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Financial Planning - Financial planning in general. (Moderated)
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Posted by dapperdobbs on July 6, 2008, 7:31 am
[snip]
> 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...
[snip]
> Thanks.
> Bhoot Nath
Estimate the cost per year (over its useful life) of a replacement
car, and compare that to the cost per year of keeping your present car
(over its useful life). If you can realize the difference (over the
estimated useful life of your present car) when you sell, then the two
are equal. (I think this is right!:-)
Assuming a new car will be more expensive, and just pulling an example
out of the air:
New - $20,000 + $10,000 repairs over 15 years = $30,000 / 15 = $2,000
per year;
Old - $12,000 repairs over 8 years = $12,000 / 8 = $1,500 per year.
If you can sell for $4,000, then the alternatives are equal (the
$4,000 compensates you for the $500 higher cost per year of the new
car, over the 8 years, after which you would have to buy a new car
anyway). You can adjust for interest on the foregone $25,000, possible
higher insurance, etc.. You also want to include the availability of
replacement parts on older model cars, and how reliable your mechanic
is to give you that information.
The rest is personal preference.
P.S. Did you use car wax on your present car?
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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 albert on July 6, 2008, 7:31 am
>
>..............snip>
> Now the civic paint is peeling, and a cheap repainting at Maaco is
> estimated at $800. The car will hit 180K miles in a few weeks, and is
> due for the major maintenance + the timing belt + water pump stuff
> that is done at every 90K miles. All of this is estimated to be about
> $1500. I estimate tires and brakes also, probably within a year, for
> another $700 or more. So, within a year, it will add up to
> $800+1500+700 = about $3000.
>
> The car is probbaly worth 3500 due to mileage + usual wear and tear
> after 14 years (& some dings), but no mechanical problem. We would
> like to keep this car (we are not itching for a new car smell), but
> does it make sense to put $3000 into a $3500 car? How critical is to
> replace timing belt and water pump stuff every 90K?
>
I find your numbers are probably too optimistic.
Using Edmunds
http://www.edmunds.com/tmv/used/honda/index.html
I did a little test run. Used car pricing varies depending on many factors,
including age, condition and location. I don't know your location, so I
used my zip code [Brooklyn, NY]. I don't know what model you own, color,
etc. So, I picked the highest line 4 door from the 96 model year. I used
175K as the mileage. Given you description of the body's condition, I chose
"average" -- that is a generous description, given your peeling paint and
dings, a dealer or other buyer would see your car's condition as
significantly below average.
I chose "gray" as the color, with A/C, 4 speed automatic and an AM/FM
cassette. The values suggested by Edmunds are significantly below what you
presently think the value of the car is:
-- trade in value -- $639
-- private party sale -- $1094
-- dealer retail -- $1887
Remember, my numbers are all guesswork -- imaginary car, imaginary
location. Keep in mind that you see the car as valuable because of
emotional factors [it always started, never gives trouble, it got us home in
that snowstorm, etc.] -- a competent buyer will consider it sans emotion.
I'd suggest that you do some further research -- use Edmunds, do a google
for Kelley Blue Book, and for NADA. You will get differing numbers
[markets are art, not science]. But I don't think you will get numbers as
high as what you currently project -- any 12+ year old car with peeling
paint and 175K mileage is likely to be difficult for a dealer to resell [and
make a requisite profit from] -- and not all that easy to sell to a private
party for 3.5K cash.
If my surmises are in the ballpark, what I'd consider doing is the
following:
I'd take that $3000 expense money you are projecting and put it towards a
newer vehicle.
Go to Consumer Reports -- read their car buying issue [in libraries, or for
a small fee, you can buy a year's full access to their website -- I
subscribe to both their paper edition and their website, it's quite
worthwhile]. I think you will find their evaluative philosophy and
criteria in line with yours. That will help you get an idea of what is out
there, what is reliable in terms of used cars and new cars, what fills your
needs, what to avoid, what is worth paying for, what realistic cost
projections are, etc.....
I'd consider a new car, or a low-mileage used car no more than 3-4 years
old. If buying a used car, unless I could buy such a car from an individual
I knew, and it was a car whose history I trusted --- I'd purchase it from a
reliable new car dealer. Yes, a new car dealer. The best combination of
used car + new car dealer would be a new car dealer selling the same brand
of used car, or a used car from/manufactured by that dealer's corporate
parent manufacturer [e.g., a Mercury from a Ford dealer, a Honda from an
Acura dealer, etc.].
Yes, buying such a used car would cost more than from a private party or
third party dealer. But......... here's why I'd spend that extra money:
As far as I know, in the real world, a dealer wants to market used cars that
will not give him headaches, or sully his reputation. If he takes back a
car from a lease, or gets it in some other transaction, he will tend to keep
the very best for himself, and let the doubtful and clunker vehicles go to
auction. If he needs used cars for inventory, he shops for inventory with
other dealers he trusts and/or thru his corporate supply chain. In all
cases, he is not looking of for headache vehicles. He does not want a shiny
vehicle that lived thru Katrina, or was hit and reassembled by artisans,
etc. So, in the case of a *reputable* dealer, what is sitting on his used
car lot is likely to be prescreened in terms of quality.
