Owning a vehicle - what's it worth? Buying new vs. used

Recently I read an interesting article written by Mark Salem, of Salem Auto Boys, Phoenix, AZ. Mark, who I've never met in person, is an ASE Certified Master Tech with L-1 rated advanced engine performance certification according to his website. He hosts multiple radio shows on auto repair, and appears on local TV as a consultant. I stumbled upon his site looking for maintenance tips.

Mark fixes cars for a living, and so probably feels the more used vehicles on the road, the better for business. However, his thinking on the topic of keeping a used car vs. buying new makes some logical sense, and doesn't seem to be aimed at taking advantage of the typical car owner. It's close to what I've been thinking for years, but I could never put it into words as well as he has.

Mark: "Think of big maintenance bills simply as a car rental fee. What would my car be worth a month to drive if I could just rent it? Would it be worth $200 or $600? I tell everyone that ANY car is worth $200 a month to drive or $2400 a year for the privilege of having the car at your disposal."

The basic idea: owning any car, new, used, or barely running, is worth at minimum $200/month. This number was chosen based on the fact you can hardly buy or lease any new car for much less than that. But a used car isn't new, so why should it be valued for as much? I think Mark's point is that any car, new, leased, or used, provides the function of transporting you from point A to B reliably, on a whim. A car that offers more in the way of luxury, performance, style, or utility could command a higher value, which is why people will pay $300, $400, $500 or more per month for certain cars.

Mark: "The real question should be, "Will my old car cost me more a month to drive (in fuel, maintenance and insurance) than another newer or better car?"."

Mark includes fuel in his comparison, which I don't agree with 100%, because fuel consumption is different for everyone based on their driving needs, and that cost is independent of the monthly lease payment. As long as the used car in question doesn't guzzle gas to a fault, fuel is a non-issue. I do agree maintenance (except tires) and insurance should be used for the purpose of comparing. But for simplicity sake, let's not worry about insurance, since we know insuring a Riviera is going to be less than for most any new or leased vehicle.

Mark: "Almost always, you can have a new engine installed in your old car for under the tax and license fees of a new car. So freshening up an old car, that has been somewhat trouble free and has a decent interior and exterior will be cheaper in the long run that buying a new one."

For example, I bought my Riv in 2003 for $13,800 + interest on a 60 month loan. Let's say I paid $15k for the car in total. That would mean for the purpose of basic transport, I got my money's worth for the Riv after 6 1/4 years, or around Sep of '09. However, I also had a transmission rebuilt at 151K miles, which cost $2100. It took an additional 10 1/2 months to pay off that cost, so the Riv needed to last until late July '10, which it did. There are also basic monthly maintenance costs for oil, small repairs, etc., but those are minor since I do most of the work myself. Then there's mod costs, which I won't include, since this money isn't spent for basic transport, but for the added personal enjoyment of increased performance, which increases the value of the car, like any car with 300 HP would be valued more than a base Honda Civic.

Remember, $200/mo only covers the very basic function of reliable transport. The Riviera has offered more, including a sleek design, luxury interior, towing capability, and the already mentioned value of increased performance. Considering only basic needs, the Riv's operational history has provided me with more than a full year of buffer room. That means if I needed to perform a $2400 repair right now, it would still make financial sense, since it's been operating basically free of cost for the past 14 months. But what if we consider the Riviera to be worth more than the bare minimum - say instead she's worth an average monthly payment of $300? Mods included, I think without a doubt this car been worth that much to me over the past 8 years, so if we do the math again based on the $300/mo figure, the result is: $15k + 2100 +$3000 (mods) = 20,100. At a $300/mo cost, this would take 67 months, or a little less than 6 years to prove itself worth the money spent. Based on this, the Riviera paid for itself around the beginning of '09, and has been providing value through cost-free luxury transport, utility, and performance ever since.

