Author Topic: Worth it to trade in my 10yo car for more fuel efficient 10yo car?  (Read 3368 times)

Guy Incognito

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I have a 28mi commute to/from work, and drive a 2004 Ford Taurus (92k miles on it) that gets ~21mpg.  FMV is ~$2500 I'd expect. Not the greatest set of circumstances, I know...

I have my eye on a 2003 Toyota Echo on Craigslist ($4500 list, only 80k miles on it).  With the low mileage, and the fact that those cars get 35MPG....does it make sense for me to sell mine and buy a car like this?

I'm currently spending $300/mth on gas, and with a 35MPG car I could get this down to $200.  This math tells me that my payback time on this move would be 20 months (assuming I sold my Taurus for $2500 and bought the Echo at list for $4500).  In reality I'd try to negotiate the Echo price, of course...just want to see if this move makes sense philosopically.

Other factors - I bought the Taurus in 2006 with 25k miles on it and a salvage title.  It's given me zero problems in the 7 years since.  That said, my commute only recently went from ~5 miles to ~30. 

I'm not a car guy in the least, and just want something that gets me from point A to point B in the most efficient way possible. 

Thanks in advance for any thoughts....

AccidentalMiser

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Re: Worth it to trade in my 10yo car for more fuel efficient 10yo car?
« Reply #1 on: May 02, 2013, 02:59:19 PM »
I would buy the Echo, particularly if it has a clear title and has been well cared for.  Much as I like Ford products, that Toyota should go for another 10 years easy.  Also, compare the insurance cost of one vs. the other, they should be similar depending on where you live.  Also, you'll probably have to pay sales tax and tags on the new car, so that factors in as well.

The way I make decisions like this is to ask myself which car I would buy if I didn't own either one right now.  The Taurus for $2500 or the Echo for $5k.  My research on edmunds.com indicates that the Echo has slightly better reliability than the Taurus but that neither are too bad in the reliability category.

Having said all that, I'll ask the next question:  Is there any possibility of moving closer to work?

the fixer

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Re: Worth it to trade in my 10yo car for more fuel efficient 10yo car?
« Reply #2 on: May 02, 2013, 03:03:42 PM »
Don't forget to account for state title, registration, and tag fees plus sales tax. In Maryland these are expensive, I paid over $600 to buy my $6500 Scion xA last year. And now I just bought a van for $3100 and owed over $400. I'm selling the Scion for as much as I paid for it, but I'm eating the $600+ fees.

Guy Incognito

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Re: Worth it to trade in my 10yo car for more fuel efficient 10yo car?
« Reply #3 on: May 02, 2013, 03:52:44 PM »
Thanks for the feedback/responses.  You're right in that I forgot to account for title, tags, registration etc.  Also fair to say that if I didn't own either right now then Id go for the Echo over the Taurus.  The more I think about it, the more I think this decision is kinda marginal....but psychologically it would be great to cut my monthly burn by $100/plus and not feel like i'm burning so much money every day I go to work...so i'm gonna look into it/go look at the car at least.

Moving closer to work would be challenging, b/c: (1) my wife loves our house, (2) schools in general are far worse in the 10-15mi radius around my office downtown, and (3) homes are much more expensive in general near downtown.  Or just to be more direct ....wife would undoubtedly veto that plan! I like the idea in theory though, to be sure.

rbiser

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Re: Worth it to trade in my 10yo car for more fuel efficient 10yo car?
« Reply #4 on: May 02, 2013, 04:51:22 PM »
we have been having a similar conversation here:

http://www.mrmoneymustache.com/forum/ask-a-mustachian/i-think-i-have-already-made-a-mistake/

I recommend a spreadsheet like this:

https://docs.google.com/spreadsheet/ccc?key=0AtsW6m_DA8c4dGlVSzU1U1NIQU9kSmxFRjREV1dWY1E&usp=sharing

and minimizing the cents per mile including all costs.

pop pop!

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Re: Worth it to trade in my 10yo car for more fuel efficient 10yo car?
« Reply #5 on: May 02, 2013, 05:17:35 PM »
I admit up-front that I'm not expert here, but I have a similar question, and I think you could imagine this as two possible alternative 10-year timelines.  In one, you stick with the Ford and invest the $2000.  After 10 years, that $2000 is worth about $3,250, assuming 5% return.  In the other alternative timeline, you pay $2000 for the gas-sipping car, start off $2000 in the hole, but begin to put $100/month into investments.  After 10 years, those monthly $100 investments accumulate, and you end up with $15,850, assuming 5% return.  But, you put $2000 down to begin with, so your profit is actually $13,580 after 10 years (assuming you don't borrow money to buy the car).  The delta between these two timelines is $13,580 - $3250 = $10,330.

