Where's the sweet spot on a car

[Jerry1]

I've been doing a lot of reading and see a general consensus that a couple year old lower mileage car is a good option. This makes sense to me, but I'm looking for some numbers and methods to get the cost down yet drive a reliable car.

The past several years, I've been leasing. Mostly 2 years 50,000 miles. Get that for about $550 per month and you're driving for around 27 cents per mile. This seemed pretty good to me because I was driving that much and really liked driving new cars and having virtually no repairs. My current lease is a truck for 2yr/30,000mi for $255/mo = about 20 cents per mile. Probably a little closer to 22 cents since I used reward points as a down payment.

However, now I'm moving into retirement and I'm not sure the equation hold up. I'm probably going to drive less than 10,000 per year and my wife even less. I'm looking to have two cars (one nice/newer and one just to get around in). I'm focused on the newer one. I'm finding it hard to see it costing less than the 25 - 30 cents I've been spending. Simple calculation - 2 year old car, $20,000 - would have to drive 100,000 miles to get the cost in the 20 cent range and that doesn't include repairs.

So, does anyone look at their purchase in terms of cost per mile? If so, do you have a sweet spot? For example, buy a 2yr old car, drive two years and sell before problems and while the value is still there. Or, drive it into the ground?

 

[RobbieB]

Drive it to the dirt. Get a 2 yr old reliable and drive it till it dies.

Or almost. I bought an 83 TBird in 85 with 23,000 on the ticker and sold it for $500 with 260,000 miles on it.

 

[pb4uski]

For years I bought gently used 2 year old cars with about a year/12,000 miles left on the manufacturer warranty. I saved a lot.

But when I went to replace my vehicle in 2006 I found that the discount to new was not very significant... I've bought new since then.... I get the thrill of a brand new car plus a better/longer warranty.

For example, I looked at 2 year old Subaru Outbacks last fall with ~$20k miles and they were ~$26-27k and I bought new for $29.5k. I found the same thing with trucks... new seemed to be only a little more than gently used... the savings were not attractive.

I usually keep them up nice and trade them around 100-125k miles unless they start giving me problems.

 

[48Fire]

A smart guy I work with just bought a Ford Fusion, 2 years old, 20,000 miles, and he described it as the "sweet spot". I may be in the market for another car soon, but I may just buy new. Buying some unknown problem is something I did before ER.

 

[RobbieB]

That's one of the bene's of buying 2 yr used, someone else fixes all the "unknown problems" so you don't have to.

 

[pb4uski]

Buying new the manufacturer fixes any "unknown problems".

 

[RobbieB]

You mean by telepathy? Or do they actually have to happen while you are driving and you have to drop it off at the dealer and waste some of your time?

 

[Bamaman]

I worked for a major automobile manufacturer for 24 years, and one of my jobs was to teach dealers how to lease cars and trucks. I'm a car guy.

I agree about the sweet spot being 2 years. But it goes a little deeper than that. I'm looking for one of the most reliable cars on the market--and one that holds it's value in the long run.

Right now, we have a 2 year old Ford Explorer XLT as a road car, and it's great to haul grandkids around in. My 2008 Lexus IS250 has 111K miles, and it's a very high quality car that easily has another 111K miles left--and it's still absolutely beautiful. I purchased a Honda Civic SI for my daughter, and Civics are tops in the "compact" class--but it's really more mid sized. Needless to say its a value leader. And any family needs a pickup truck, and mine is a 2003 Ford F250 diesel--scheduled to wear out when I'm 95 years old.

Other vehicles I'm big on are the Honda Accord, Nissan Altima and Toyota Camry as stylish, great driving and very economical vehicles. There are other vehicles out there too that fill the bill. Modern SUV's are another solid value in transportation, and they're just about all good vehicles.

I pay no attention to cost per mile. I'm after reliability and total value in the long run. I also want something that's fun to drive.

 

[Car-Guy]

Buying new the manufacturer fixes any "unknown problems".

