This weekend the local dealers have the 4 cylinder LX, MSRP $20575 +
freight $515 = $21090 total sticker price on sale for $19034.
The car comes with a 36,000 mile 36 month factory warranty. I haven't
studied the depreciation or inflation on these cars and at what the extended
warranty cost but today I started to wonder about this scenario. Assume I
buy the car and keep if for two years and drive 25,000 miles and then sell
it with one year and 11,000 miles of warranty remaining. Now here comes the
unknown part, how much can I sell it for. If I assume it drops $1500/yr for
the first two years I might get $16000 for it. If this is close then my
ownership & maintenance (zero on warranty) cost would be $3000/25000 $0.12/mile. If drops at $2000/yr my cost is 16 cents/mile.
But if I keep the car five years and assume the extended warranty costs
$1200 and I can sell the car for $9000 my ownership cost is 14.4 cents/mi.
If I've made no big errors it seems like it might make sense to sell the car
every 2 years and get a new one with the latest in safety.
Any facts and thoughts appreciated.
The chart below shows what Edmunds.com assumes a 2005 Honda Accord Lx
automatic 4 door vehicle will cost over 5 years. As you can see it is
assumed that it will depreciate $4000 the first year, $2000 the second and
so forth. On the flip side my girlfriends 2004 Accord, Auto, LX, 4 door was
bought at $18,850 plus tax and license in July/August of 2004. If I go to
Kelleys blue book the private party selling price is still $18,300. So for
example if this car was totalled the insurance company would be giving about
$18,300 to my girlfriend if not more in my experience. That is a
depreciation of only $500 the first year. That is why I tell people it
really isn't worth it to buy a 2-3 year old Honda since the price of a new
one is not that much more. If it were a Chevy, Ford, GM, Chrysler, etc then
the vehicle would really depreciate the first couple years and buying a used
one would be more worth it than buying new.
So depreciation is a relative thing I guess. There are dealers out there
asking more for a 2003/2004 Accord than what a new one can be bought for.
The problem with buying every two years is that you are paying for the
depreciation continually and for sales tax for the full amount every two
If you buy the car outright and pay the sales tax once with a 5 year loan
then at the end of five years you have a relatively new car, in today's
standards, and it is worth about $8000k. I guess then you could sell it and
put the 8k down on a new 20k Honda and have a loan for about $12k which
could be paid off in 2-3 years. At the end of 2-3 years you could sell it
for about $13k and put that down on a new Honda....just a thought.
The latest in safety has been here for a while..the next few years isn't
going to produce any fabulous safety devices for the base Honda Accord.
These new laser guided collision avoidance systems will most likely only be
available on the high end models which if you are buying you are not that
concerned about money or cost per mile.
Year 1 Year 2 Year 3 Year 4 Year 5 5-yr Total
Depreciation $4,072 $2,023 $1,780 $1,578 $1,416 $10,869
Financing $1,190 $958 $710 $445 $161 $3,464
Insurance $883 $914 $946 $979 $1,013 $4,735
Taxes & Fees $1,670 $50 $50 $50 $50 $1,870
Fuel $1,230 $1,267 $1,305 $1,344 $1,384 $6,530
Maintenance $282 $553 $384 $867 $1,131 $3,217
Repairs $0 $0 $108 $257 $375 $740
Yearly Totals $9,327 $5,765 $5,283 $5,520 $5,530 $31,425
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Waiving the right to remain silent, "Henry Kolesnik"
You need to determine the *real* depreciation on the vehicle.
Otherwise, all the rest of your calculations are based on guesswork,
and are essentially meaningless.
A good starting point might be to get the values on the 2003, which
is now a two-year-old car. kbb.com could be a place to go for the
Larry J. - Remove spamtrap in ALLCAPS to e-mail
The United States is the greatest country in the world..!
you want "new every two"?
lease. easy enough to negotiate a higher mileage (if needed) beforehand.
to me, its stupid as all hell, since i like NOT having a car payment,
but some people have nothing better to do with their money.
You're overanalyzing it and not using facts, just assumptions.
The best thing to know is that the Honda Accord retains the highest value of
any car in it's class. In other words, it has the lowest depreciation. Ask
around and you'll find that to be true. That is also why an Accord can be
leased for very reasonable rates. In a lease you pay for what you've used,
ie: time and mileage. If over time your car has a higher value than the
next, then you will pay less while leasing, providing you keep the miles to
within the ageed upon lease terms.
If what I've said is true, and I think you will find it to be, if you buy a
car based on the economics of your best deal over the life of the car then
you can't go wrong with an Accord.
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