Car Cost per Year - New vs Used
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I've only had one real lemon using this approach. The previous owner told me it had over-heated once, but I took a chance anyway. Part of the engine was warped due to the over-heating. I had to replace the engine after it kept breaking timing chains. Otherwise, I've been fortunate.
- timing chain should be replaced at 100K. Should do the water pump at the same time. $800-$1000.
- starter motor (typically the brushes wear out). $300.
- engine mounts.
- CV joints.
- suspension bushings, possibly shock absorbers, wheel bearings too.
- pneumatic door lifts.
Then you just start to run into random problems: dashboard lights go out and are too expensive to replace, electric windows or door locks start to fail, steering develops a strange wobble that comes and goes and 3 different mechanics can't figure out. Etc.
I just sold my 2003 Odyssey (that I had bought new and maintained it well) with 230K on it. I'm glad to not be dealing with it anymore.
I still own a 98 Cherokee XJ which is built like a tank but still has its weaknesses. An electric door lock is failing but a replacement part is no longer made, so I have to find a used replacement or adapt a part from a newer vehicle. That sort of stuff.
If you're willing to deal with it great, but there's definitely a large tradeoff there.
There's also safety issues. My new cars have collision detection, lane keep assist, air bags all the way around, etc. I'm happier having my family in vehicles with these options.
It's expensive on gas (12-13mpg), but cheap to insure.
Not even an airbag.
Buy a brand that is fully guaranteed for 5 years. We sell them at 4 to 5 years old. This completely kills the repair budget.
Buy vehicles 6 months to 1 year old. That one brand we buy (like most but not all brands) doesn't depreciate linearly, and depreciate the most the first year. So this reduce the depreciation budget significantly.
The only difference in the consumable budget, compared to a 10 year old car is that we pay a lot for insurance (full vs 3rd party only).
The plus of our strategy is that an accident does not change our budgets, which it would in OP's case, as they might have to increase repair (assuming 3rd p ins) or force them to buy their next vehicle early, throwing out some of their calculations.
I heard 7 years in Europe. Is it true in the US too?
I wonder why 5 years only in Canada!
Why? The sliding door roller system is garbage and breaks semi-annually. (@$900/per incident) Biggest issue the Pilot is a poor quality key cylinder system that was a recall in several 1999-2004 models, but not the Pilot.
Let's be upfront and frank about it. You will pay more for the added convenience. You really should put a number on it to get an idea.
I bought my car 6 years ago for $9000. It was an 8 year old car, but with low miles. In the last 6 years, I've paid $2100 in repairs and maintenance (includes changing oil, tires, etc). So a total of $11,100 in 6 years. My car is worth $2900 now. So a loss of $8200 in 6 years. That's $1367 per year.
How much will your car depreciate in 6 years?
If I compare it with a top of the line Subaru Forester, that depreciated at least $8K in the first two years.
Your situation may be good - I'm not sure. But unless you really run the numbers, you'll never know. People always do hand waving rationalizations in their hand. Don't. Get a spreadsheet and run the numbers.
Not saying paying a lot for peace of mind is a bad idea. That's for you to decide.
Yes piece of mind is worth that, and I can attach a number to that to, we've had a car that was maintained regularly and broke down, cost of tow + taxi to go to the rental place, rental (we need a minivan => expensive) was close to 1 K CAD. Kia warranty comes with 24 h emergency. We will have an older car once the kids are out (or possibly live somewhere we don't need a car), but today I'm happy to pay this.
F.ex. adding something like this: https://news.ycombinator.com/item?id=11879869
Buying a super complicated engine with high reliability is a different risk than buying a simpler engine that has lower reliability, but that can be repaired much more cheaply.
As you admit, it's for piece of mind. Because I can't imagine something like that happening to you every year if you owned a used car.
Well, gas consumption surely are not identical between a 10 year old and a new car. Depending on your usage buying a newer and more expensive car might be justifiable due to savings in gas prices (you folks in the US might not agree since gas is so cheap for you).
Or do you mean there are just more hybrids and electrics available now than there were 10 years ago?
https://de.statista.com/statistik/daten/studie/185831/umfrag...
But it might be more interesting to look for, say, the lower 30 percentile. I have the feeling that the improvement at the lower end is not as great, but I don't have numbers to back that up.
To get specific: a 2017 Ford F-150 (to stick with the absurdly parochial example used here) gets 19-26mpg; a 2002 F-150 got 17-21 - that may not look like much but is a 12-25% improvement, not a completely insignificant difference. A 1987 f150 got 10-12mpg, so it's clearly a continuing trend, too.
An older exampl of ~40mpg for Golf III Diesel combined is not bad even in todays standards.
That's why buying used is the environmentally best choice.