The reasons not to buy the Toyota are (1) inertia -- if it ain't broke, don't fix it, plus it's a pain to negotiate and buy a new car, and (2) the Ford is a known quantity, you know it's been taken care of, while the Toyota is an unknown (though Toyotas have generally good reliability).  Plus reason (3): whatever other reason you may have, such as you like the bigger car, etc.  The question is, are (1), (2), and (3) worth foregoing a net gain of $10,330 after 10 years?  10 years is a long way off, so you want to know what $10,330 in 2023 is worth today's dollars.  The present-day value of $10,330 in May 2023 is -- according to a calculator I found on the internet (use at own risk) -- $6,341.72, again assuming 5% return.  So, to restate the question, are (1), (2), and (3) worth $6,341.72 to you today? 

Anyone think I'm thinking through this incorrectly?  I ask because I have a similar dilemma as the OP.

Edit: as I look this over, I'm not sure if I should subtract both the $2000 you put down on the car AND the $3250 you would have with timeline 1, or just subtract the $3250 you would have in timeline 1.
« Last Edit: May 02, 2013, 05:32:21 PM by pop pop! »

foobar

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Re: Worth it to trade in my 10yo car for more fuel efficient 10yo car?
« Reply #6 on: May 04, 2013, 10:00:04 PM »
I would be worried about selling the taurus.  Having a Salvage title is going to scare a heck of a lot of people away. The other thing to think about is will either car last another 10 years. I can't tell if the daily comute is 28 mi or 56(~12k/yr) but somewhere past 150k is when you start seeing cars require expensive repairs. You might get lucky but you might also be person where the car blows an engine at 125k. EPA estimates are also a total crap shoot especially the old ones. If the echo only average 30mpg I wouldn't be shocked.

As the math suggest the car only needs to live ~2 years for you to break even, I would probably do it. Heck I would even consider shopping for a more recent version. Depreciation gets pretty constant after the first couple of years and avoiding having to buy a car sooner in the future can be a win. Obviously this only works if you have free cash laying around.


I admit up-front that I'm not expert here, but I have a similar question, and I think you could imagine this as two possible alternative 10-year timelines.  In one, you stick with the Ford and invest the $2000.  After 10 years, that $2000 is worth about $3,250, assuming 5% return.  In the other alternative timeline, you pay $2000 for the gas-sipping car, start off $2000 in the hole, but begin to put $100/month into investments.  After 10 years, those monthly $100 investments accumulate, and you end up with $15,850, assuming 5% return.  But, you put $2000 down to begin with, so your profit is actually $13,580 after 10 years (assuming you don't borrow money to buy the car).  The delta between these two timelines is $13,580 - $3250 = $10,330.

The reasons not to buy the Toyota are (1) inertia -- if it ain't broke, don't fix it, plus it's a pain to negotiate and buy a new car, and (2) the Ford is a known quantity, you know it's been taken care of, while the Toyota is an unknown (though Toyotas have generally good reliability).  Plus reason (3): whatever other reason you may have, such as you like the bigger car, etc.  The question is, are (1), (2), and (3) worth foregoing a net gain of $10,330 after 10 years?  10 years is a long way off, so you want to know what $10,330 in 2023 is worth today's dollars.  The present-day value of $10,330 in May 2023 is -- according to a calculator I found on the internet (use at own risk) -- $6,341.72, again assuming 5% return.  So, to restate the question, are (1), (2), and (3) worth $6,341.72 to you today? 

Anyone think I'm thinking through this incorrectly?  I ask because I have a similar dilemma as the OP.

Edit: as I look this over, I'm not sure if I should subtract both the $2000 you put down on the car AND the $3250 you would have with timeline 1, or just subtract the $3250 you would have in timeline 1.

destron

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Re: Worth it to trade in my 10yo car for more fuel efficient 10yo car?
« Reply #7 on: May 05, 2013, 07:19:22 AM »
Try plugging the numbers into the vehicle cost per mile calculator:

http://mustachecalc.com