Trade or Keep Car

[marko]

I'd like to ping the collective wisdom of the forum here.

Broadly, my question is whether trading in vs keeping a car is "actuarily neutral".

I have a 2009 Mercedes that I bought in 2011 as a Certified Preowned for ~$35K. My original plan was to trade it in in two years as it neared the end of the warranty. It is still on the original 5 year warr.

My idea was to get another 2 yr old CPO car using a good trade in value of the old one and always have a car under warranty. (repairs on these cars is $$$)

Now I'm wondering if I should keep it longer.

But my real question is..."does it matter?" financially...as time goes on the value (trade in) goes down and down, and it is out of warranty and eventually you have to come up with big bucks again to get a new one.

Am I better putting up ~$5K every two years for new CPO?

Again, the question is not reallly about 'running it into the ground' but more about is it a financially neutral proposition no matter what you do?

 

[REWahoo]

Googling "buy a new car or keep the old one" brings up a lot of hits that confirm my personal experience - keeping your car is the better financial decision, usually by a large margin.

Should You Keep Your Old Car?
Make your car last 250,000 miles - 1 - vehicle maintenance - MSN Money
Should I keep my old car or buy a new one? | Your Smart Money Moves

 

[Gotadimple]

Warranty: what does it cover? I am curious about this being the decision point. Does your warranty cover brakes? tires? alternator? belts? alignment? water pump? These are the things you will likely spend money on.

Generally they aren't covered by a warranty, so why is the decision to buy a replacement vehicle hinge on the remaining amount of time on the warranty?

 

[FinanceDude]

I'd like to ping the collective wisdom of the forum here.

Broadly, my question is whether trading in vs keeping a car is "actuarily neutral".

I have a 2009 Mercedes that I bought in 2011 as a Certified Preowned for ~$35K. My original plan was to trade it in in two years as it neared the end of the warranty. It is still on the original 5 year warr.

My idea was to get another 2 yr old CPO car using a good trade in value of the old one and always have a car under warranty. (repairs on these cars is $$$)

Now I'm wondering if I should keep it longer.

But my real question is..."does it matter?" financially...as time goes on the value (trade in) goes down and down, and it is out of warranty and eventually you have to come up with big bucks again to get a new one.

Am I better putting up ~$5K every two years for new CPO?

Again, the question is not reallly about 'running it into the ground' but more about is it a financially neutral proposition no matter what you do?

I think it all comes down to personal preference. My mechanic has his own take: "If you can't afford the repairs on a Mercedes, don't buy one"......

 

[marko]

Warranty: what does it cover? I am curious about this being the decision point. Does your warranty cover brakes? tires? alternator? belts? alignment? water pump? These are the things you will likely spend money on.

Generally they aren't covered by a warranty, so why is the decision to buy a replacement vehicle hinge on the remaining amount of time on the warranty?

I don't view it as a major decision point (and another poster's comment implies to me that I wasn't clear on that).

It is a factor in that for the past 35 years, I always bought a new Benz every two years.

As part of my RE downsizing, if I'm buying a 2 y/o S-Class Benz, I like the idea of being covered for the major 'surprises' that can come from a pre-owned car....unseen engine/transmission/electronics problems, etc.

As noted, the warranty is the balance of the original new car warranty.

So, back to my stated concern, "is it actuarily neutral"? One reply so far says 'no...keep the car'.

I CAN afford the repairs, I'd just rather have Stuttgart pay for them...

 

[unclemick]

My is a Chevy(2006) at 124,000 miles. The guy at the Chevy place looked at littled pissed of when I told him it was a great advertisement for Toyota.

Front wheel bearing, Fan motor control doo hickeys to make the A/C work for my trip to New Orleans.

heh heh heh - I do read those articles on keeping cars longer, five year cost of ownership, etc, and feel better perhaps a little.

But after 18 years of ER the lust to get wild and frivolous and buy that newer(not new) BMW or other sports car does surface occacionally.

 

[Gearhead Jim]

On another forum, there was a discussion about the costs of Mercedes ownership.
Several long time MB owners said they would never own a MB that was not under warranty, claiming the parts and labor costs were exhorbitant. They also said that using an independent shop (if there is a good one in your area) reduces the cost significantly but the cars are still extremely expensive to repair or maintain.

Of course, trading frequently may be expensive because of depreciation, though buying used will help.

No personal experience here.