+1

I usually sell/trade my "daily drivers" before the warranty expires. Maybe not for LBYM types but it works well for me. I've got a number of 40+ year old collectables but I like the latest and greatest for my daily drivers.

 

[Rich]

Wife and I own four cars. Keep two in Cape Cod and two in AZ. All bought used; two Jeep Wranglers (2009 and a 2011), a 2001 Lexus RX-300 and a RAV4 2001(wife’s cars). Lots of miles on the older models, somewhat less on the Jeeps. No major/unusual problems with any of them. I do keep up on maintenance very carefully. Noticed the RAV4 had an eight year old battery in it so I replaced it today. Not a “had to” but rather a “want to.”

I’d have no issue buying new for my next car, but will see the price difference between a two year old model and a new one before deciding which one makes the most economic sense.


Rich

 

[travelover]

I plan to buy my next car new. I drive about 9,000 miles a year, cars last 200,000 miles and I'm 64. It should just about come out even.


Sent from my iPad using Early Retirement Forum

 

[enginerd]

I think it's hard to compare against your previous higher mileage leases, the yearly depreciation gets divided over a greater number of miles. Driving less than 10,000 per year, your car will depreciate faster because of its age rather than its miles driven. This should all be figured into the lease cost. Also, remember in your comparison that a 10 year old car with 100,000 miles will still have quite a bit of value left.
If you don't like the idea of having a 10 year old car and plan to need something different every few years. Then it's really just a toss up between leasing or buying. It depends on the individual deal and the terms you can negotiate.

 

[samclem]

For example, buy a 2yr old car, drive two years and sell before problems and while the value is still there. Or, drive it into the ground?

Some cars (Toyotas, Hondas, etc) depreciate so slowly that it's almost the same price to get a new one. And they routinely run for 200K miles before they start to decline in reliability. Without a daily commute to work, you might find that 200K miles is a darn long time. So, since it sounds like you are starting to do the math on this stuff, I'd recommend that you seriously evaluate how much happiness you really get from that new car smell every few years, and if you could get more happiness by spending the money on some other thing.

 

[CaliKid]

A lot of cars can easily be purchased at 15-20% off window sticker when new so sometimes buying 2-3 years used may not be that much cheaper. I would always look at new options before buying lightly used. Then you get new car smell too!

 

[sengsational]

My formula is to make a list using the Consumer Reports auto issue (to select only the mkst reliable models), go to Carmax to get an idea what's around that's in the 2 year old range (they don't have many older cars there), then shop the individual seller market. If I find something, I might get it, or might end up back at Carmax.

Might sound like I do that often, but no, I drive 'em till they drop. It's just that DW, DD and I all had car transactions in the last 5 or so years.

 

[Texas Proud]

To OP....


One of the problems (as mentioned by someone else) is that your mileage is changing big time... so you cannot compare cost per mile on your old mileage on a lease to cost per mile on your new mileage for purchase....


So, I will make up number and you can get real one... Say you want to lease a Camry.... I just looked it up (so real numbers) and it cost $199 per month plus $1999 at signing for 36 months.... so.. $200 X 36 + $2000 / 36000 is 25.555 cents per mile... if you only drove 30,000.... it is 30.667 per mile....


Now, after 3 years you can buy the car for $14617.... but you can drive it for at least 100,000 miles or 14.617 cents per mile... and you would still have some value in the car so it is really less than that...

 

[Sunset]

Our driving dropped like a rock after retirement for most years, so I know I could buy a car and 20 years later it would be at 100K miles.
So leasing would be dumb for me as I'd feel I'm paying $200/mo for the car to sit in the garage most of the days.

 

[Ronnieboy]

But when I went to replace my vehicle in 2006 I found that the discount to new was not very significant... I've bought new since then.... I get the thrill of a brand new car plus a better/longer warranty.

For example, I looked at 2 year old Subaru Outbacks last fall with ~$20k miles and they were ~$26-27k and I bought new for $29.5k. I found the same thing with trucks... new seemed to be only a little more than gently used... the savings were not attractive.

