Car Purchase -- Deciding When

[Joss]

I manage an 800+ vehicle municiple fleet and have tried for years to build a slick math model to spit out the clear cut turnover point. Though I am totally convinced that it is economic foolishness (right up there with perpetual motion machines) to repair/rebuild indefinitely, I have never successfully completed the model. For me, it turns out to be like stacking sand.

The models I liked the best, though, tried to get there on the basis of ultimate "cost per mile". For instance, we get about 140,000 miles out of our Ford Crown Vic police units. They cost about $20,700 each and this is reduced to $18,000 by selling them at the end. Then the straight cost per mile is 12.9 cents. This increases when you begin to add lifetime repair costs - but not ALL repair costs matter here.

Leave off accidents and consumable "normal wear items". Accident repairs obviously aren't the car's fault. Wear items include scheduled services (oil changes, filters, etc), wiper blades, hoses, belts, tires, brakes rotors and pads. You have to have these whether you have an old car or a new car. Fuel doesn't matter either - IF the replacement has the same consumption rate. If the replacement has better mileage you should factor it in.

But.... the best application of this type of thing is to build it with data culled from a large sample of cars... and then apply it to a fleet on a rule of thumb basis. As someone above pointed out, this doesn't work well with just one vehicle.


A few things to keep in mind:

Technological economy improvements are important and coming closer together every day. 20 year old auto designs are WAY out of date now for economy, reliability, performance and safety.

The idea of perpetual repairs must, ultimately, compete with an auto assembly plant, where it looses badly. Once you imagine repairing your car to the point that there is nothing left of your original vehicle, this becomes clear. You can "rebuild" your 20+ year old car, over time, but an assembly line built the new one on the showroom floor. This is HUGELY different, cost-wise.

Every replacement part you put on requires the labor to first remove the old part. This would only double the labor if repair shops were as ergonomically designed as assembly lines. And if the mechanic you use repeated this specific task over and over and over. And if he had precisely the tools and parts he needs for that specific task. Since this almost never applies, I'd guess the labor to build a car via rebuild costs more like 3-5 times more than an assembly line.

Then there's the cost of your parts vrs the parts an assembly line uses. You go to NAPA or Pep Boys and pay retail. THEN you go back two or three more times because it was the WRONG part. The assembly lines purchase in quantities of hundreds of thousands of units in an entirely different pricing system. They also use "OEM" quality parts... by definition... and there are serously important quality differences in automotive parts.

Then there is the availability of parts for old vehicles. At some point, there just won't be any more NEW parts for that old keepsake. Then you get into the fun world of junkyards and used or remanufactured parts.

The bottom line is that all vehicles must ultimately be replaced, so the only question is when. The answer is before you put money in that you can't get back out. If that car's book value is $10K and you spend $5K replacing the engine, the value is still just $10K and you kept it.... $5K too long.

I just read back through this and it seems to be "all over the place". Sorry if it's confusing. Oddly enough, that's exactly how I have found this subject over the past 15 years.

[FinanceDude]

Quote:

Originally Posted by Joss I manage an 800+ vehicle municiple fleet and have tried for years to build a slick math model to spit out the clear cut turnover point. Though I am totally convinced that it is economic foolishness (right up there with perpetual motion machines) to repair/rebuild indefinitely, I have never successfully completed the model. For me, it turns out to be like stacking sand. The models I liked the best, though, tried to get there on the basis of ultimate "cost per mile". For instance, we get about 140,000 miles out of our Ford Crown Vic police units. They cost about $20,700 each and this is reduced to $18,000 by selling them at the end. Then the straight cost per mile is 12.9 cents. This increases when you begin to add lifetime repair costs - but not ALL repair costs matter here. Leave off accidents and consumable "normal wear items". Accident repairs obviously aren't the car's fault. Wear items include scheduled services (oil changes, filters, etc), wiper blades, hoses, belts, tires, brakes rotors and pads. You have to have these whether you have an old car or a new car. Fuel doesn't matter either - IF the replacement has the same consumption rate. If the replacement has better mileage you should factor it in. But.... the best application of this type of thing is to build it with data culled from a large sample of cars... and then apply it to a fleet on a rule of thumb basis. As someone above pointed out, this doesn't work well with just one vehicle. A few things to keep in mind: Technological economy improvements are important and coming closer together every day. 20 year old auto designs are WAY out of date now for economy, reliability, performance and safety. The idea of perpetual repairs must, ultimately, compete with an auto assembly plant, where it looses badly. Once you imagine repairing your car to the point that there is nothing left of your original vehicle, this becomes clear. You can "rebuild" your 20+ year old car, over time, but an assembly line built the new one on the showroom floor. This is HUGELY different, cost-wise. Every replacement part you put on requires the labor to first remove the old part. This would only double the labor if repair shops were as ergonomically designed as assembly lines. And if the mechanic you use repeated this specific task over and over and over. And if he had precisely the tools and parts he needs for that specific task. Since this almost never applies, I'd guess the labor to build a car via rebuild costs more like 3-5 times more than an assembly line. Then there's the cost of your parts vrs the parts an assembly line uses. You go to NAPA or Pep Boys and pay retail. THEN you go back two or three more times because it was the WRONG part. The assembly lines purchase in quantities of hundreds of thousands of units in an entirely different pricing system. They also use "OEM" quality parts... by definition... and there are serously important quality differences in automotive parts. Then there is the availability of parts for old vehicles. At some point, there just won't be any more NEW parts for that old keepsake. Then you get into the fun world of junkyards and used or remanufactured parts. The bottom line is that all vehicles must ultimately be replaced, so the only question is when. The answer is before you put money in that you can't get back out. If that car's book value is $10K and you spend $5K replacing the engine, the value is still just $10K and you kept it.... $5K too long. I just read back through this and it seems to be "all over the place". Sorry if it's confusing. Oddly enough, that's exactly how I have found this subject over the past 15 years.