I guess there comes a point where the Riviera really can't justify being worth $300/mo anymore, due to its age and increased mileage, but as long as it "runs like new", it will always be worth $200/mo as basic transportation. Either way, I'm well ahead of the curve in terms of value vs. money spent. It would not be a waste of money to put in a rebuilt engine, or even another transmission in the near future. A lot of folks would just make a decision not to invest more money based on the age of the car (mostly because they just desire to buy a new one!), but Mark Salem offers a more logical argument for when to throw in the towel:

Mark: "When an old car owner gets into trouble is when one major repair after the other happens and they never get the first one paid for in "use" before they have to pay another one. So 6 months after you spent $1,800 for a new transmission and before you get to use the car for 9 months to benefit from the miles you bought when you paid for the transmission overhaul, the rack and pinion goes bad and it costs $800 to replace it and that will add another 4 months you need to get before the cost of the repairs are paid in "use". But before the 13 months are up (9+4=13), something else major happens and you never get ahead. That's when it's time to bail out and get rid of that car."

One last word of advice, which I also couldn't agree with more:

"Mark: On the other hand, if you simply want a new car, then get one and don't try to rationalize it."

Source: http://www.salemboysauto.com/original-faqs/faq-52.htm

This is excellent advice and well written. However, it's difficult for the average car owner to predict when a car will reach that stage of major repairs outrunning that $200/mo average. For many economy cars that can be predicted around a certain milage, i.e. at 200K miles everything on an (insert model z here) starts to go. Years ago this number used to be 100K miles on most cars. In the last few decades that milage number has increased dramatically, and somewhat inconsistently across brands and even models within brands.

But wait! There's more!
I once owned a lovely 2000 Saab Aero. Extravagant alloy wheels, immaculate in general.To be frank for this discussion, it was not new. And I liked it very much. However, it had a character of it's own that I always felt it untouchable as far as mods, as if anything I might do would affect its purity. Eventually I got rid of it and bought something else that I felt more comfortable messing with.
Am sure that sounds a bit odd, but my point is that used cars seem to present a more receptive platform for expressing one's personality than brand new, sparkling examples of the latest professional engineering. And there's some pride in making it your own with your own hands, eh? I'm thinking maybe Dr. Frankenstein gleaned a very similar pride

Different cars are engineered to different lifetimes. Say 100, 150, 200 thousand miles or maybe more. Basically Mark's advice will keep you in a car until it's hit its engineered life time at least.

A GM engineer (shall stay anonymous) told me the Riv was engineered for a 150,000 mile lifetime. Whereupon I asked him about the transmission (on mine the TCC lockup failed earlier than that) and he then waxed poetic about tier I and tier II supplier build issues. That engineering number is basically the lifetime that the things that are **not** on the maintenance schedule are targeted to last.

Albertj

That would variable that results in the warranty lifetime.

I'll put repair money into my Riv for as long as it's in decent overall condition and I continue to have use for it. And still actually LIKE the car. I'd like to see it on the road long enough for my daughter to get a few years out of it once she starts driving in a year or 2. Everything works fine on it except the power trunk release. If it started developing a lot of system failures, I'd have to reconsider. Esp since the paint is beginning to peel badly in areas, and I DON"T see spending the money for a paint job.

1998 Riv wrote:

I'll put repair money into my Riv for as long as it's in decent overall condition and I continue to have use for it. And still actually LIKE the car. I'd like to see it on the road long enough for my daughter to get a few years out of it once she starts driving in a year or 2. Everything works fine on it except the power trunk release. If it started developing a lot of system failures, I'd have to reconsider. Esp since the paint is beginning to peel badly in areas, and I DON"T see spending the money for a paint job.

That trunk release isn't available (new or from Ed Morad) - I bet he'd sell you one pretty cheap.

What I've found is that keeping after what appear to be small failures can sometimes avoid system failures. Also, sometimes a little more spend gets a whole lot of value.

