Author Topic: An unusual rent vs buy (it's a car, not a house)  (Read 5086 times)

Dr. A

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An unusual rent vs buy (it's a car, not a house)
« on: August 11, 2013, 12:03:13 PM »
I’m pondering whether to own a vehicle or not, and am looking for some advice on a few issues. I found one thread on this topic, but it didn’t really get specific enough for me. Apologies for post length.

If you want to skip my long winded story, my primary question is how to project maintenance costs (average and reasonable worst-case) if I own an older car but put very few miles on it each year?

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First some back story. My wife and I have lived in NYC for about 6 years, and have not owned a car during that time. Since our son was born (2.5 years) we have been making regular trips to Massachusetts (where all of his grandparents live) approximately 100 miles away, with 2 parents, 1 child and 1 dog (a 12 lb. pug). There is a good chance of adding one more child to the mix in a couple years.

We make this trip 6 times per year:
-3 weekend trips
-2 extra-long weekends (Thanksgiving & Christmas)
-1 week+ vacation when we typically go on to a family lake house in New Hampshire (additional 400 mi round-trip)

We also have one or two must-drive local trips each year to Home Depot or the like.

When my son was born, I ran the numbers and found that renting for these trips from Enterprise (out-of-town) or Zipcar (in-town) was cheaper and more convenient than owning a car. Since that time, two variables have changed:
1)   I realized I had just assumed we would purchase an almost-new car. It would be crazy for us to do this, but changing the assumption obviously changes the math.
2)   I don’t know if it’s because we turned 30, or because I didn’t look hard enough last time, but my insurance rate is low enough now to flip the scales. (previously $2,400 per year for liability-only, now $700)

My analysis covers the next 8 years. After that, there is a good chance we will move to an area where occasional driving will be necessary, so we’d have to buy a car anyway.

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So, this brings us to today. Here is what I’ve figured out so far, and the questions I still have.

For Renting:
-   Approx. $3,000 per year
-    Includes supplemental liability, since I am not otherwise insured ($14 per day)
-   Decline the damage waiver since the credit card covers damage over $1,000. I have some exposure here, but I’m thinking it’s negligible, especially since bumpers don’t count in NYC.

For Owning:
-   Vehicle type: unknown, suggestions welcome
-   Purchase Price: This is what I’m trying to solve for, paid in cash (obv.)
-   Terminal Value: Assume 8 years and approx. 16,000 miles added.
-   Insurance: Geico quotes me at approx. $700 per year for a solid liability-only policy on a 10-year old car
-   Maintenance: I’m struggling to pinpoint this, and it’s potentially a big piece. If, say, I bought a car with 100-120k miles, I want to identify my estimated maintenance costs, as well as my “reasonably likely worst case” maintenance and repair costs, over the 8 years. I’m totally clueless on this one and looking for help.
-   There is an exposure for damage and theft vs. renting. It seems like the best I can do here is take an insurance company’s quote for collision and comprehensive, add a multiplier to be conservative, and assume that I am absorbing this cost by self-insuring. Does that make sense, or am I over-thinking this?

Other notes:
-   My dad is mechanically inclined and I can do routine maintenance at his house when we’re up there. At home I will be parked on the street and can’t really store supplies in my apartment, so I am unwilling to do any repairs or maintenance myself when at home.
-   I am under the impression that the fear of breakdowns is mostly overblown. However, most of our driving will be way out in the boonies. At what point is a vehicle old/worn down enough for the risk of roadside breakdown to be legitimate?

Irrational Issues (I know these factors should not matter, but they are in my head so I’m stating them out loud)
-   We have alternate-side parking, which would require the car be moved twice each week. While there are always a few spaces available here and there, this still seems like a gigantic pain in the ass that I just don’t want to deal with.
-   Not owning a car is my status symbol, and the first thing I brag about when people ask how I like living in the city.
-   When I rent, I get to drive a different brand-new car every time. This is just fun.

daverobev

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Re: An unusual rent vs buy (it's a car, not a house)
« Reply #1 on: August 11, 2013, 12:15:57 PM »
$700 insurance + $500 maintenance + $4k purchase price @ 7% p.a opp. cost (=$280) and $400 p.a. depreciation assuming you keep it til it dissolves and get nothing back.

