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Financial Planning - Financial planning in general. (Moderated)
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Posted by Douglas Johnson on July 7, 2008, 5:37 pm
>How many miles do you put on it? Do you rely on it for your livelihood?
> Can you afford to leave it in the shop at any old unexpected time, and
>be without a vehicle for a day or two?
Just factor a rental into the repair estimates. But as I said, it has been very
reliable. It has had unexpected repairs only once in 13 years. Everything else
could be scheduled.
>
>If I am spending $750/year cash for repairs to a $1,500 car, and I
>replace it with a $5,000 car and reduce my repair bills by two-thirds
>for the next seven years, then I am even or ahead.
You had originally suggested 2 years.
>Otherwise, I still recommend the "replace when
>repairs are 50% of value" rule, it's easy to follow and pretty much
>guarantees cash-flow payback in two years.
Notice that, in your example, the value of the car only shows up as reducing the
net cost of buying the new one. It really has no effect on the fix or replace
question.
A couple of other points. One is that $5,000 Explorer is only going to be 3 or
4 years newer than my $1,500 Explorer. You're going be back on the high
maintenance curve before you've broken even.
Another is that you only do essential maintenance (including essential
preventative maintenance) on cars of this age. Once you have been presented
with a $750 repair estimate, the value of the car declines by $750 until you fix
it. The alternative is to foist it off on some unsuspecting buyer.
-- Doug
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Posted by Mark Bole on July 7, 2008, 8:01 pm
Douglas Johnson wrote:
> You had originally suggested 2 years.
I was just repeating something I'd heard in a business setting years
earlier. Even if the math is a more complicated than I implied at
first, I still think it *sounds* like a really solid and easy rule! ;-)
> Notice that, in your example, the value of the car only shows up as reducing
the
> net cost of buying the new one. It really has no effect on the fix or replace
> question.
Well, what does then? The older the car, the harder parts are to get,
and the less likely you are to find a mechanic intimately familiar with
the model and year. Some cars are so old (yet less than twenty years)
that even when operating to manufacturer specs, they don't pass modern
smog laws in some states.
I'm still claiming there must be *some* point when repair costs
accelerate for an older car. Since older cars (excluding collectibles)
are cheaper, then there would be a strong inverse correlation between
the value of the car and annual repair costs.
> A couple of other points. One is that $5,000 Explorer is only going to be 3 or
> 4 years newer than my $1,500 Explorer. You're going be back on the high
> maintenance curve before you've broken even.
To tie this back to financial planning and the OP, I got three things
out of his message: older car (14 years), high mileage (180K), and
peeling paint. What we don't know, although some hints were given, is
the role this car plays in sustaining his (family's) earning capacity,
and what the condition of non-essential systems (air conditioning,
sound, safety/security, interior coverings and finishes) are. If he
lives in the snow belt, there's sure to be some rust by now.
With those conditions, I'm still advising that after ten years, let's
say fifteen max, it makes sense to buy a newer used car, say in the
five-year old range, and plan to then keep it for another ten years or
so. Others have suggested keeping it for another five years, never
selling it, and at least one other suggestion to trade in a for a newER
(not brand new) vehicle.
-Mark Bole
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Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM THE
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Posted by Daniel T. on July 7, 2008, 11:21 pm
> Douglas Johnson wrote:
>
> > Notice that, in your example, the value of the car only shows up
> > as reducing the net cost of buying the new one. It really has no
> > effect on the fix or replace question.
>
> Well, what does then? The older the car, the harder parts are to
> get, and the less likely you are to find a mechanic intimately
> familiar with the model and year. Some cars are so old (yet less
> than twenty years) that even when operating to manufacturer specs,
> they don't pass modern smog laws in some states.
The first item on your list is the only viable one, and only for
vehicles that are unusual. Honda Civics, even 10-15 year old ones, are
quite common. (Almost 40% of the cars in service in the USA are over 10
years old.) It is generally easier to find a mechanic familiar with an
older car, after all most of them learn their trade on older vehicles!
As for the smog laws, older cars get grandfathered in so the laws don't
apply to them anyway.
> ... it makes sense to buy a newer used car, say in the five-year
> old range, and plan to then keep it for another ten years or so.
> Others have suggested keeping it for another five years, never
> selling it, and at least one other suggestion to trade in a for a
> newER (not brand new) vehicle.
In other words, the suggestions on this group have been all over the
map. :-)
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Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the
Newsgroup.
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Posted by Chip on July 7, 2008, 5:08 am
Mark Bole wrote:
I'm talking about
> the other extreme, the automobile equivalent of dirty jeans with holes
> and a threadbare t-shirt with something mildly obscene on it.
>
>
Veeerrrrry close to my daily attire now that I am retired.
Chip
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Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the
Newsgroup.
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Posted by Don on July 5, 2008, 8:14 pm
> We can afford a new car, without loan, and it won't impact our other
> savings, yada, yada, but I feel crummey having to "throw-away" a
> perfectly good car...
>
> I would appreciate how prudent people who post on this newsgroup make
> such decisions...
I have been told that imported cars like Volkswagens, Toyotas, etc.
last longer and need less maintenance than the big US made-in-Detroit
vehicles. I know little and care less about cars and don't know whether
or not that is true, but it seems like this issue could make a
differences in expenses in the long run. I realize it is nice to
support the local economy, but doing so to the tune of a few thousand
in maintenance expenses might not be prudent. Maybe a US citizen can
save money by dropping patriotism (just temporarily, of course) along
with collision insurance.
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Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the
Newsgroup.
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