I also find that the least expensive way to maintain a vehicle seems to be to buy factory parts at the best discount you can finagle. Might be dealer or mail order - but yeah in general it's the way to go.

There are of course the exceptions that prove the rule so to speak. Sway bar links come to mind. Wheel bearings maybe if you buy Timkens. Shocks & struts -- monroes, gabriels and KYBs have their strengths (price or performance) compared to OE. Maybe other parts?

I do spend money on the little issues that need attention. The power trunk release isn't something that NEEDS attention. However, it would need diagnosing by a professional who knows electrical systems. That's not me. And diagnostic shop time adds up fast. So I use the key... no big deal.

denim wrote:

...my point is that used cars seem to present a more receptive platform for expressing one's personality than brand new, sparkling examples of the latest professional engineering...

That makes a lot of sense, actually. Who would start hacking up or painting parts of their car's engines and interiors if it's brand new and they just paid a ton of money, or will be paying over the coming years, for it? Psychologically speaking, it's much easier to have fun with a used car.

I'd say that for a fun model, or sport trim, like a WRX, Si, GT, what have you, it's better to buy used because for the same price as a new economy car, you can get any number of different truly fun cars to drive. For a commuter that goes through very high mileage a year, it's somewhat more secure to buy new. My dad will be commuting 100 miles a day for the next 5 years, so buying our new Fiesta made more sense than spending $14k on a used car, since we will hit the 200,000 mark in about 7-8 years on that car. The peace of mind and dependability is what you buy when you have a zero-mile, brand-new car.

This begs the question, how long will this board be around. I hope its here a very long time. The obvious answer is, as long as there are members. Right now there are thousands of us, and some newer members have spent some decent cash to get their rides up to snuff. But as the article explains, when the costs of keeping your Riv going start to pile up, it becomes harder and harder to justify the expenditure. I mean don't get me wrong, it'll take something major for me to let go of my Riv. I am managing to avert disaster so far by doing regular maintenance and attending to things as soon as its needed. But for example I just got a stone chip repaired just off to my peripheral, and it bugs me, but its about $400 to get the windshield replaced, and I started to notice the beginnings of paint peel on the roof, so I am starting to compound those costs and compare them to my living expenses and adding that I need to get on those sub-frame bushing and boom, you start to have nasty thoughts of letting her go. I donno, that's just my two cents. One thing for sure though, the Riv has served me well up to this point and I have surpassed my usage to cost ratio long ago.

1998 Riv wrote:

I do spend money on the little issues that need attention. The power trunk release isn't something that NEEDS attention. However, it would need diagnosing by a professional who knows electrical systems. That's not me. And diagnostic shop time adds up fast. So I use the key... no big deal.

I can "talk" you through it. Basically either the release is wack, the glovebox lockout switch is broken (stuff happens) or a wire got damaged from flexing at the trunk hinge or at the lock (both unlikely) or there's an issue at a connector. What you do is get a buddy to work with you on it and a test light or multimeter. You can often get test lights for a buck at larger dollar stores or always for a few dollars (better quality) at a NAPA or other parts store. Anyway first make sure the lockout switch in the glovebox is not "off." Then you go to the trunk and ground the test light on some bare metal something or other (trunk lid?!?) and probe one side of the connector to the trunk latch solenoid. Your buddy pushes the button on the driver's door to open the trunk. Does the light flash on? if so - bum trunk latch solenoid, call Morad and get another. If not - try backprobing the other pin in the connector and have your buddy hit the switch. Light flash? again - bum trunk latch solenoid. No flash - go in the glovebox and check that switch. If you pry carefully it pries out of the place it's mounted. Look for damaged, loose or broken wire. IF no apparent damage then jump the wires behind the switch and push the trunk button again. Does the solenoid work? If so replace switch. If not then you need to use a multimeter to find the wiring fault.