So owning the car costs $1880 p.a. plus hassle if someone scratches it

Tricky. I'd probably say keep renting.

girly mustache

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Re: An unusual rent vs buy (it's a car, not a house)
« Reply #2 on: August 11, 2013, 12:44:41 PM »
I vote to keep renting -- not having to move a car on the street twice a week is worth it alone... Even if the $$ was a little more - being able to not worry about a car is awesome. I'm jealous :)

olivia

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Re: An unusual rent vs buy (it's a car, not a house)
« Reply #3 on: August 11, 2013, 01:18:16 PM »
Definitely remain carless.  We just sold our car and are stoked to be completely carless.  Plus having to move a car twice a week sounds like a giant pain in the ass.

Kazimieras

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Re: An unusual rent vs buy (it's a car, not a house)
« Reply #4 on: August 12, 2013, 07:33:03 AM »
See if you can get a premium credit card that has the insurance built-in. I currently use a car sharing program and it saves me $6/month plus I do not need to take the insurance when renting a car.

Dr. A

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Re: An unusual rent vs buy (it's a car, not a house)
« Reply #5 on: August 12, 2013, 07:49:43 AM »
I didn't think there was liability coverage with any card, just theft/damage. Can you point me to any specific cards?

We use car sharing (Zipcar) for local trips, but I've found anything over 24 hours and I'm better off with a traditional rental.

Thanks for the responses. I think I've found my justification for continuing to rent. If I run into just a couple of unexpected problems (if it gets hit on the street, if the insurer raises rates in the area, etc.), it would totally wipe out any anticipated savings.

It also gives me some vehicular flexibility. I.e. I've got a buddy getting married out-of-town next month, and my wedding gift is spending a little more to rent a minivan to haul him and 5 of his drunk friends around all weekend.

EK

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Re: An unusual rent vs buy (it's a car, not a house)
« Reply #6 on: August 12, 2013, 07:54:06 AM »
Do not underestimate how much of a pain it's going to be to move that car around to accommodate street sweeping.  I had a car for a while when we were in Brooklyn- the car moving is a worse hassle than you would ever think.  Unless someone is home all day on street sweeping days to move the car around and has nothing better to do than hunt for parking spots, go ahead and add a few hundred per year to the cost of car ownership to cover parking tickets! Even if renting costs more, it's definitely worth it not to have to worry about the car.

Forcus

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Re: An unusual rent vs buy (it's a car, not a house)
« Reply #7 on: August 12, 2013, 11:47:13 AM »
I love cars and currently have 6 (!) but if I was in your situation, rent all the way. Home Depot / etc. rent trucks for $20 for 90 minutes which is a screamin deal, and not having to worry about maintenance, etc. is great peace of mind.

unpolloloco

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Re: An unusual rent vs buy (it's a car, not a house)
« Reply #8 on: August 12, 2013, 12:57:50 PM »
Check into a "non-owners" auto insurance policy - might save you over the $14/day SLI.

Dr. A

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Re: An unusual rent vs buy (it's a car, not a house)
« Reply #9 on: August 12, 2013, 01:04:39 PM »
Hmm... I did check out a non-owners policy last year, and it was just expensive enough to not be worthwhile, but maybe I'll check again with a few more companies.

turboseize

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Re: An unusual rent vs buy (it's a car, not a house)
« Reply #10 on: August 13, 2013, 03:23:47 AM »
Note: I am a car freak. I like cars. Really. But...