I think it's brilliant, makes perfect sense, and is a REAL WORLD example, which is refreshing..........

The only 20 year old car I would drive is a well cared for Ferrari, Porsche or Lamborghini that goes like bat out of hell..........I think that's LBYM versus a new one.............

[free4now]

I love this board... posting this question anywhere else would get a raft of "when the repairs cost more than the cost of a new car", but here everyone realizes that point never happens.

The decision comes down to when the desirability of the old car is too low and you can afford a replacement.

The "desirability" of a car stays very high as long as the car is under warranty and the manufacturer hasn't introduced a replacement model.

I've bought my last two cars new in the first year that model was introduced by the manufacturer. This tends to extend the period that the car looks and feels modern and safe. Also I tend to buy cars whose styling is more futuristic, which extends the amount of time before they start looking dated.

In the case of my last car the event that motivated me to sell was when it was on the verge of failing california smog emission standards and there was a new vehicle (the 2004 Prius) coming available that was much more desirable to me.

[CyclingInvestor]

Quote:

Originally Posted by free4now In the case of my last car the event that motivated me to sell was when it was on the verge of failing california smog emission standards and there was a new vehicle (the 2004 Prius) coming available that was much more desirable to me.

When I own a car, they are usually very used - the last one I bought (now deceased)
had 266k miles on it when I got it. The car before that was retired when it failed its
CA emissions test as a "gross polluter" (no visible exhaust, though), and the state of
CA paid me $1000 to retire it (much more than it was worth).

[Milton]

Quote:

Originally Posted by Spanky When the car starts to require a major repair or frequent small repairs, that's time that I would consider getting another 2-3 years old used car made by Toyota or Honda. I might consider Hyundai since its quality has improved significantly over the years.

Agreed. I have had very good experiences with Toyotas, but if I were in the market I would also consider Honda, and perhaps Nissan or Mazda.

Never a lemon car made by one of the 'Big Three' (Shrinking Three?) manufacturers.

[W2R]

Quote:

Originally Posted by Want2retire Camry Solara is 7 years old with 33,000 miles on it, and up to now it has needed no repairs. Just this week, one of the power windows doesn't seem to work any more.

Quote:

Originally Posted by Moemg The same thing happened to my Camry Solara so I had the dealer check it when I was in for an oil change .They told me it needed a new motor and they would have to order one for $453. I said I'd think about it but guess what ,the window worked fine after they took off the door panel to look at it .It did not need a motor some wire was probably loose . Another dealer rip off story !

As long as this thread has been revived, I thought I'd add that earlier this week my power window fixed itself, too!! I really don't get these magical, self-fixing power windows but I'm pretty happy about it. I didn't do a thing to cause it to start working again. My only hypotheses are a big change in the weather or else just being shaken as I drive around over the potholes here.

I suppose my working power window means that my Solara still counts as being repair-free after 7 years.

[Texas Proud]

Quote:

Originally Posted by Want2retire As long as this thread has been revived, I thought I'd add that earlier this week my power window fixed itself, too!! I really don't get these magical, self-fixing power windows but I'm pretty happy about it. I didn't do a thing to cause it to start working again. My only hypotheses are a big change in the weather or else just being shaken as I drive around over the potholes here. I suppose my working power window means that my Solara still counts as being repair-free after 7 years.

Nano Bots...

