Author Topic: Is low cost a good reason to buy a car?  (Read 409 times)

Greystache

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Is low cost a good reason to buy a car?
« on: April 27, 2020, 08:59:34 AM »
Here is my situation. My wife and I have two older cars (2003 with 125K miles) and a 2005 with 150K miles) that have been pretty reliable. When we retired 5 years ago, we put some money aside in a money market account to replace these cars when they died. So far, they have refused to die and remain very inexpensive to operate.  Now, we are seeing used car prices drop by more than 10 percent with predictions that they will fall much further.  Is there a point when it makes sense to take advantage of low prices to trade an old car that may or may not last a long time? My thought is that if I buy while my cars still run, I can be patient and wait for a great deal. If I wait for one of the cars to die, I might not have such a favorable market in the future. Neither car has much of a trade in value. I expect that if they are still running when I get a replacement, I would just give it to one of my kids.

Sibley

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Re: Is low cost a good reason to buy a car?
« Reply #1 on: April 27, 2020, 09:18:00 AM »
No. You have perfectly good vehicles. If one of them were to die, then you either shift to only one car, or you make do with 1 car while you find a replacement. You're getting antsy, and are just going to over complicate things. As the saying goes: Don't fix what ain't broke.

SailingOnASmallSailboat

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Re: Is low cost a good reason to buy a car?
« Reply #2 on: April 27, 2020, 09:31:25 AM »
Those are low mileage cars that will last a while longer, or they should anyway. I'm with Sibley - keep them until one dies and then either decide you would like to replace it or just stick with one car.

If you weren't ready to buy a different car now, the prices being where they are shouldn't be a sway. It would be different if you knew you were needing a change within the next month or so. (Obviously just my opinion!)

teltic

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Re: Is low cost a good reason to buy a car?
« Reply #3 on: April 27, 2020, 04:23:54 PM »
Where are you getting your sources that used car prices are dropping?  I always stare at Teslas (look but don't buy); but have noticed some STEALS on ebay.  2014 Model S just went for $19k (I believe it would resell on craigslist for $25k); and just watched a 2013 model S with lower miles for $20k.


Anyway; would love to see any articles you have showing car prices dropping.  I think it's true; and does make me wonder if capitalizing on this (buy a Tesla and flip in a year or two?  Even breaking even would be a win for me.  I want to itch the Tesla scratch soo bad)

Laura33

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Re: Is low cost a good reason to buy a car?
« Reply #4 on: April 28, 2020, 10:31:43 AM »
Bird in hand.

I could envision a situation in which you come out ahead, sure.  Say you buy now, as compared to a year from now, and the vehicle market shoots up in the meantime, while the stock market stays down (unlikely, given that the factors that will increase demand for vehicles are likely also the factors that would improve stock market performance, but whatever).  What's the time value of keeping that money for another year?  Well, if the market just sits around or even loses money, then you're better off getting a replacement vehicle now than paying a lot more for one next year.

The problem is that this decision involves precisely the same market-timing skillset as stock-picking does -- in fact, it requires more, because you need to accurately predict both the car market and the stock market.  What happens if the stock market shoots up later this year?  In that case, you're probably better off keeping your money in there for another year, even if you pay more for the car in a year for now.  What if the car market stays depressed for two or three years?  Then you jumped the gun and took your cash out of the market far too early and would have done better to wait another year or so and see how things played out.  The problem is that you won't know what scenario this is until after the opportunity is over. 

Also look at the magnitude of the pros/cons of each option.  If you miss the trough on car prices, then maybe you spend an extra $1-2K when you do need to buy.  OTOH, if you sell now, you could miss out on another decade of very low-cost performance from your current vehicle.  The money you save by waiting to buy is very likely much higher than the extra cost you will save by acting now.

So, since you can't predict the future, and since the risk of waiting is pretty low, you should continue to follow the path that you know provides the best returns over the long run in most situations:  don't spend money on depreciating assets before you need to.

MilesTeg

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Re: Is low cost a good reason to buy a car?
« Reply #5 on: April 28, 2020, 11:25:38 AM »
Here is my situation. My wife and I have two older cars (2003 with 125K miles) and a 2005 with 150K miles) that have been pretty reliable. When we retired 5 years ago, we put some money aside in a money market account to replace these cars when they died. So far, they have refused to die and remain very inexpensive to operate.  Now, we are seeing used car prices drop by more than 10 percent with predictions that they will fall much further.  Is there a point when it makes sense to take advantage of low prices to trade an old car that may or may not last a long time? My thought is that if I buy while my cars still run, I can be patient and wait for a great deal. If I wait for one of the cars to die, I might not have such a favorable market in the future. Neither car has much of a trade in value. I expect that if they are still running when I get a replacement, I would just give it to one of my kids.

Depends on how well maintained and how good of shape the vehicles actually are in. They aren't particularly high mileage, but they are long in the tooth. Ironically, low and sporadic usage of a vehicle is harder on it than steady usage. If you don't drive a car regularly (weekly at least) you start to get corrosion problems, dried out seals, acidified fluids, rotting rubber components, etc. well before the mileage interval in the owners manual. One big ticket item that both your cars are likely due or past due for is a change of timing belt.

Anytime a car gets to be 15-20 years old and 100k+ you should be very proactively looking for those types of problems. Newer cars are marvels of engineering, which is both a blessing and a curse. A blessing because they last much longer, a curse because they can provide a false sense of confidence.

Do you know the real status of the vehicles?


Cassie

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Re: Is low cost a good reason to buy a car?
« Reply #6 on: April 28, 2020, 11:31:04 AM »
When our Saturn hit 145k miles we kept our eyes open for a good deal. Saturns arenít known to go much longer. About a year later we found a awesome deal. We now have a Toyota and Honda which should last much longer.