Government should tax cars by weight. The heavier a car is, all other things being equal, the greater it's negative externalities. Heavy vehicles cause more road wear&tear, take up more street parking space, are more dangerous to other road users if an accident occurs, reduce visibility more greatly for other road users, worse for the environment.
In the large car arms race, everybody is a loser. Plus, smaller cars are just more fun to own and drive, heh!
I kept the end point constant at 10 years. So it was:
* Option 1: Buy a new car, keep 10, and sell
* Option 2: Buy a 3 year old car, keep 7, and sell
* Option 3: Buy a 5 year old car, keep 5, and sell
* Option 4: Buy a 7 year old car, keep 3, and sell
At the time I was shopping, the car I wanted had really high resale. So option 1 was coming out CHEAPER per year than option 2. (new price / 10 compared to used_price / 7). Options 3 and 4 were cheaper, but not by a ton. But then the thing I thought about was:
* With option 1, the car I am driving is an average of 5 years old
* with option 3, the car I am driving is an average of 7.5 years old
* With option 4, the car I am driving is an average of 8.5 years old
So that pushed me to go for option 1. No regrets so far, my car just passed his 7th birthday. Not 100% sure I will sell at 10, but a strong possibility.
I think the simple math of "new car = always bad unless you are rich" is wrong. "new car every 3 years trading in = always bad", sure. But throw in dealer incentives and financing, and the new vs used debate can be less black and white.
So cash in my pocket, option 1 was the "best". I had no initial outlay, the car dealer loaned me the money for free.
So yes that is even 1 more reason why option 1 worked out best for MY case. But who knows when I next get a car what will be true.
The cash flow calculations vs the cash on hand - risk costs are where the math happens but it is perfectly possible to walk away with the decision to buy new to work out better on certain models of car.
I have friends that said the same thing about certain diesel sedans (pre mpg scandal) but never calculated it myself.
Small Japanese SUVs had a very very high value retention for the first 4-5 years.
Something like maybe the sticker price new is 25k, but what you really pay is closer to 21k new. A 3 year old would be going for 17-18k. After the maths above, it ended up costing more per year to buy used.
I negotiated a cash rate. I had the cash in my hand, and I got the lowest possible cash price, after talking to 6 dealers. Once I had the price printed on paper including all fees, I then said sure I will do the 0% APR loan. My price did not go up a single dollar.
Options 3 and 4 I could take that cash I would have spent on the car, and put into the stock market. It would have generated me 5-6% return, on average, over the life of my car.
edit: my mistake, I guess you want to have 3.333 cars in 10 years for Option 4. Carry on...
not sure what 3.333 cars means
This sort of implies that they wouldn't generate a lot of repairs. Crate transmissions for m that truck ran about $2000 for a remanufactured one. For my current truck it's more like $4000.
- new cost
- depreciation per year
- increasing maintenance costs per year
The "F-150" assumption was used to estimate new cost and depreciation over time.
You should not discount the data based on a single model, but it is wise to recognize those three variables can diverge significantly between models - enough to change the outcome.
The main problem with used Hondas is that their reliability is priced in so they cost more than other brands' used cars. Though this helps you a bit when you try to sell, balancing it out somewhat.
Everyone keeps saying this, but when I ask, no one answers:
How much should I adjust for sudden issues?
I once got stuck in the middle of a national park because my starter malfunctioned. People might have laughed at me for buying a used car. But let me ask you: I'll give you two choices:
1. For free, I'll give you a special insurance. If you are ever inconvenienced in a fairly populated national park, I'll pay you $5000. Heck, I'll sweeten the deal - I'll pay you $5000 if you're inconvenienced anywhere because of your car. Heck, I'll sweeten it further. I'll pay you $5000 even if you are never inconvenienced due to the car!
2. You get to not be inconvenienced. This option will give you no money, though.
Which would you take? Note that in reality, my special insurance can be worth a lot more than $5000.
I imagine some people may not take your "insurance" deal with a 50% chance of breaking down versus no insurance deal with a 5% chance of breaking down.
Folks probably put a large price tag on the time and trouble they'd have to spend waiting for help, getting towed, and dealing with the repair, plus the opportunity cost of losing that time and interrupting or missing outright whatever they were on their way to.
There's also the consideration that a small fraction of break-downs may be dangerous (either high speed loss of control, which I'm sure is rare, or even standing at the side of a highway, which I bet is much less rare but also dangerous). What value do you put on that?
Not some - many. It's just that few are willing to put an actual number they would pay for that insurance - especially given how under other circumstances, most of them do their best to get the cheapest insurance. On this one type of insurance, they think differently. Perhaps this is a clue that they are not viewing it as insurance.
