Author Topic: Do I pull the trigger?  (Read 4685 times)

cbr shadow

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Do I pull the trigger?
« on: November 14, 2012, 03:14:02 PM »
I asked a question fairly simliar in the past, but the situation has changed a bit and I have more specific numbers..

It's looking like a good idea to sell my wife's 2011 Kia Sorento.  We bought it 18 months ago brand new for $21,900 (sticker price was $25,550!).  It now has 39,000 miles on it.  She gets 24mpg average in this car.   I put it up for sale for $18,000 and today I got an offer for $16,500.  When you look at the numbers like this it's very apparent that I took a big hit on this car.. something that I'd like not to continue.  Never going to buy a new car again.  I think I can get the guy to give me $17,000.  If so, that's a $4,900 loss.

We are going to buy my wife a 2010 Honda Insight Hybrid. $14,900 plus tax.  40k miles.  The new MSRP on it was $24,500.  So someone ELSE took the almost $10,000 loss on that.  My wife took it for an extended test drive and got 48mpg average.

Is my logic here flawed?  It seems like a win/win situation as long as my wife is just as happy in the Insight, which she is.  Do I pull the trigger and sell the Kia for $17,000 then buy the Insight?

We're now set on the Insight, so please stick to advice on this particular situation, not on prius or honda fit, etc.  I think a used honda insight is the sweet spot.

Thanks,
Ryan


DoubleDown

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Re: Do I pull the trigger?
« Reply #1 on: November 14, 2012, 03:28:48 PM »
Given JUST the two choices and information presented here, I'd say yes it's a (small) win/improvement to purchase the Insight. But it's hard to say how much improvement you're getting without knowing some other details, like how many miles your wife is driving. For example, the 16mpg improvement won't mean that much if she drives 16 miles per month (which is an exaggeration no doubt, but you get my point).

In exchange for giving of up the Kia, you'll pocket an additional $2100 which you can invest or pay off debts. You'll get better mileage. [EDIT -- I see you wrote $14,900 PLUS TAX. I don't know what tax is where you live, but you could see your $2100 disappear real fast in tax and license/registration fees! So now I'm questioning any perceived "savings"]

You will give up at least one year of manufacturer warranty and the knowledge of where your car has been, how it has been used (which is presumably an unknown on the Insight). Don't Kia's come with a 10-year warranty??? If so, THAT is definitely worth something, maybe even more than the $2100 you will be getting or gas money saved!!!

And FWIW, I'd say forget about the "loss" in depreciation. You lost that the second you drove away with the car, it's sunk at this point. It doesn't factor into your decision now.

You know others are going to tell you to buy a much older/less expensive car, right?! :-)
« Last Edit: November 14, 2012, 03:32:44 PM by DoubleDOwn »

Jack

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Re: Do I pull the trigger?
« Reply #2 on: November 14, 2012, 03:30:53 PM »
IMO you want this kind of Insight, not that one.

cbr shadow

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Re: Do I pull the trigger?
« Reply #3 on: November 14, 2012, 03:46:09 PM »
I already drive the older version of the Insight (2001 - 65mpg avg gas mileage!) but it's a ROUGH ride compared to the new ones.  The new ones dont get as good of gas mileage, but they're much more comfortable, quieter cabin, BACK SEATS, etc.  I LOVE my car, but having (2) 2-seaters would be difficult for us, plus she needs a 'nicer' car for part of her job.
That's why I stated in the original post that we're dead set on a used 2010 Insight. :)

cbr shadow

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Re: Do I pull the trigger?
« Reply #4 on: November 14, 2012, 04:01:17 PM »
Double Down, I see what you're saying but I dont think it's fair to give the Kia an edge because of the warranty since that's built into the original purchase price of the car.  Wouldn't that be like giving the Insight extra points for being a hybrid after we've already said it's better because of the higher fuel economy?
When all is said and done, I think I should walk away with about $1,000 and a more fuel efficient smaller car.  Thoughts?

Ben

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Re: Do I pull the trigger?
« Reply #5 on: November 14, 2012, 05:36:20 PM »
CBR,

If possible, ignore what you paid for it, and what someone else paid for the insight. Only focus on the expected utility of the two vehicles to your family. If you do so, whether the warranty was built into the purchase price or not becomes irrelevant.

http://en.wikipedia.org/wiki/Sunk_costs

1. How long do you plan on owning the vehicle? e.g. if you plan on trading in cars every 3-4 years, the transaction costs become more of a factor, and the trade-in becomes less appealing.