[the above theory goes out the window if you shop with a lousy dealer]......
As for the old car, you can either sell it, or, if you do not want the
aggravation, I like the suggestion that you donate it.
HTH
albert
> --------------------------------------
> 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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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 John A. Weeks III on July 6, 2008, 10:39 am
In article
> The car is probbaly worth 3500 due to mileage + usual wear and tear
> after 14 years (& some dings), but no mechanical problem. We would
> like to keep this car (we are not itching for a new car smell), but
> does it make sense to put $3000 into a $3500 car? How critical is to
> replace timing belt and water pump stuff every 90K?
I am on my 8th Ford Ranger. I have always traded every 2-1/2 years
as the vehicle hits 75,000 miles. That has been expensive, but I
wanted to keep a nice newer truck to drive.
On my last trade in, the Ranger #7 was in near perfect condition,
but I felt I gave it away in the trade. That left a bad feeling,
so when Ranger #8 was due for trade in, I started doing some math.
I came up with, even in a worst case, scenario, I could never
outspend on maintenance what a new Ranger would cost.
Ranger #8 now has 230,000. It just passed the mark where it did
the work of 3 trucks, and now is in the area of the 4th vehicle
that I would have needed if I had kept to the plan of trading in
at 75K.
While I haven't run the numbers recently, last time I updated my
spreadsheet model, I was ahead by something like $20,000 over
where I would be if I had traded. Not only that, but by doing
all the maintenance, and replacing some key chassis bushings
(little rubber bumpers), the Ranger still looks, drives, and
handles essentially like a new vehicle.
I wouldn't hesitate to drop $3,000 into an older car. But
I think that there is some criteria that you have to consider.
The car has to be basically sound, it should have modern safety
equipment (airbags), and both the engine and transmission need
to be sound.
As far as the timing belt and water pump go, don't skip it.
In this car, the timing belt drives the water pump. The water
pump will run about 100K. If it seizes up, it will ruin the
timing belt. If the timing belt breaks, the engine will quit.
When it quits, the valves will be in a open configuration, and
then the pistons will come up to top dead center, and one by
one, bend each valve, and destroy you engine. This is called
an interference style engine, and a water pump or timing belt
issue is fatal to the engine.
BTW, don't let anyone scare you with stories about getting
stranded or stuck on a bridge. That can happen to any car.
In fact, and older car might be less likely to do this since
it has a proven track record.
-john-
--
======================================================================
John A. Weeks III 612-720-2854 john@johnweeks.com
Newave Communications http://www.johnweeks.com
======================================================================
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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 Elle on July 6, 2008, 11:52 am
Re replacing a 1996 Civic, 180k miles, original and sole
owner:
> Now the civic paint is peeling, and a cheap repainting at
> Maaco is
> estimated at $800. The car will hit 180K miles in a few
> weeks, and is
> due for the major maintenance + the timing belt + water
> pump stuff
> that is done at every 90K miles. All of this is estimated
> to be about
> $1500.
Hi, original and only owner of a 91 Civic here, 204k miles.
Runs like a top, but except for alignments, I personally
maintain it with TLC. I recommend posting your query to
rec.autos.makers.honda and alt.autos.honda. I read and post
at these groups regularly. The regulars are very helpful and
have great experience. For now: The $1500 estimate above is
quite a bit on the high side high. Was this a Honda
dealership estimate? Have the shop that did this estimate
break it down for you by parts and labor. Then get an
estimate from a non-dealer import repair shop for the same
work.
> I estimate tires and brakes also, probably within a year,
> for
> another $700 or more. So, within a year, it will add up to
> $800+1500+700 = about $3000.
>
> The car is probbaly worth 3500
I have been shopping for an older Honda for a friend.
Everyone selling and with any smarts uses www.kbb.com. It is
your best online resource for pricing used cars.
www.edmunds.com prices cars much lower, for some reason.
Craigs List and newspaper ad prices are consistent with
KBB.Com
You know this car well and have a maintenance history on it.
What I am finding with used cars is that, unless one buys
from a dealership (paying more!), it is usual for used cars
for sale to have multiple owners, flawed titles, and no
maintenance history to turn over. E.g. odometer tampering,
accidents, filthy inside and out, etc. Gosh knows how they
have been maintained. If the choice is between getting a
lower mileage, newer used car and keeping this one, from
what I know of Hondas (read: religious belief in their
reliability) I think you are far better off keeping this
one.
A few other things you want to consider before making this
decision: Does the car handle well? Specifically, does the
suspension seem sound? If driven on salty roads etc. in
winter, what people generally see is that the suspension
needs rebuilding, especially replacing bushings and ball
joints. Now this could add up. If not driven on salty roads
and it drives well, I would not be concerned about this.
Economics wise, unless you simply like driving a newer
better looking car, I would rule out looking for a used car,
do the maintenance on this one, and figure it will last you
5-10 more years pretty easily.
--------------------------------------
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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