Sunday, October 10, 2010

New Car, Used Car, Modified Car --- Part II

I used to hear the argument of changing to a new car every 5 years is the most economical way to enjoy the ride. The argument was low maintenance cost and you can redeploy your money by trade-in your old car.

I also hear the argument of buying a 5 year second hand car and sell it when it reaches 10 years old is the most economical way to go. The argument was the car price has dropped substantially after being used for 5 years. The maintenance cost will somewhat be manageable.

The last group, the cheap skate, is to continue to stretch the car another 5 more years by doing a major restoration when the car reaches 10 years old.

There is nothing wrong with each view but it's about time to run the numbers as objective as possible.


(Click on the image to see details)

I have a maintenance log book on the cars I owned from the beginning. I found that the first 5 years maintenance per km was around $ 0.09, 6 - 10 years is around $ 0.18 and would expect it to go up to $ 0.23. The cost calculation was based on roughly 30,000 km per year mileage.

Arguing on the maintenance cost alone may be able to sway a lot of people that buying a new car is a no brainer. However, beside maintenance cost, when we take into consideration of opportunity cost(just the down payment to be generous), insurance, interest charges, monthly installment, etc, the picture will change drastically.

In my table, I listed three scenarios. The first scenario is to buy a new car around $ 330 k. The second scenario is to buy a used Subaru around 5 years old. The last scenario is do a major restoration buy putting in $ 20,000, I did not assign a new car or used car cost in this scenario as the car is fully depreciated.

After I run through the numbers on a spreadsheet, I find that owning a new EVO or equivalent will cost me $ 4,672/month. That is almost 818% higher than restoring my car. How about owning a used Subaru? The number is somewhat makes me feel better, $ 1,973/month but it's still will cost me serious money. The last scenario makes me smile because it will cost me roughly $ 509/month only.

I don't know what's wrong with me that somehow I have this rebellious DNA in me. Most people will naturally pick a Camry or Honda Accord when they move into their mid career progress. I somehow feel conforming to the norm is not me. If I decided to follow the crowd -- have that clean good boy image minus the fun. Just substitute $ 0.09/km maintenance cost for a new Camry or Accord. A new Camry or Accord will cost around $ 140 k. The ownership will come to around $ 1,700/month.

The conclusion? The ownership cost will pretty much depend on the personality. It's highly personal and I had better stop here so that I will not offend anyone further unintentionally. Cheers!

3 comments:

morpheuzneo said...

Hi,

I assume you own a honda Civic? or maybe lesser model? can you share the model name , so we can make sense whether to follow your model or not..

I owned a 4 year++ Honda Civic FD, and now getting more itchier to change car, but finance minister not agreeable.. let's hope she would found your blog or else.. i rest my case..! :D..

thanks for sharing! very true indeed!

elizabeth said...

Wouldnt it be more meaningful if it is a like for like comparison, as in, a new evo, versus a 5 year old similar class?

Jay said...

I am waiting for this car, most people will naturally pick a Camry or Honda Accord when they move into their mid career progress.
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