In your case I'd suggest you rent. Maybe owning a car (if done right, and with a bit of luck) will be cheaper, but cars are like pets. You have to take care of them. They require attention. For some people that's ok, some even like it and find recreational value, but if you don't, it can be very annoying. Some people just want their cars to be there, and to get them from point A to B. And they don't want to have to bother too much. Some cars can do that. For some time. But eventually, everything wears and needs maintenance- or it will break.*

If you decide to own a car, I'd rather deviate from the mainstream "get a slightly used Corolla or Civic"-advice. In my opinion, there are two strategies that work. Both involve getting much older cars - 15 to 20 years, or even older. Both strategies have one common element: to avoid depreciation.

1. buy a pristine car that will certainly become a classic.
I did so with my three Mercedes.
#1 was a 200d (MY 1983), bought in autumn of 2003 with 140.000km for 2500€, sold 14 month later with 96.000km more on the odometer for 2350€. Repairs: new speedometer cable for 57€ (including work at a Mercedes dealership!), new shocks around 200.000km for about 500€. Rust protection ca 400€. Else only regular maintenance (every 10.000km oil change and inspection of the chassis - 100€, every 20.000 km replacing air and fuel filters (20€), adjusting valave clearance and lube door hinges myself.
 #2 was a very well equipped 300d (MY 1984) in absolutely insane condition, completely stripped, rustproofed and reassembled by the previous owner with only 100.000km. I paid 6000€ for that, drove 80.000 absolutely trouble-free km and then sold it, as the eco-fascist government decided it could not be driven into bigger cities (yes, the w123 community was working on a particulate flter to solve the problem, but so where others, and the federal agency to approve the filters completely drowned in work and admission of the filter was delayed 2 years...). So it became completely useless over night and the market for older diesels collapsed, but because of it' pristine condition I was able to sell it to a collector in Denmark and get at least 3800€. In retrospect, this was a very dumb move. I should have just kept it, unreistered it  and stored it in the garage, either until the filter was admitted or until next year, when it gains veteran status and will be exempt from all "environmental" prohibitions. Comparable cars trade for above 7000€ now...
#3 was a well-used, but well kept 560 SEL (MY 1990). 80's S-class. The ultimate sign of power and wealth. Shut the door and enjoy the qietness. Welcome home in a world of blue leather and walnut wood, and the star sparkling in front of you... Wonderful. The big V8 was nice, too. ;-)
Drove this car about 50.000, replaced ignition cables and distributor cap (300€), had the power steering pump sealed and the hydraulic level control on the rear axle redone (1000€). Else only routine maintenance. Sold it prior to starting studies, as it had developped a noise on the right cylinder bank which could have been either a bad camshaft or a cracked exhaust manifold (both  insanely expensive), the compressor of the ACC was worn and the front axle needed to be overhauled - I expected around 3000€ for all of this. Which would have been very fine If I intended to keep the car, but being a student with a reduced income and three car-toys  is rather unmustachian. So I sold. Got 5000€ back from the 5900€ I had bought it for.
This car is especially interesting, because in spite of it's horrendous fuel consumption, my total costs (at 15.000km anually) were 32ct/km. This  is exactly the same what the ADAC (biggest german motor club) assumes for a basic trim (cars in Germany come with almost no extras, unlike in the US: you have to pay for everything extra) Golf TDI (which, over here, is considered a very reasonable and frugal car). Yes, the S-class has been my most expensive car on ct/km-wise, but it was far cheaper than one would have thought.

2. Buy a beater.
- My current Saab 900 turbo** (MY 1985) cost 1000€ when I bought it with 300.000km on the odometer. I knew it would need immediate repairs for around 2500€, but overall substance was ok. In the meantime, it has consumed A LOT more money than that, but the odometer reads 512.000km - and cost per kilometre is about 24ct. Choosing a non-turbo might have been cheaper, but still, it's cheaper than what most aquaintances pay for their used compact cars - and so much more fun!
- before that, I had a Saab 90. Bought it for 1200€, replaced ignition cables and radiator (500€), drove it for 35.000 trouble-free km, and traded it in with my garage for about 1500€ worth of work on the 900 turbo.
- Last year, I had my cheapest car ever***. Bought a 1996 Saab 9000 Griffin v6 for a bottle of wine. (Dagernova, Spätburgunder/pinot noir, Dernauer Kosterberg 2008. Cost 6.99€). I knew the car had issues: some rust, one brake caliper stuck, and some transimssion misbehaviour. 850€ later the rust was taken care of, the brakes repaired and the car was road-safe again. Drove 48.000km (with some maintenance and additional work) and sold it for 130€. 
On this car, I came out with 19.4 ct/km. This is cheaper than even a crappy romanian Dacia Logan could do! And I had leather seats (electrically adjustable, with memory), walnut dashboard, ACC, cruise control, power everything, reading light in the fond and so on. And a nice 211hp v6. Value-for money-wise, absolutely impossible to beat.