Reason for not using the trunk remote on the key fob - you run out of hands for one, for doing the backprobing without accidentally shorting something. Also if the system is basically working but the key fob is not you don't need me to find and fix that problem - it's the remote (open it and clean the contacts with alcohol) or the receiver (it's under the rear package shelf - get the part number off it and get one from a dealer or Ed Morad).

Back on topic: I think the time to buy a new car vs. used is when there is a technology change that gives me motoring value. That value might be in style or features -- or in fuel economy and/or power -- or in comfort. Or my needs changed and a used vehicle won't provide the value I need for whatever reason.

I think what will happen (kind of has happened already) is the exciting part of the new car market will move to the Pacific Rim and the US market will look like a somewhat bigger cousin of the European car market. .

Albertj

BMD wrote:

This begs the question, how long will this board be around. I hope its here a very long time. The obvious answer is, as long as there are members. Right now there are thousands of us, and some newer members have spent some decent cash to get their rides up to snuff. But as the article explains, when the costs of keeping your Riv going start to pile up, it becomes harder and harder to justify the expenditure. I mean don't get me wrong, it'll take something major for me to let go of my Riv. I am managing to avert disaster so far by doing regular maintenance and attending to things as soon as its needed. But for example I just got a stone chip repaired just off to my peripheral, and it bugs me, but its about $400 to get the windshield replaced, and I started to notice the beginnings of paint peel on the roof, so I am starting to compound those costs and compare them to my living expenses and adding that I need to get on those sub-frame bushing and boom, you start to have nasty thoughts of letting her go. I donno, that's just my two cents. One thing for sure though, the Riv has served me well up to this point and I have surpassed my usage to cost ratio long ago.

So what is the general condition of your car? If in otherwise good shape, get a quality paint job and the windshield replaced, and you are back into extending the overall life many more years. Consider this cost vs complete replacement in a few years if you are in an area that's harsh on body components. Do you do your own work or do you have a regular mechanic?

Doing your own work drastically changes the formula to this whole premise, because you cut into small fractions the cost of maintenance and minor repairs. By Minor I mean things that don't include complete engine or transmission replacement.

I agree, and I probably will spend the $1000 or so to get the windshield replaced and roof painted. The car is in very good condition and I would like to keep her for as long as possible. I do most of my own work which does help defray costs. I am just saying that the sub-frame bushings still have to get done, maybe the rear shock too. At that point if anything catastrophic happens, I'd be in excess of the formula discussed in the interview. I am just wondering how much longer owners will continue to make that kind of investment as time goes on.

deekster wrote:

This is excellent advice and well written. However, it's difficult for the average car owner to predict when a car will reach that stage of major repairs outrunning that $200/mo average.

It's difficult to predict, but it's not difficult to know when you are already in too deep. Using the formula, you can get out before descending even deeper. Taking a hit, but at least it's only one hit.

Also, the formula can help you know when it's not time to give up. When my transmission failed 85k miles ago, my father in law advised me to give up the car, as he claimed the head gaskets would be next. The difference between his thinking and mine is, I would rather drive the car until that actually happened, then give up. Turns out the head gaskets were fine, and the transmission repair has long since been paid off.

albertj wrote:

Different cars are engineered to different lifetimes. Say 100, 150, 200 thousand miles or maybe more. Basically Mark's advice will keep you in a car until it's hit its engineered life time at least.

As long as you're not spending more than $200/mo on repairs, I think the engineered lifetime might be irrelevant. Why get rid of a car that's past it's life expectancy, if it's not costing too much to repair? In theory, after you repair a number of items, there becomes less and less to fix, as there are more and more new parts on the vehicle. Could it be that proper maintenance can extend the engineered life of a car out beyond the original estimate?

1998 Riv wrote:

If it started developing a lot of system failures, I'd have to reconsider. Esp since the paint is beginning to peel badly in areas, and I DON"T see spending the money for a paint job.