 

[Independent]

I'm not in the S-Class league. I do know that every time a dealer turns a car over, he needs to cover his expenses and wants to make a profit. The more frequently you trade, the more frequently you pay a dealer for his trouble. (We used to have a dealer who posted here, not sure if he's still around. My guess for typical cars is a $1,500 margin, no idea what it would be on your car.)

I'll guess that the expected cost of repairs is embedded in the buying/selling prices. So there is no best segment of the car's lifetime that non-mechanics can identify.

Toward the end of the car's life, reliability begins to trump price for most people. So there may be a financial window there for someone who is very cost sensitive and can live with unpredictable down time. That doesn't sound like you.

 

[Andre1969]

What kind of Benz are we talking about here? I've heard that with the German luxury cars, the smaller ones, like the BMW 3-series, Audi A3 or A4, and Benz C-class aren't too horribly expensive to maintain. But if you move up to the 5-series/A6/E-class, or get a high performance version like an AMG or whatever, they can get expensive. And moving up to the top of the line, like an A8, 7-series, or S-class can get downright obscene, once the warranty runs out.

If nothing else, I'd say if you buy a 2-year old Benz every two years, versus a new one every two years, you're definitely saving some money.

Cars tend to last a lot longer nowadays than they used to, but I think 100,000 miles is still a psychological point for a lot of buyers, and once your car hits that mileage, it'll probably take a big hit in resale value.

 

[Live And Learn]

I have a Ford, but just bought it (a 2010 still under warranty) and bought a 10 yr 100k incremental warranty at the time of initial purchase. Bumper to bumper - cost about 2k. doesn't cover normal maintenance, but maintenance is a known and budgetable expense.

Since the Mercedes is still under original factory warrantee perhaps you can buy an extended warrantee and solve your own debate

 

[Koolau]

But after 18 years of ER the lust to get wild and frivolous and buy that newer(not new) BMW or other sports car does surface occacionally.

Or Vette! (Heaven, and DW help me.)

But, back to OP for a second. You probably know this already, but the owner cost of most used vehicles actually goes down for several years as the depreciation takes its toll. IOW buying a 3 year old used car lowers the owner's overall cost of ownership vs buying a new one and keeping it the same number of years/miles. Also, "trading in" is usually more expensive than selling the car yourself and then buying whatever you had in mind for cash. Finally, a warrantee is similar to an insurance policy. You DO pay for your repairs, but you do it over time. Sometimes you win and sometimes you lose as far as what you end up paying. Don't forget that a good insurance company plans to come out ahead on the deal, so while a warrantee is nice to have, you DO pay for it.

With all these and perhaps some others, I don't see any trade as being "neutral". It's going to cost you vs. keeping the old one longer - assuming average repair costs. If your crystal ball is telling you that your "old car" is about to do a Blues Mobile imitation, I suppose it would be good to get rid of it.

Summing up: In theory, keeping a car longer lowers the cost of ownership (within limits and with a bit of luck). As always, YMMV.

 

[samclem]

So, back to my stated concern, "is it actuarily neutral"? One reply so far says 'no...keep the car'.

I CAN afford the repairs, I'd just rather have Stuttgart pay for them...

I think deep down you probably know the answer--Stuttgart isn't paying for the repairs. They were paid for in advance by buyers who paid extra for the car to get the warranty bundled into the price.

If you live near a good independent MB garage you might be able to save considerably on repairs compared to the dealer's rate.

I vote for keeping the car--from an actuarial basis. Though we must admit that the whole exercise is a bit silly ("which overcoat is a better bargain from a practicality standpoint--this ermine coat or the mink?" )

 

[Texas Proud]

I don't view it as a major decision point (and another poster's comment implies to me that I wasn't clear on that).

It is a factor in that for the past 35 years, I always bought a new Benz every two years.

As part of my RE downsizing, if I'm buying a 2 y/o S-Class Benz, I like the idea of being covered for the major 'surprises' that can come from a pre-owned car....unseen engine/transmission/electronics problems, etc.

As noted, the warranty is the balance of the original new car warranty.

So, back to my stated concern, "is it actuarily neutral"? One reply so far says 'no...keep the car'.

I CAN afford the repairs, I'd just rather have Stuttgart pay for them...

Stuttgart is not paying them... you are... buy spending $5K every two years according to you...

You can get a LOT fixed for that amount of money... and, if something major does go wrong I would bet the the trade-in value of the car does not go down by that much...

Since you want an answer... it is not a wash, buying every two years cost a lot more...

 

[marko]

Thanks folks! Current concensus is running 5-0 on it 'keep the car' with some nice insights to go along with it.

