evidence apparently that if you straighten a road, say, the road death rate doesn't drop, the easier driving conditions cause people to drive faster, and so have more lethal accidents (or more deaths when they do have accidents). Human beings have a 'risk budget' and if you save on risk in one area, they unconsciously compensate. This is held (and I've seen it happen) to be a factor in the poor accident record of SUV type vehicles-- the drivers are too comfortable and protected, detached from the road conditions-- I have seen drivers on a suddenly iced highway (freezing fog) just plough on ahead, the 4x4 lets you *increase* your speed more easily, but it doesn't give you any better *stopping* distance.

This is apparently true even of quite subtle road safety changes, like mandatory wearing seatbelts. Or cyclists wearing helmets (drivers drive closer to them and are more aggressive towards them).

The engineers and psychologists who discovered this have been quoted as saying 'the best traffic safety measure is a spike in the centre of the steering wheel'.

I don't know how we square that with long term declines in traffic fatality rates, although it does underline the importance of unconscious societal change, the degree to which our behaviour is driven by a sort of collective gestalt, maybe bad driving has become more unfashionable?, but from what I have read there is a lot of empirical evidence for it. The whole MADD thing came from 'nowhere' in the early 80s, became one of the most powerful lobby groups in America (they moved the drinking age) and triggered a whole culture change (similar things happened in many other countries).

The next phase will be computer controlled cars. It's coming because the traffic congestion problem in places like California is now so bad that they have to grab the best solutions. Cars that will decide you are driving dangerously, and take control (anti lock brakes do this already). Conversely, they'll be scary to be in, because they will drive a lot closer and faster under some conditions than you or I would.

If you look at the next phase of in-cabin telemetry, where you get a lower insurance rate if you let them monitor your driving, then you can see where this goes. Pretty soon all below average risk drivers will have these things. That will drive up rates for above average risk drivers, and eventually it will get prohibitively expensive *not* to have a little insurance minder in your car.

I know what they did in France. They started enforcing speed limits and traffic laws. This was seen as impossible, and un French. But they did it, and the road death rate dropped. Whole societies can change in quite surprising ways: they cross a 'tipping point' and lo, behaviour changes. We may be the planet's most advanced primate and a long way from the plains of Africa, but a primate we are, with many of the same group dynamics.
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Re: New car every 5 years vs 10

Post by abuss368 » Sat Dec 28, 2013 2:01 pm

The one thing I was always taught was the lost Opportunity Costs. The ability to invest in other ventures.
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Re: New car every 5 years vs 10

Post by Valuethinker » Sat Dec 28, 2013 2:06 pm

TomatoTomahto wrote:Seat belt use is such a habit that I put mine on if I'm moving the car 10 feet so that I can snowblow another section of the driveway.

There are many car thefts in our area, but at least a quarter of the local newspaper's police blotter reports indicate that the car was unlocked and the keys were left in the center console. I think insurance should not cover the theft in that case (which will probably only increase the rate of lying). I think something financially painful should take place when you don't wear a seatbelt.


In some jurisdictions you pay a nasty fine.

http://en.wikipedia.org/wiki/Seat_belt_ ... _in_Canada

$240 in Ontario. And, not coincidentally, a 96% compliance rate.

http://en.wikipedia.org/wiki/Seat_belt_ ... ted_States

New York is $135 after charges according to this.

There's no US state with below an 80% compliance rate (I can remember in the early 80s when there were states with 30% compliance rates, if that).

Note that people don't believe accidents will happen to *them* (similarly, something like 80% of Americans believe they are above average drivers, so presumably they don't believe they can cause accidents, either). So greater penalties if people have accidents, won't have much impact on behaviour (people significantly underestimate their lifetime risk of being in a severe car accident).

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Re: New car every 5 years vs 10

Post by Valuethinker » Sat Dec 28, 2013 2:07 pm

abuss368 wrote:The one thing I was always taught was the lost Opportunity Costs. The ability to invest in other ventures.


Your discount rate in a Net Present Value calculation is to factor in opportunity costs.

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Re: New car every 5 years vs 10

Post by tadamsmar » Sun Dec 29, 2013 2:09 pm

Valuethinker wrote:Small cars don't generally have the worst accident rates nor the highest fatalities, AFAIK-- partly, for example, because they are more likely to be driven at slower speeds on urban roads.


If you look at the US insurance data for Personal Injury and Medical Payments (these categories are about the passengers in your car) small cars are worse, but its not a sure thing:

http://www.iihs.org/iihs/topics/insuran ... nformation

for 2010-2012 the Charger is the worst of the large cars, it's a large car that draws reckless drivers. Perhaps because it was featured in the old TV show Dukes of Hazard.

All the mini cars are much worst than average. There is a definite pattern that favors the larger vehicles.

But maybe the data is skewed, perhaps younger less experienced drivers drive the small cars.

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Re: New car every 5 years vs 10

Post by TomatoTomahto » Sun Dec 29, 2013 2:31 pm

Thanks, tadamsmar, interesting link.

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Re: New car every 5 years vs 10

Post by sunnyday » Sun Dec 29, 2013 2:54 pm

Valuethinker wrote:
But the big difference is what happens when you invest that $30k saved every 10 years for say 5% pa. The first $30k is c. 4x as much in 28 years time. Ignoring taxes.



A $30k difference every 10 years seems far too high. My calculations were around $5k for a 10 year period. Sure, $5k will grow over time at 5% but my point is that $500 a year isn't that much. It's not going to make or break retirement for most. The savings will be even smaller of course if we calculate them for something like a Honda Fit or Honda Civic.

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Re: New car every 5 years vs 10

Post by Dave76 » Sun Dec 29, 2013 5:35 pm

tadamsmar wrote:
Valuethinker wrote:Small cars don't generally have the worst accident rates nor the highest fatalities, AFAIK-- partly, for example, because they are more likely to be driven at slower speeds on urban roads.


If you look at the US insurance data for Personal Injury and Medical Payments (these categories are about the passengers in your car) small cars are worse, but its not a sure thing:

http://www.iihs.org/iihs/topics/insuran ... nformation

for 2010-2012 the Charger is the worst of the large cars, it's a large car that draws reckless drivers. Perhaps because it was featured in the old TV show Dukes of Hazard.

All the mini cars are much worst than average. There is a definite pattern that favors the larger vehicles.

But maybe the data is skewed, perhaps younger less experienced drivers drive the small cars.


There are exceptions...

http://www.youtube.com/watch?v=oF4phDLfGF4

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