[Meadbh]

Quote:

Originally Posted by Webzter This is sort of off-topic, but I think it's handy to tie-in with the actual car purchase. I read about this tip in one of the Motley Fool books and have since used it to help my FIL get a motorcycle and friends with their cars... Basically, sit down and figure out what model and options you want. Come up color options that appeal to you. Then, fax every dealer for that car in your area and outline what year and model you're looking for, what options are necessary and which ones are desired, tell them something to the effect that you're accepting bids for your business and will decide on where to purchase within the week. Also, just tell them that you'll determine how you will pay to purchase the vehicle after you've chosen a dealer. To make the comparison easy, ask for a quote that includes all costs such as tax, title, licensing and anything else. After you have that price, you can expand your search range (say you looked everywhere within 50 miles, maybe go 200 miles out). With those people, tell them the lowest price you've been quoted so far and then ask them if they can beat it. Word the letter nicely, follow up and thank people you haven't chosen. Walk into the winning dealership with the faxed quote and buy your car. No emotions, no bartering, no haggling, and you'll save a ton. When my FIL was here, they were thinking about a 2006 HD Sportster for his girlfriend... the 2007's were out so they thought they'd be able to get a decent deal. Prices in one place they looked were only down $500. We went to a dealership here and they had them marked down $1500 but they'd need to pay to get it railed to Arizona (FIL was in the middle of moving there). I faxed every dealership in the area, every dealer around where they were going to be in Michigan to get his stuff, and where they were going to be in Arizona when he moved in with her. I told them I wanted a 2006 Sportser (I forget the exact model) and preferred color x or y, that we'd determine financing after we selected a dealer, and my current lowest price was $6000. The feedback we got was awesome. Some dealers told us there was no way they could match that price and that it was a great deal. Some offered a similar price but would discount the rail shipping. some offered gear. I think we ended up with a dealership in Michigan that came down another $500 and threw in two helments. all told, not bad for 10 minutes work.

I read about this technique and used it when buying my present car 12 years ago. It put me in the driver's seat. I had dealers calling me with their best deals and I was very happy with the result.

[cute fuzzy bunny]

I went with Cardirect.com on my last two purchases, and i'm a haggler. The deal on the lexus was better than anything I came up with on my own and the honda deal was stupendous. I called the local honda dealer and asked if they'd come close to matching it to save me a bit of a drive and they didnt even call me back.

Smooth transaction...I spec'ed the car I wanted, the dealer that carsdirect had the best relationship with had someone drive that exact car from another dealer, then I went to the selling dealer, signed the papers and was driving hom in the new car within 45 minutes, including the test drive.

[starter82]

Quote:

Originally Posted by free4now I love this board... posting this question anywhere else would get a raft of "when the repairs cost more than the cost of a new car", but here everyone realizes that point never happens.

Huh? Of course that point happens. It might not be easy to determine when it occurs, but it would seem to have to occur. I don't know of anyone who's been driving a car heavily (i.e., realistically) for 4 decades.

[free4now]

Quote:

Originally Posted by starter82 Huh? Of course that point happens. It might not be easy to determine when it occurs, but it would seem to have to occur. I don't know of anyone who's been driving a car heavily (i.e., realistically) for 4 decades.

While it's certainly true that there aren't many 40 year daily drivers on the road here, the reason is not because "the repairs on a 40 year old car cost more than the cost of a new car". It's generally because one of two things happened:

1. A big repair was required that would cost more than the purchase price of a better used car.

2. The owner found the old car undesirable due to reliability or other concerns.

I do agree that there probably is a point perhaps 20-30 years into a modern car's lifetime when it will be more expensive to keep nice than payments on a new car. But that point is mostly irrelevant because anyone except a classic car collector will have sold it a long time ago.

[starter82]

Quote:

Originally Posted by free4now While it's certainly true that there aren't many 40 year daily drivers on the road here, the reason is not because "the repairs on a 40 year old car cost more than the cost of a new car". It's generally because one of two things happened: 1. A big repair was required that would cost more than the purchase price of a better used car. 2. The owner found the old car undesirable due to reliability or other concerns. I do agree that there probably is a point perhaps 20-30 years into a modern car's lifetime when it will be more expensive to keep nice than payments on a new car. But that point is mostly irrelevant because anyone except a classic car collector will have sold it a long time ago.

Exactly. It's all the more reason to focus less on the cost of what the new car will cost.

I didn't say new car or used. Had I, 'new' would have referred to 'different' car.

Yes, I believe that if you go far enough out.... it's not just about how much repairs will cost but also the time that you're without the car (renting a car? paying a friend to drive you around for a few days, etc.?). It's not simply about any one repair but about the total cost. I think it'd be somewhat difficult for a single repair to be more expensive than the cost of a new car (clearly depends on the kind of car). Then again, the Civics of today get worse gas mileage than those of yesteryear. That should be a factor as well.