>Folks probably put a large price tag on the time and trouble they'd have to spend waiting for help, getting towed, and dealing with the repair, plus the opportunity cost of losing that time and interrupting or missing outright whatever they were on their way to.
Yes, this is how they rationalize it, but always careful to avoid putting a number on it. My $5000 is a low estimate. Realistically, think $10K. For less than a fifth of that, you can have a great vacation for two for a week. You're ruining the experience of one vacation so you can have 5 or more of them. (This particular trip cost me less than $200, so it can be a lot more than just 5 vacations). But instead, people prefer to have fewer such vacations in order to not have a breakdown.
For that one experience that you're worried about being ruined, I could have had (and may actually have had) many that you did not take due to lack of money.
>There's also the consideration that a small fraction of break-downs may be dangerous (either high speed loss of control, which I'm sure is rare, or even standing at the side of a highway, which I bet is much less rare but also dangerous). What value do you put on that?
I'll invert the question back to you, or to whoever is using that argument to justify a much newer car. How low a probability of it occurring would make it not be a consideration for you? If this happens to 0.1% of people who buy used cars, I don't even consider it as a factor. If it happens to 20%, it's definitely a consideration. And I'd compare it with the likelihood of other ways of dying.
My point is people will come up with these rationalizations (a fancy word for excuses) without really thinking about them. Very often, people just want a shinier car and use these reasons. Or they're scared to admit how much they'd pay for their insecurities, so they exaggerate the costs (be it in Dollars or in human life) of a used car.
Don't get me wrong. One of my cars is a very expensive 2 year old car, which I got primarily for safety reasons. So I am aware of both sides. But I'm not going to try to tell anyone that getting a safer car can, in any way, be a wise decision purely from a financial standpoint.
Why assume it is them being dodgy? Perhaps it is really hard to put a number on it.
What number would make me risk my life on a low-shoulder highway in the middle of the night with my son in the back seat? I have no idea, but I can tell you it is not in the ballpark you are discussing.
> purely from a financial standpoint
Maybe you've never suffered significant financial loss due to a breakdown, but can you guarantee no one ever will?
And there's more to it than finances, obviously...
>What number would make me risk my life on a low-shoulder highway in the middle of the night with my son in the back seat? I have no idea, but I can tell you it is not in the ballpark you are discussing.
As you say, you yourself do not know your tolerance threshold (and that's OK). So it's futile to use it in decision making unless you do put a number on it.
As for the difficulty of putting a number on it - I don't know, as I have not tried. But do you think you could find out if you're willing to pay $1000? Just because you can't put a number on it doesn't mean you have to pay $10K more. There are intermediate options.
>Maybe you've never suffered significant financial loss due to a breakdown, but can you guarantee no one ever will?
I know people who have paid a lot of money due to cheap cars dying much earlier than expected. Looking a those in isolation, the cheap car was more expensive than the newer car.
But that's all part of the insurance mindset, which is to think in terms of probabilities. If I buy a cheap used car from a reliable brand every 7-8 years, do I expect all of them to end up being disasters? No. Do I expect none of them to be disasters? No. I expect I probably will end up with a bad car from a financial standpoint one day. But the amount I'll save over all those other cars that turned out fine will more than compensate. I won't get upset - it's all part of the strategy.
I think what I'm trying to get at is everyone points to the person who bought a cheap used car that ended up dying within a year or two and point at how wasteful that was. Yet few people point to those who buy much newer cars and talk about how bad that decision was. Purely from a financial standpoint, both are bad decisions. Yet society tends to think only one of them is.
>And there's more to it than finances, obviously...
Sure, there's peace of mind and comfort. And if you're open about it, that's fine. I often see people justifying it as being cheaper or "almost the same as used car when you factor in repairs". I think my goal in this thread is to highlight that if you do your research, that statement is just not true.
>What number would make me risk my life on a low-shoulder highway in the middle of the night with my son in the back seat? I have no idea, but I can tell you it is not in the ballpark you are discussing.
I should add: While you don't know the number, it's not as nebulous as you may think. If you paid $10K more to get a newer car that you think is safer, we know it's at least $10K.
If I offered you a car that costs $40K more than your current one and convinced you that your son will have a 50% lower chance of injury/death than your current car. Will you pay for it? What about $100K?
Let's not kid ourselves. Everyone has a number. It may be hard to tighten the bound, but it does exist. There will be a price point where for a 50% reduction you'll say "You know what? I'll take the risk". Or even "You know what, I think the risk is low enough as it is in my car - a 50% reduction of a tiny number is not much of a gain"
I do hope you will never respond with the latter, because you have no idea what that number is. Or at least realize that if you rationalize that way, so do people who buy cheap cars. They likely think the probability of serious injury/death for their son is not much different from a newer car.
