Pacifica - Resell value ugh.

It doesn't sound as though you've learnt the real lesson here, which is that buying a new car of any model means taking an immediate and large hit in its retail value the moment you drive it off the lot.

Can't imagine you needing a larger vehicle just for one child and one dog. How big is the dog?

The big thing here was going to CarMax to get a trade in value. They will quote hundreds, maybe thousands less you going to a new car dealer. You were getting a quote on trading a used car for a used car.

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This is an easy one:

1. In order to keep the FAA satisfied, aircraft have to be built to last and maintained vigorously. You'll never see "100hr SMOH" in a used-car advertisement. A used airplane is just far less likely to crap out on you than any used car. Good thing, too; there are no breakdown lanes in the sky.
2. Light planes didn't appreciate in value for a very long time. Only when the world's liability attorneys turned their attention on light plane makers did the cost of making a small plane go through the roof. In adjusted dollars, a new Cessna 172 costs three or four times what it did in 1965... why? Insurance and legal fees. If you could buy a new 172 for K today, used ones wouldn't fetch K.
3. For reasons 0) and 1), aircraft don't change nearly as often as cars do. Look at an old 172 and a new one; the avionics are different but if you couldn't fit your cello in the old one, it won't fit in the new one either.

You're very right about cars not being an investment, but I hear people refer to cars as investments all the time.

How can you compare a car to an aircraft? Cars don't have to have it's parts FAA approved, there aren't 2 to 4 aircraft sitting in everyones driveway, there aren't hundreds of thousands of light aircraft made annually and should my car break down while driving it, I can roll to the side of the road. There aren't used light aircraft (any kind of aircraft) for sale lots on every street corner.

The fact that fewer aircraft are built, new ones are terribly expensive compared to cars, they are built better (I hope) and built with lighter and more modern composites, I would think that aircraft would hold their own or increase in value. I still wouldn't consider an aircraft an investment because of the upkeep, insurance, certifications, etc are not cheap.

Actually, I've had the opposite experience. CarMax had always given me 10% to

15% more than any trade-in deal I've tried to make.

That and the fact that Chryslers don't hold their value all that well. Maybe better than Fords, but worse than almost every other brand.

Matt

Dealers are offering discounts of $6500 on new ones so yep, it is bad to be in a rush to buy.

I've owned Chryslers, Fords, Toyotas, Subaru's, GM and others. None hold their value worth a darn. That is why I drive them a good 6 years or so and if I wanted to save more money I would drive them longer.

I agree in an absolute sense, but the Japanese brands hold their value much better than American brands. Same for Harley motorcycles vs. Japanese brands. Doesn't make any sense to me, but that is the reality.

Matt

I always get a kick out of complaints of low resale value primarily because it is a two-sided coin. The fact that Chryslers have a low resale value meant that I could afford to buy an (IMO) excellent 3 year old car that cost $25k when new for around $10.5k. IOW, the bad thing about Chryslers is that they have low resale value. The good thing about Chryslers is that they have low resale value. Just depends if you are a new car owner selling or a used car owner buying.

Bill Putney (to reply by e-mail, replace the last letter of the alphabet in my address with "x")

According to Consumer Report the depreciation of most Toyota's is about average. Same as Chrysler. Subaru's depreciate faster according to CR. Check their April issue. Some models do better than others. Some worse.

This is pretty much true of any new vehicle unless it has a huge demand and a minmal supply. Consider buying a car that is a few years old and let someone else take this huge inital depreciation hit.

Steve B.

I agree; in spite of what Dan said, there are not that many cars that really depreciate like the "good old days". You used to be able to buy a 2 year old car for half of what it cost new, but it's hard to do that now. Chryslers do depreciate a lot, probably the worst of anything. Lincoln town cars are pretty bad.

You can sort of tell what depreciates the most by comparing 3-year lease payments for all sorts of dissimilar vehicles. Sometimes there are different size up-front payments, but you can just add all that in.

This isn't true. A car is an investment. You spend a set amount of money on it. You gain (hopefully) a utility out of it's use that is far in excess of the value of the money spent on it.

A car is not a required purchase. It is possible to live one's life and not own a car. You will be spending a lot of time on the bus. But people invest in the utility of a car so that they basically gain time for themselves and freedom to do things they couldn't do using mass transit, that is an investment.

Ted

A lot of that is probably because light aircraft cost a LOT new due to liability issues and prices go up significantly every year, so few people can afford to buy them.

nate

Very true. I tend to buy cars that are new or at most a couple of years old, but I also keep them till they croak so the depreciation isn't a big factor for me either.

But if you are in the situation of the OP, it is a huge difference between a Toyota and a Chrysler.

Matt

Your definition isn't the generally accepted one. The only cars that are investments are classic cars that are appreciating.

Main Entry: investment Function: noun

1 : the outlay of money usually for income or profit : capital outlay; also : the sum invested or the property purchased 2 : the commitment of funds with a view to minimizing risk and safeguarding capital while earning a return ?compare SPECULATION

Source: Merriam-Webster Dictionary of Law, © 1996 Merriam-Webster, Inc.

Matt

No, classic cars only meet definition #2 - as they earn a rate of return (presumably if you sell them)

But definition #1 covers just about all vehicles purchased for business use. That is what "capital outlay" means. A capital expenditure is one made on an item that does not earn a rate of return when the item is sold, instead it earns a rate of return when it's used.

If I work out of my home and I buy a car to enable me to work better, I am making an investment.

The IRS understands this which is why they allow you to write off vehicles other than just classic cars.

If I work for Domino's Pizza and I buy a car to shuttle myself around, as well as deliver pizzas, when I am delivering pizzas I am making income - which also matches definion #1. The IRS also understands this which is why they allow Domino's Pizza to pay me mileage, then deduct this from their taxes.

It is a very thin line between investing in a vehicle to make an income - like delivering pizzas, broom samples or whatever - and investing in a car so I am then eligible to commute to a job that is on the other end of the city and make my income from that job. This is what freedom to do things you couldn't do using mass transit means. In fact a car purchased as a pure commuter vehicle is for all intents and purposes, an investment. The only reason the IRS doesen't recognize it for tax purposes is because everyone who works does this, and if the IRS did, the amount of mileage deducted would bankrupt the country.

Even so, though, people still loophole this by buying vehicles then rolling the vehicle loans into home equity loans, and getting the deduction that way.

"money spent" is money spent on crap like candy, junk food, vacations, xbox games, etc. in short, stuff that consumes time, and gives absolutely no monetary return to you whatsover. A car is far, far from this.

Ted

Supply and demand.

----------- Alex