+1

Not only did I notice the above, but when people compare 'gently used' vs new they compare MSRP for new and lowest trade in value to show the huge difference in savings. Well most decent gently used cars are not at lowest trade in value and I have never paid close to MSRP for a new car.

I do all my research at home, determine what I feel is a fair price for the car, compare inventory and then go on the test drive, offer what I want and if they don't want to sell it for that much, I leave. I will give them my contact info and say when you are able to sell the vehicle for XXX then call me, I barely made it to the first traffic light on the way home before I was called back for the last sale.

ETA: I forgot, the sweet spot is right in the middle, between the rear wheels.

 

[travelover]

..........
ETA: I forgot, the sweet spot is right in the middle, between the rear wheels.

When I was a lad, the back seat was a sweet spot. Especially in drive-in movies.

 

[MichaelB]

When I was a lad, the back seat was a sweet spot. Especially in drive-in movies.

They had motion pictures back then?

 

[travelover]

They had motion pictures back then?

Yes, but I don't think they were talkies, yet.

 

[Big_Hitter]

So, does anyone look at their purchase in terms of cost per mile? If so, do you have a sweet spot? For example, buy a 2yr old car, drive two years and sell before problems and while the value is still there. Or, drive it into the ground?

no. not ever. I look at my purchase in terms of how good of a deal I'm getting compared to MSRP (or KBB if used) and how much fun I'll have driving it.

 

[RE2Boys]

In my experience, when shopping for value cars has been:

1. Two to four year old low mileage cars.
2. Do not buy high demand vehicles (whether it is body style or trendy).
3. Prefer cars that depreciate quickly as they are not in demand, but also stay away from those that appear to be troublesome. Usually means stay away from Fiat/Chrysler products.

My best values in last 20 years have been minivans (but not Toyota or Honda or Chrysler).

Be very patient in shopping. It usually has taken me months to find an acceptable vehicle at a good price.

Current fleet:
2011 Kia Sedona minivan, purchased in 2013 with 8K miles for $18K
2012 Hyundia Sante Fe AWD purchased in Jan 2016 with 40K miles for $15K, added new tires, minor cosmetic issues I can easily live with.
2010 Mercury Mariner AWD purchased in May 2016 with 36K miles for $13.2K, needs tires.

My observation has been that if your looking for a Honda, Toyota, or Subaru, you may as well buy new, the price differential is not there to bother with a few year old version.

 

[brett]

We bought a full load new 97 Camry. Drove it for 18 years and now our son has had it for the past two years. Just under 250K miles. Perfect shape, have never burned oil, etc.

Bought a three year old full load Accord in 2010. It had 23K miles on it. Bought it on the lot but called the previous owner first (long story). We had been looking a new one. The used one was about 60 percent of the cost of the new one. We expect to keep this for at least another 10 years. We do not put much mileage on the unit. When we were shopping our target vehicles were Camry, Honda, and possibly Mazda 6. Very satisfied that we went this route. Why incur the first few years of depreciation expense?

 

[euro]

For years I bought gently used 2 year old cars with about a year/12,000 miles left on the manufacturer warranty. I saved a lot.

But when I went to replace my vehicle in 2006 I found that the discount to new was not very significant... I've bought new since then.... I get the thrill of a brand new car plus a better/longer warranty.

For example, I looked at 2 year old Subaru Outbacks last fall with ~$20k miles and they were ~$26-27k and I bought new for $29.5k. I found the same thing with trucks... new seemed to be only a little more than gently used... the savings were not attractive.

I usually keep them up nice and trade them around 100-125k miles unless they start giving me problems.

That's a very good point - I find the same holds for me too. The major reason for that is that I always go for the lower end trims (fewest extra gizmos) when I buy new, while most of the used cars tend to be more decked out versions that started at a much higher price. Since I don;t need all those extras, I'm better off buying new, stripped down models