But both these strategies do only work if you like cars - and don't mind they cost some effort. These strategies will be cheaper than renting, but only if you put in this effort. And there is, as always, some risk involved. If you buy the wrong car or neglect it, it can become a money pit.
If you do not feel comfortable with this, renting is the better choice for you.





* Which is why people often sell cars if the first troubles come or are expected, or if repairs excede "market value" of the car. Which, from a financial point of view, is silly. With some a little bit more effort, the very same car will do 200.000 km more. What counts is cost per km (or mile, if you happen to live somewhere outside the metric world). Getting rid of the car for fear of repairs and buying a newer one means you are paying extra for the comfort of not having to deal with the hassle of keeping your car in good shape.
**/*** link to my blog. Written in german, but perhaps google translate might help.
« Last Edit: August 13, 2013, 03:45:16 AM by turboseize »

Kazimieras

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Re: An unusual rent vs buy (it's a car, not a house)
« Reply #11 on: August 13, 2013, 12:43:20 PM »
I didn't think there was liability coverage with any card, just theft/damage. Can you point me to any specific cards?

It largely depends where you live. In the province near me (Quebec), there is automatically no fault, so liability isn't necessary. In my home province Ontario, you need the liability. I haven't found a card that offers liability, but like someone pointed out below you can get it usually as a separate item through your primary insurance provider.

Spudd

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Re: An unusual rent vs buy (it's a car, not a house)
« Reply #12 on: August 14, 2013, 02:32:54 PM »
I've done some research on this and I think that in Ontario, the rental car companies are required to provide liability at their own expense if you don't have it.

Kazimieras

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Re: An unusual rent vs buy (it's a car, not a house)
« Reply #13 on: August 21, 2013, 09:21:56 AM »
So I did some further research on this and wanted to share the results.

So for car sharing - checked with the company and we are covered under their liability insurance. Yippee!

For car renting - also covered under their liability insurance! Only hitch (and really it isn't a hitch), is that you must be truthful about where you plan on taking the car. So for me normally we get unlimited kms in 2 provinces, but if we want to go to the USA, we need to let them know and are then subject to the 200km per day plan. Still a great deal!

StaceStache

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Re: An unusual rent vs buy (it's a car, not a house)
« Reply #14 on: August 21, 2013, 10:22:13 AM »
You could also check out RelayRides - another car sharing program. I'm not familiar with ZipCar, but I assume it's a similar thing? I've rented my car out on RelayRides and looked into it for other trips. Pretty neat.

https://relayrides.com/

Dr. A

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Re: An unusual rent vs buy (it's a car, not a house)
« Reply #15 on: August 21, 2013, 11:12:15 AM »
So for car sharing - checked with the company and we are covered under their liability insurance. Yippee!

For car renting - also covered under their liability insurance!

Make sure to check out the limits on those coverages. Rental companies in the US generally only provide the legal minimum (typically 25/50), which is too little to make me comfortable. Car sharing co's vary, I know Zipcar recently increased theirs to something more reasonable.

EMP

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Re: An unusual rent vs buy (it's a car, not a house)
« Reply #16 on: August 21, 2013, 11:30:35 AM »
I just skimmed the responses, so sorry if I missed this, but I don't see where you budgeted for taxes and tags.  Mine are $300/year and I don't live in NYC.