What types of breakdowns happen unexpectedly while driving outside of tires going flat, without any warning and people ignoring the obvious signs and getting the cars fixed once they see the light or hear strange noises?
The car breakdowns I've had requiring a tow usually involve the car not starting at all.
It also doesn't factor in the 0% financing that Ford has offered for the last 10 years, which is a significant benefit...Ford is essentially paying you about 5% of the value of the car each year (as you can avoid getting a 5% loan, or if you have the cash you can invest it in the stock market for a 5%+ return).
So, which option is cheaper?
Isn't that the ultimate question?
In another comment, I showed how a good 8 year old car had depreciated in 6 years (including repairs) as much as a new Forester did in 2 years (no repairs). Even for the 8 year old car, most of the loss was in depreciation, not in repairs. Yes, this included:
1. Change in timing belt + water pump (most expensive)
2. Changing brakes.
3. Changing tires.
Everyone seems to want to avoid $200-500 repairs on their car, but few seem to be concerned about avoiding $10K on the price of the car to begin with.
In My experience though, a lot of the car selling business is focused on producing unreasonable buying decisions.
Cars keep getting more expensive despite most other inflation-basket goods aren't.
One way of achieving this is by adhering to emotions. See Tesla fans doing basically "anti-leasing" for the newest model, or the whole genre of SUVs or better yet even more erratic: SAVs. My favorite in this is the new Range Rover evoque mini-SUV/convertible: 2 cars in one, each deminishing the usefulness of the other one. Yet already a success.
This is AFAIK the exact opposite of what the car industry is doing. At least in the high price range. There, the newest models most of the time are being sold via lease.
'Buying used to save money' in this case is like getting the diet soda to go with your big mac and fries.
A truck may retain 80% value after 3 years, where a luxury car may retain 50% or less.
Edit: I should also note that variation between depreciation curves on luxury cars is also much greater.
Whether this analysis makes sense depends on your perspective. Also assumes you are not a car lover. And even in this, the three year lease is not substantially more than the other options.
It has never made sense to me to keep cars until I can't trust them anymore.
Thus conditioned, the idea to me of buying a used anything and keeping it for 10 years sounds like a recipe for answering the Ship of Theseus thought experiment.
When I first struck out on my own, I had a used, but good condition Toyota that a year later had $3500 worth of engine trouble that ended up costing me a job. I finally swore never again.
After that Toyota, I bought a brand new, small, car for $12k with the highest reliability I could find and kept it for over a decade. It required exactly one repair to an O2 sensor after 10 years. Being small and commodity, maintenance was cheap (a set of four new tires ran under $350). One day, 12 years in, the engine conked out and the repair was estimated at $500. The car was still worth $5k. I made a deal with the mechanic and he bought it for $4k.
Considering that the cost to "buy" the car was about $8k, maintenance was cheap, and fuel efficiency was high, the car cost pennies per mile to drive over its life with me.
I've since bought another reasonably priced new car that I fully expect to drive for another 10-12 years. And my family, after seeing my experience with proper cars has also cried uncle and now only buys new, reliable, cars. My father can't believe that he doesn't even know a mechanic anymore, whereas he used to spend significant time cultivating relationships with "good" mechanics to deal with repairs. Hundreds of dollars a year used to go into towing fees, and thousands were lost to lost work or other opportunities when a vehicle was down and being worked on or to rental fees so we could still get around.
I know that its possible to get a highly reliable used vehicle, but honestly, its impossible to know what a used car has gone through before it ends up in your hands.
Another thing that this chart neglects and which I feel is a very important consideration, is safety. The difference in safety of a current vehicle with one from even just 10 years ago is striking (never mind 15 years).
https://www.youtube.com/watch?v=emtLLvXrrFs
10 years from now all new car's will probably self driving.
PS: That Moderate overlap / frontal offset test configuration is relatively recent in crash testing. http://www.iihs.org/iihs/ratings/ratings-info/frontal-crash-...
My sense is that if cars are safer now, compared apples to apples (i.e. a base model mid size sedan) to ten years ago, it's marginal. And the same will be true (driverless cars potentially excepted) in five years.
http://www.consumerreports.org/car-safety/positive-impact-of...
I also think that folks who rent aren't any more rough on a car than folks who lease, but again, that's just my feeling.
Have not seen this. Keep in mind that insurers only care about the cost to replace the car. If the car's value is so low (which it will be after 10+ years), the cost to insure would be low too.
Leasing is generally the most expensive option. You're basically getting a loan for the depreciation + profit. Since it's not technically a loan you don't get the interest rate disclosed to you. And market research shows the interest rate you are paying is 14%.