2. Based on the Sorento mileage, it sounds like she averages 25k miles/year. Is she a realtor? Just guessing. Anyways, at those numbers, the difference in fuel efficiency is a major factor, and the Insight appears to be the better choice.

matt_g

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Re: Do I pull the trigger?
« Reply #6 on: November 14, 2012, 06:55:25 PM »
Sell the Kia for 16,500 and buy a Prius.  I sold my Audi A4 and Chevy Astro Van and took a big hit.  Now I'm savings $200/month in gas, it feels so good to get 48MPG.  You'll be kicking yourself if you can't find another buyer.  The money is already gone.  I got a 2009 with 75k on it for $14k a few months ago.  If you already have your mind made up, you can get the smaller insight with worse gas mileage for the same price, either way, you'll be way ahead.
« Last Edit: November 14, 2012, 06:57:24 PM by matt_g »

chucklesmcgee

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Re: Do I pull the trigger?
« Reply #7 on: November 14, 2012, 10:38:35 PM »
This really isn't an either or situation. I'd take a look on CL for older vehicles in the sub $7000 range. Yeah they might not have AS great mileage, but do you know how many miles you have to drive to make up the difference in $7000 between, say, a 30 mpg car and a 48 mpg car if gas is $4/gal? A lot.

thurston howell iv

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Re: Do I pull the trigger?
« Reply #8 on: November 15, 2012, 07:11:42 AM »
Does the "new" car really have to be so expensive? (sounds kind of anti-mustachian)  I can find all kinds of great mpg cars on CL for under $5k. Heck some as cheap as $2 or 3k!  Imagine what you could do with a $2k car and $15k cash supposing you get $17k for the other car... Now, I know that most people don't want to drive a "beater" but realistically, if the $15k gets some of your debt paid down or gets you closer to FI wouldn't it be worth suffering the "ugly, econo-box, cheapie" car even for a little while until you have your FI situation in place?

I "downgraded" a few years ago to a 15 year with old Honda (with 208k miles) that gets 43mpg on average and cost me less than $3k. It's not a fancy pants "look at me" sort of ride but, my fuel is cheap, insurance &  registration is minimal and I really enjoy passing gas stations.

There are tons of "old or older cars" out there that get surprisingly good mpg. Might be worth considering.

James

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Re: Do I pull the trigger?
« Reply #9 on: November 15, 2012, 07:22:25 AM »
Given the choice of making the change to that particular Insight or keeping the Kia, the obvious choice is to change to the Insight based on the mpg.  Whether that is the right decision for you (rather than buying a cheaper vehicle) depends on your goals.

DoubleDown

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Re: Do I pull the trigger?
« Reply #10 on: November 15, 2012, 08:19:55 AM »
Double Down, I see what you're saying but I dont think it's fair to give the Kia an edge because of the warranty since that's built into the original purchase price of the car.  Wouldn't that be like giving the Insight extra points for being a hybrid after we've already said it's better because of the higher fuel economy?
When all is said and done, I think I should walk away with about $1,000 and a more fuel efficient smaller car.  Thoughts?

As Ben pointed out, the initial cost of both cars is irrelevant at this point. All that matters is the value from this point going forward. So, the value of the ten-year warranty is very relevant, in my opinion. It boils down to deciding the "total cost of ownership" for both cars, over the life expectancy of (or time you expect to own) both cars.

So since you're planning on pocketing about $1000 by buying this newer Insight, plus some savings in better gas mileage, is that amount expected to outweigh possible repairs down the line that would be covered by your Kia's warranty? As an example, if a $1000 repair is needed on the Insight 5 years from now, but it's a repair that would have been covered on your Kia, then you will have lost the savings on the difference in price. So, the warranty does have some value, although it's an unknown value since we can't predict what exactly might break in either car. Does that make sense? You could use average costs of ownership and repairs (which are available on NADA) as a decent estimate.

I'm assuming insurance costs on both cars are similar, but it would be worth checking that out too in your "total cost of ownership" calculation.

Paul der Krake

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Re: Do I pull the trigger?
« Reply #11 on: November 15, 2012, 11:36:02 AM »
If you are considering your car to the ground, I'd make sure you buy the one with lots of similar models on the road to find aprts easily in the future. I am struggling to find a replacement hose for my Celica, but see dozens of parts for Camrys. Safety in numbers.