Also, how high's the resale? Around here, there are several Honda models (and others) that don't drop in value very quickly. I bought a new one (first car) because the used one wasn't much cheaper. Add in the warranty and possible greater dependability, not beatable.

[old woman]

I am 59 and my Dodge Dakota is 10 it runs fine so I will keep it a while maybe in about 6 years if I don't trust it I will buy something new. If I buy new at 65 it might be my last car since I won't commute it shouldn't get 90K miles in 15 years and by then I will be 80 it if last a few more years and dies it may not be worth buying another so maybe i should buy one sooner replace it when I am 75 so I have a nice one the rest of the years I want to drive. Mom got a new one at 77 but she doesn't drive much now probably doesn't have 15,000 miles in 3 years.

[JustMeUC]

I had a 91' Honda Accord that got over 300,000. It was still running like a trooper when it got killed by tree during Hurricane Fran. I averaged about $300-500/year on maintenance including oil changes.

Now I bought a 92' Toyota Camry with 190,000 miles that I bought off my boss for $1800 last year. The interior and exterior were spotless. I knew that he changed the oil every 3000 miles (overkill in my opinion) and he had all maintenance records and I have since put about 30,000 miles on it with just oil changes. I hope to get over 300,000 miles on it. <fingers crossed> I average 30 mpg which I check regularly.

I also have a 2001 Chevy S-10 truck that has 30,000 miles on it. It is basically used for Truck purposes.

I just can not justify buying a new(er) car when there are so many perfectly well maintained older Toyotas and Hondas out there that can easily reach over 300,000 if taken care of. There is no way that I can spend the kind of money on maintenance that you take in depreciation with a new(er) car. I look at a car as a way to get from point A to point B. My cars have the basics, PW, PL, Cruise, AC etc etc....

Sure, It helps that 90% of my miles are highway, but still.... I carry a cell phone and have family nearby that could come to my rescue if I broke down.

[Spanky]

Amazing! >300K miles. We sold our Camry when it had 160K miles. It's possible that it might had been good for another 100K miles.

[Sandy]

Since grad school, I have only gotten rid of cars under 2 conditions:

The car has been wrecked beyond repair. I had one car totaled when a truck hit me while parked, another had a bent frame from a wreck by someone who borrowed it. It had been repaired, but kept wearing out the right front tire every 3-6 months, so I decided it probably wasn't completely safe.

Lifestyle changes: I had a 2 door hatch Mazda 323 that was 13 years old and needed a new clutch. But, I also had two car seats in the back, the twins getting larger, and it was too tight for my DH to get in and buckle them up. We bought a new 01 Honda van - which we will keep and probably give to the twins when they can drive (only 5 more years).

[FinanceGeek]

I tend to buy ex-rental vehicles, they come at ~2/3 of "new vehicle" cost with ~20k miles on them and the balance of the manufacturers warranty. They also tend to come fairly loaded in terms of features, which can be a good or bad thing. They tend to be American made which depending on your opinion can be good or bad.

For a full sized SUV I'd pay around $20k for such a vehicle, at 10% opportunity cost thats $2k per year and I figure another $2k per year for depreciation. So if non-routine maintenance repairs are less than perhaps half that, or say $180 per month I'd keep the vehicle, otherwise I'd get another one. There are second order effects too like higher insurance premiums on a newer vehicle's comprehensive / collision but I haven't included them in my model.

In practice I keep my vehicles around 10 years which gives me around 120,000 miles above and beyond what the rental company put on them. I've done this for many years, did it with passenger cars before SUVs were popular too, and its worked out OK so far.

I've encountered a singularity in my model right now in that gas prices have risen tremendously, making the resale value of my existing SUV @ 15 mpg pretty darned near zero. So, I'm a bit stuck as of now.

As others have said there are tremendous quality and safety improvements trading up to a newer vehicle - in car navigation, LATCH child seat attachment point, side airbags, etc etc etc

[TromboneAl]

One consideration for me was that 1. we live 30 miles from the mechanic's, and 2. I didn't want to break down in the middle of nowhere (which I drive through a lot).

But now 1. I'm retired, so I have the time to take a car in for repairs, and 2. I have a cell phone.

I saw this guy on Jay Leno:

This Volvo has been driven 1,800,000 miles.



It is almost all original, only a few parts replaced, and it's been repainted a few times. The engine was rebuilt once at 680,000 miles.

[TromboneAl]

That info was out of date. He's now driven that car over 2.5 million miles.

[starter82]

He must really love the car.