Seems that it is not a neutral proposition.

I do appreciate the input.

 

[73ss454]

I think that it would be much cheaper to buy a warranty than trade the car in. You can roll the dice at this point and pay as you go with the repairs. DW has a 2004 MB and we purchased the extended warranty from MB. It was for 8 years and it ends this year. I know repairs on this car are an arm and a leg but the car only has 20K on it. We don't use it that much as we mostly use my car. We are going to roll the dice and keep the car at this point.

 

[pb4uski]

Would it be better to buy a 2 year old CPO and add a 2 year MB extended warranty (keep the car 5 years with 3 years o MB warranty and 2 years on MB extended warranty) then repeat? I guess it depends on how much a MB 2 year extended warranty costs.

 

[foxfirev5]

I'd keep the car. I have been a huge supporter of US lux cars over the years. i drove the wheels off Caddy Devilles (200K) over a couple years before slowing down. When the time came to buy a new car in '05 my DW wanted a basic Lexus model. Long story short- she took it in for her 90k maintenance, and the total bill INCLUDING A TIMING BELT, was $432. I have changed the oil and this was the first visit to a dealer or repair facility in 7years. The service manager said that they had a recall on the crank pulley and this greatly reduced the maintenance charges. Needless to say, where will she be buyng her next car?

 

[megacorp-firee]

Warranty: what does it cover? I am curious about this being the decision point. Does your warranty cover brakes? tires? alternator? belts? alignment? water pump? These are the things you will likely spend money on.

Generally they aren't covered by a warranty, so why is the decision to buy a replacement vehicle hinge on the remaining amount of time on the warranty?

I think that warranty does cover major parts, but not worn brakes (normal wear and tear), tires and maybe belts, although it might cover that. Parts like water pump, alternator, electrical, ....etc. should be covered. Usually, when you buy a certified warranted car, they make sure the belts, tires and brakes are in good condition. I bought a certified car last year and the dealership even replaced a grill that fell off within the 1st month. They wanted me to be 'happy' with my 'new' car. They even painted my rear bumper when I had brought it in for my 35k servicing and had scratched it. I am really happy with the dealership and their service. They are making it REAL hard for me to buy a car anywhere else.

I think it depends upon how much of a hassle you want to deal with and if it is worth $5k every 2 years not to deal with them. A personal cost/benefit analysis.

 

[brett]

I am a huge believer in keeping a car. But it has to be the right one. Our high end 1997 Toyota import still runs like a top after 170K miles. No mtce issue other than changing fluids at the appropriate intervals, and timing belt. I intend to keep it as long as I can. Replaced my wifes car with a 4 year old high end import label two years ago. Same story. No issues.

For each of five years, my employer provided me with a new domestic vehicle. I tried everything from their high end luxury units to their SUV. The only thing I liked was the air conditioned leather seats. Spent an awful lot ot time at the dealership-the last one had transmission problems as did several others in the fleet. I found a significant difference in the quality of service and service staff between domestic and import dealerships.

 

[flyfishnevada]

Here's my take. It's probably cheaper to keep the car. But not everything in life needs to be calculated and analyzed. If you want a new CPO Benz and you can afford it, buy one. I mean all this figuring is well and good but when it comes right down to it, the numbers should help you come to a decision not make the decision for you. If the numbers are telling you it's sort of a wash, buy the new one. If they are telling you keeping it is the better option but you still want one, flip the bird at those numbers and buy it anyway.

 

[Alexp30092]

Here's my take. It's probably cheaper to keep the car. But not everything in life needs to be calculated and analyzed. If you want a new CPO Benz and you can afford it, buy one. I mean all this figuring is well and good but when it comes right down to it, the numbers should help you come to a decision not make the decision for you. If the numbers are telling you it's sort of a wash, buy the new one. If they are telling you keeping it is the better option but you still want one, flip the bird at those numbers and buy it anyway.

+1. If you are not stressing over 5k every two years and like the car than its not a big deal.

 

[Birchwood]

My brother and I have prob. almost the same income. His taste in everything is just a little bit above mine.

He drive a Lexus and a E-class mercedes, plus a Highlander Hybrid for the winter.

For me it is a Ford F150 Super crew pickup for winter and hauling around and a Honda Accord Coupe for spring and summer.

To him, driving those cars is important, for me it's a total waste. I'll drive
mine till the wheels almost come off, he buy a new one, thinking that that is the only time he can afford one.