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SUVs Honda CR-V 2001 - 2006 Honda CR-Vs
16132 messages, Last post on Nov 11, 2009 at 10:05 AM
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Replying to: jimbres (Nov 05, 2009 5:08 pm) Hey, wait a sec.... 
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Replying to: jimbres (Nov 05, 2009 5:08 pm) From a financial basis you can look at it on a depreciation basis which is probably the basis you are using. However, to me its more than just a pure dollar decision. You can also look at it from a risk basis. Right now the vehicle still has a some decent trade value left, if the AC goes that just changed big time. Honda's are not invincible, and just like domestic cars when a car gets to be 8 years old its likely to start nickel and diming you, and also more likely to fail on the road than a newer car. If you don't mind these inconveniences and are willing to absorb a seemingly better than average chance of a $3500 AC bill, then keep the car. However, I prefer to to get rid of them when they get around 6 or 7 years old ( or 65-70K or so) anyway, before all the hassles start. Most cars I've had (foreign or domestic) also start riding worse and rattling at this point, as well as leaking on the garage floor. If a car has an apparent high dollar weakness, be it AC, engine, tranny, etc. to me that's another reason to dump it. Besides, when you start replacing major components there is a good chance it won't hold up or perform as well as the original which has been my experience at least. So I just don't dump cars frequently, nor does holding a car 6 or 7 years lead to impoverishing myself (most of the depreciation is over by then anyway as that curve has pretty much changed to straight line depreciation by then, similar to learning curve behavior). Also, at this point the money you are saving on depreciation for a 7 or 8 year old car is probably being outrun by the inflating new car prices over that period of time and repair and maintenance costs. Take a look at the 02 price versus a 2010. You don't see a lot of fleet cars, even low mileage ones kept much past 5 years other than municipal vehicles. Please don't start telling me the corporate fleet and accounting people don't know what they're doing either. |
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Replying to: berri (Nov 05, 2009 6:56 pm) Back in the 90s, Hertz, owner/operator of the world's largest privately-owned vehicle fleet, & the General Services Administration, the Federal agency that purchases the U.S. goverrnment's non-military vehicles, ran separate long-term studies to answer this question. They both reached the same conclusion: to achieve the lowest possible cost per mile, you should keep your car for at least 10 years and, if you can put up with it, drive it into the ground. We typically keep our cars for 8 to 10 years - long enough to save up the money to pay cash for the next new car, since we're allergic to debt. Although I did keep one car for more than 13 years, I would have saved a lot of money if I had gotten rid of it at the 11 year mark. Apart from that outlier, our repair bills have been low (thanks in part to a good independent mechanic), so I don't allow unknown future repair costs to drive our buying decisions. In any case, you'll recall that I said in an earlier post that if I owned an '02 CR-V, I'd replace it, so we're in substantial agreement. It's just that my reasons for doing this aren't the same as yours.
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Replying to: jimbres (Nov 06, 2009 6:10 am) Me too. All 3 cars paid for, house is on a 15 year mortage. 2nd property is paid off.  Life is good.
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Replying to: ateixeira (Nov 06, 2009 8:55 am) |
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Replying to: jimbres (Nov 06, 2009 6:10 am) You're smart to do this as long as you pay cash, don't run into some major repairs and don't mind the ride and ambiance of the car deteriorating a bit. If you have the equipment and skills to do the repairs, that's even better. Here's the problem for most though, many people don't bank the car payment (heck a lot of people cash out their 401K rather than rolling it over when they change jobs). By not saving the cash to buy a car, the less the trade is worth, the bigger their problem at replacement because this situation often forces them to both take an extended duration loan and a higher principal amount. The longer the loan, usually the higher the rate as well. If a car isn't real popular they might get a lower promotional rate, but that usually means forgoing the rebate so it doesn't end up helping them as much as they think, plus the less desirable new vehicle will likely depreciate even faster next time. A $20K loan for 5 years at 7.5% results in over $9K in additional interest cost. That puts a big cut into their net savings from depreciation avoidance. In effect, this situation means the nonsavers end up with a cash flow problem that negates their opportunity to minimize vehicle cost. People that can't save may actually end up better by just having a set lease payment every month unfortunately. As for fleet vehicles, trucks tend to last longer than cars. However, there is the issue of increasing repairs and fleet down time as well as direct cash outlay and recoupment. A lot of firms ditch a vehicle around 5 o r 6 years because they can still get some residual value back and they avoid increasing repair frequency and vehicle downtime impacts. |
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Even if people don't have the cash to buy their first new car outright, they can make it happen with their second car. Let's say they financed a car for 5 years at $300/month. After the loan is paid off, and they keep te car, but they put the same $300/month they were spending on the car note into a interest bearing account. After 5 additional years of using the same car, they would have accumulated $18,000 in principal and some interest. Even if they used that account to pay for the repairs, they would still have enough money to not to have to finance their second car. Even if the car prices run away and an average transaction is $30,000, they are already $18,000 ahead.
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Replying to: blueiedgod (Nov 10, 2009 12:32 pm)
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Replying to: ateixeira (Nov 11, 2009 8:56 am) Majority of the people have this mentality of "I see it, and I want it now!!" The troubling part is that they have been elected to offices and are now running the country in the same manner. Spend, spend, spend, think later. Unfortunately, there is no bankruptcy protection for when you run the country into the ground.
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Replying to: blueiedgod (Nov 11, 2009 9:56 am) People get bored with what they are driving. Boredom equals unhappiness. |
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