Car Cost Curve

Car/truck/automotive news and discussion
bill25
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Joined: Thu Oct 31, 2013 2:20 pm

Car Cost Curve

Post by bill25 »

This is pretty interesting.

https://www.msn.com/en-us/money/persona ... spartanntp

Not surprising, buying 10 years old and selling at 15 is the sweet spot. But, about the same cost is to buy 8 years old, and keep for 8, meaning you have a 2 year newer car to start and end with a car one year older.


According to the chart over 20 years these 2 options cost about 45K. For about 60K over 20 years, you could buy a brand new car and keep it for 20 years, or get a 3 year old car and keep it for 15 years. So that is less than 1K extra per year. For an extra 2K per year (from the cheapest), you can buy a new car every 10 years.


This is very interesting, and obviously an average. There are probably much better and worse cases.

According to this, just over 2K per year gets you a car that is always somewhere between 8-16 years old, and 4K per year gets you brand new to 10 years at the oldest.
Also looks like it assumes the new car price is 35K.
kevm14
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Re: Car Cost Curve

Post by kevm14 »

I'd say one of the biggest variables in which way the curve goes is whether you work on your own vehicles.

Also they posted a chart with a typo.
Adam
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Re: Car Cost Curve

Post by Adam »

They must have grabbed the chart from Reddit.

They don't cover buying at 15-20 years old and keeping until rust destroies it.
kevm14
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Re: Car Cost Curve

Post by kevm14 »

I still believe that above all else the most important thing to do is buy on price and condition. Buying on the low end of a depreciation curve adds a lot of room for repair and maintenance expenses.

I also think there are factors that change the age/mileage that buying a car may be most optimal. One that I mentioned is whether you work on your own cars.

But I'm also thinking about higher mileage Japanese cars. I think they actually are NOT a good value, because, and I am generalizing here, they seem to do this thing where they go to 200k and then tend to need a whole bunch of stuff. Why does this make them a bad value compared to other used cars that need a bunch of stuff? Because they are, inexplicably, still worth way too much money, even in this state, to buy and then sink a bunch of money into. Can't explain that one. It may mean that depreciation is not directly tied to anticipated ownership cost, because perceptions are what drives that, not reality. It would be nice to actually try to graph that and see how good the market is at pricing used cars (makes and models). I know Bob has a theory that the market is generally good at it. I am not sure because I don't think most people do any kind of research and go on a general feeling.
Not surprising, buying 10 years old and selling at 15 is the sweet spot
This does make sense. At year 15, for most people, the ratio of cost to continue owning and driving compared to the small amount you can still get out of the car in resale, makes it an ideal time to sell.

I need more data to really understand the graph though...

Really not sure what is going on with the maintenance/repair costs. It looks like a linear projection of $0 per year at year 1 up to $760/yr at year 20. Could grab the CSV and fool around with it.

Just talking through some stuff...

The buy 10 year old car, drive 5 years, repeat thing means your car is always between 10 and 15 years old. I guess this means it averages 12.5 years old? Dark green, cheapest all the time.

The buy 8 year old car, drive for 8 years, repeat thing means your car is always between 8 and 16 years old. And I guess this means it averages 12 years old? Light green, second cheapest all the time.

Buy 3 years old, keep for 15 years. Averages 10.5 years old. Orange, third cheapest 19 out of 20 years.

New, keep 20 years. Averages 10 years old. Yellow, 4th cheapest.

New, keep 10 years. Averages 5 years old. Blue, second most expensive.

New, keep 5 years. Averages 2.5 years old. Red, most expensive.

This trend seems to most heavily weight depreciation, because the average age of your car in each scenario is the direct indicator of total ownership cost, by this model. I think the model is too simplistic. Then again, the result jives with my own personal beliefs that riding the high end of the depreciation curve cannot be overcome by resale value, by definition. But maybe the point is, depreciation curves actually vary substantially across makes and models, so it is really impossible to derive any useful information from a one size fits all graph like this.
kevm14
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Re: Car Cost Curve

Post by kevm14 »

The other thing is, vehicle requirements.

I can always find a cheaper way to drive a car and get from A to B depending on some things.

Driving a 20 year old Cavalier is likely pretty cheap, even accounting for repairs. But I don't want to drive a 20 year old Cavalier.

I like used luxury cars for this reason. It is hugely depreciated. And unlike a similar age low end car, it has some actual power and features, even compared to modern cars. So for the cost of some DIY work, I get to drive a very nice car (the STS fits neatly into this category). This formula works well for me. Most of my stuff falls into this category. I'll throw the Roadmaster in. So 4 out of 6.

Conversely, an old compact Japanese car is probably one of the worst values (when taking into account features, space, power, etc.), though resale offsets some of that. Unless of course you love old compact Japanese cars, in which case you are getting exactly what you want.
Adam
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Re: Car Cost Curve

Post by Adam »

kevm14 wrote:and I am generalizing here, they seem to do this thing where they go to 200k and then tend to need a whole bunch of stuff.
Jenn's car started needing non-standard wear items around 260k (ball joints, control arms, struts, etc...).
kevm14 wrote:Why does this make them a bad value compared to other used cars that need a bunch of stuff? Because they are, inexplicably, still worth way too much money, even in this state, to buy and then sink a bunch of money into.
Other than rust, if you do all the things (with quality parts) you can get another 5-10 years relatively trouble-free out of it before either that stuff wears out again or you are in for additional repairs (engine/transmission worn out). If you rebuild the suspension on your 200k W-body can you expect the same sort of life span of the rest of the car?
bill25
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Re: Car Cost Curve

Post by bill25 »

Driving a 20 year old Cavalier is likely pretty cheap, even accounting for repairs. But I don't want to drive a 20 year old Cavalier.
According to the chart, the car was 35K new. So you don't have tp ever worry about driving a Cavalier.
Adam
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Re: Car Cost Curve

Post by Adam »

The other thing about the "cheap" Japanese car is the inexpensiveness of the replacement components as well as the dealer availability of everything (like bolts and other stuff), even on a 20+ year old car.
kevm14
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Re: Car Cost Curve

Post by kevm14 »

Adam wrote:Other than rust, if you do all the things (with quality parts) you can get another 5-10 years relatively trouble-free out of it before either that stuff wears out again or you are in for additional repairs (engine/transmission worn out). If you rebuild the suspension on your 200k W-body can you expect the same sort of life span of the rest of the car?
The W-body is not considered a high quality car by most standards, and I'm sure the Civic has better interior materials and fitment, with fewer squeaks and rattles with age/mileage. But when it comes to getting 300k out of a 3800 powered W-body, I don't really see the advantage to the Civic. I don't think the 4T60 would last as long as the Jenn's transmission though I don't think that kind of mileage is typical for a Honda auto, especially if it was an EX. You will have had to do ball joints, tie rods and the like sooner than the Civic. But those parts are also dirt cheap. Possibly cheaper?

So in this example...what is going to happen to the W-body that won't happen to the Civic? I don't see thousands of extra repairs in the W-body to justify the thousands extra in market price of the equivalent Japanese car (say, a Camry).

I guess pick an example with an engine not known for lasting forever (3800) and also having a good power to fuel economy ratio for its time.
kevm14
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Joined: Wed Oct 23, 2013 10:28 pm

Re: Car Cost Curve

Post by kevm14 »

bill25 wrote:According to the chart, the car was 35K new. So you don't have tp ever worry about driving a Cavalier.
And as with the depreciation discussion, what you are literally paying for is driving a later model car vs the same car when it is older. And the people that care the most about driving the latest thing, and showing it by paying big bucks despite the known and obvious extra markup: luxury car buyers.
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