If the paint job costs $5000, and you keep the car 2-3 more years, it might be worth doing. If during that time, the car needs more repairs, you could add up the costs and make a decision about whether or not to keep the car. Maybe someone would buy it from you? A coat of fresh paint should make it an easier sell.

albertj wrote:

There are of course the exceptions that prove the rule so to speak. Sway bar links come to mind. Wheel bearings maybe if you buy Timkens. Shocks & struts -- monroes, gabriels and KYBs have their strengths (price or performance) compared to OE. Maybe other parts?

I agree. Parts from proven aftermarket brands can sometimes improve upon the OEM designs, especially with higher performance demands. For example, if you're going to be throwing the car around in the curves a lot, the factory McPherson struts are probably not the best choice.

IBx1 wrote:

My dad will be commuting 100 miles a day for the next 5 years, so buying our new Fiesta made more sense than spending $14k on a used car, since we will hit the 200,000 mark in about 7-8 years on that car. The peace of mind and dependability is what you buy when you have a zero-mile, brand-new car.

I would challenge that, because $14k gets you a LOT of used car. You could buy an almost new car that sold a year or two for twice as much. I paid about $14k for my 24k mile Riviera in 2003, paying monthly payments on it for 5 years, just I would have a new car. I hit the 200k mark in 8 years, and honestly had piece of mind during most of that time. There were a couple of set-backs later on, but even a new car won't have everything covered past 150-200k miles. The biggest difference between buying new or slightly used is how much you get. In some cases, you can get quite a bit if you look. For example, check this out: http://www.autotrader.com/fyc/vdp.jsp?ct=u&car_id=305189741

Yes, you can own a 2003 Audi RS-6 for $16k. Yes it has 116k miles, but it's also one of only 1200 models imported into US, representing Audi's highest performing V-8 powered sedan at the time. Huge amounts of power and torque, and very luxurious, too. Maybe economy not so good, but you get the point.

BMD wrote:

This begs the question, how long will this board be around. I hope its here a very long time. The obvious answer is, as long as there are members. Right now there are thousands of us, and some newer members have spent some decent cash to get their rides up to snuff. But as the article explains, when the costs of keeping your Riv going start to pile up, it becomes harder and harder to justify the expenditure.

The site will be around as long as I'm alive, and possibly longer. I may get rid of my Riviera someday, but I won't close the board down. There will always be someone looking to fix up a Riv and drive it. Even if that's only one person, it's worth keeping the board up. If eventually the board dies from lack of activity, it'll be a web relic, and a fountain of info for anyone who wants to read. I'm sure you've stumbled upon such sites before. I'm very happy to see when site owners decide to keep a site up and running, long after its prime! Some of the most interesting reading can be found at these 'expired' forums.

Quote :

I am just saying that the sub-frame bushings still have to get done, maybe the rear shock too. At that point if anything catastrophic happens, I'd be in excess of the formula discussed in the interview.

These suspension issues are fairly inexpensive if you do the work yourself. Even if you have someone do the shocks, it's not going to be much more than $200. The cradle mount bushings are a job, but probably not more than $1200, and less than $300 if you do yourself.

BMD wrote:

This begs the question, how long will this board be around. I hope its here a very long time. The obvious answer is, as long as there are members. Right now there are thousands of us, and some newer members have spent some decent cash to get their rides up to snuff. But as the article explains, when the costs of keeping your Riv going start to pile up, it becomes harder and harder to justify the expenditure.

The site will be around as long as I'm alive, and possibly longer. I may get rid of my Riviera someday, but I won't close the board down. There will always be someone looking to fix up a Riv and drive it. Even if that's only one person, it's worth keeping the board up. If eventually the board dies from lack of activity, it'll be a web relic, and a fountain of info for anyone who wants to read. I'm sure you've stumbled upon such sites before. I'm very happy to see when site owners decide to keep a site up and running, long after its prime! Some of the most interesting reading can be found at these 'expired' forums.

Amen

That makes it sound like we'll be in the world of Fallout soon, and this'll be an archive for some post-apocalyptic garage...