The economics of car ownership and buying new versus used

[Vdubchaos]

Well in my case I actually loved driving my 89 dodge caravan but then it was a turbo LOL and I doubled the stock boost pressure and did all kinds of other tweaks. Had a lot of fun with that thing. I rebuilt the engine and trans and still spent almost nothing on it. In my case though I always have two cars so I never really have to worry about it. My other car being a $2k miata that I used for autox.

ahh, THE turbo caravan

I love minivans.......and that is one of the best performance ones ever made. This guy used to be my hero hehe (RIP).
https://www.youtube.com/watch?v=t6-CADcY4KU

We can't live without one. And I still think minivans are the best muti funcional/people movers/best bang for the buck vehicles on the road.

 

[Eug]

So your definition of used car = shit bucket

When the car you JUST bought is already used.

Nope. A cheap old used car is often a shit bucket. Indeed, most of the analyses suggest if you're buying cars older than say 5 or 6 years you run the risk of incurring high enough repair bills to make it not worthwhile... unless you spend your own time fixing them.

OTOH, in the 2-4 year-old range, it's often safer (albeit not always).

Used paid off car doesn't require full coverage. And in general used cars/as they age are cheaper on insurance anyways.

And insurance rates are not just based on cars, mostly drivers. Yes it can be 10x the price if you wife has DUI, tickets and accidents.

She has no DUI, tickets, or accidents. Yet her 7 year-old Yaris costs more to insure than my 2012 Prius Plug-in. Actually, we have the same insurer, on the same policy. Both of us are considered the same, since we have the policy together, both with clean records.

According to Kelley Blue Book, her Yaris with a small scratch on the fender is worth US$5228 as a trade-in, which is similar to the $6300 CAD we were told in Canada. The same Blue Book site states that my as-new condition 2012 Prius Plug-in (Tech Package, which is basically the same as the US Advanced Package) is worth US$24907 as a trade-in. That seems high to me, but nonetheless you get the picture. If you down grade the assessment of the condition of the car (as dealers often do), it still is in the US$23900 to $24400 range.

Yet, that car costs less to insure than the Yaris. I asked my insurance agent about this and she said this is a very common occurrence.

One important component of the insurance is the liability, and you're an idiot if you take less than $1 million liability. I wouldn't take less than $2 million myself since awards of over $1 million are becoming less uncommon. We have $3 million actually, since there have been very rare cases of courts awarding over $2 million in damages. I've noticed a lot of people who want cheap insurance get the minimum amounts, which is probably in the range of $200000.

 

[NutBucket]

Well, if you have no assets there's no reason to get high coverages

 

[Vdubchaos]

Well, if you have no assets there's no reason to get high coverages

Pretty much, to say "you are an idiot if you don't get X" sounds like some kind of salesman lingo to me.

It depends how much you have to lose.

If your Net worth is 25k, I doubt you need even 200k of insurance coverage.

 

[NutBucket]

exactly

 

[JulesMaximus]

Pretty much, to say "you are an idiot if you don't get X" sounds like some kind of salesman lingo to me.

It depends how much you have to lose.

If your Net worth is 25k, I doubt you need even 200k of insurance coverage.

Until you get a $500k judgement against you in a lawsuit and they garnish your wages for the rest of your life.

 

[Eug]

So I just went over the details of our insurance policy.

All of our setup with the two cars is the same - 2008 Yaris (value ~US$5200) & 2012 Prius Plug-in (value ~US$24900) - except that we've said the Yaris gets LESS mileage at 10000 km per year vs. the Prius Plug-in at 16000 km, and that the Yaris is only driven for pleasure whereas the Prius is driven for pleasure and for commuting to work.

For collision the cost is almost the same. I pay $137 per year for collision (peanuts) and for the Yaris it's $26 per year less at $111 (less than $10 per month).

Most of the other items are also similarly priced. However, there is one big difference, and that is the mandatory Accident Benefits insurance cost.

Coverage includes, among other things, income replacement benefits, supplementary medical and rehabilitation benefits, death and funeral benefits and long-term care benefits. These benefits are available not only to the owner of the policy, but they could also be accessed by passengers in the vehicle, as well as pedestrians, who may not have coverage under their own automobile insurance policy.

On the Prius, it's CAD$371 per year. On the Yaris, it's CAD$663 per year. Ouch. I'd bet that $663 would balloon even bigger if we upped the mileage to 16000 km and said it was for commuting to work.

Dunno if it's because the Yaris is less safe car, but I could see that, because it's smaller and older without the updated safety features.

Until you get a $500k judgement against you in a lawsuit and they garnish your wages for the rest of your life.

Indeed. Furthermore, one can have a NET worth of $25000 but make way more than that in salary. So with someone with a stable job making say $50000 a year with a mortgage, even just a $400000 judgement would essentially destroy that person's finances. The court could garnish the wages for decades.

$400000 is not a lot of money for a judgement. That's a reasonably common ballpark amount. $1.2 million is much less common though, which is why $1 million coverage makes sense. But like I said, I think $2 million is more advisable since the difference between $1 million and $2 million coverage is very low in cost.

 

[Vdubchaos]

Until you get a $500k judgement against you in a lawsuit and they garnish your wages for the rest of your life.

And when you have 1 million dollar coverage. You are an idiot cause when you get a 2 million dollar judgement against you, they will garnish your wages.

And if that was to happen, there would be no wages to garnish....so good luck to them.

 

[Vdubchaos]

$400000 is not a lot of money for a judgement. That's a reasonably common ballpark amount. $1.2 million is much less common though, which is why $1 million coverage makes sense. But like I said, I think $2 million is more advisable since the difference between $1 million and $2 million coverage is very low in cost.

You should get $5 million dollar coverage, just in case.

You never know.

Do they have meteor insurance? One might hit you on the head today!!!

Hey, you never know.

 

[exar333]

Until you get a $500k judgement against you in a lawsuit and they garnish your wages for the rest of your life.

This is key.

On a cheap car, its not much about replacing it, as the price of the car might only be 2-3x your deductible. Full coverage protects you from putting someone else (even someone in your own car) in the hospital and getting taken to court for said judgment. To me, a small amount per month is WELL WORTH this piece of mind.

 

[NoCreativity]

Dunno if it's because the Yaris is less safe car, but I could see that, because it's smaller and older without the updated safety features.

Bingo. Smaller, less safe cars (or less safe cars in general) will cost more for insurance. Cost of car repairs is small compared to cost of medical bills.

 

[Eug]

You should get $5 million dollar coverage, just in case.

You never know.

Do they have meteor insurance? One might hit you on the head today!!!

Hey, you never know.

And when you have 1 million dollar coverage. You are an idiot cause when you get a 2 million dollar judgement against you, they will garnish your wages.

And if that was to happen, there would be no wages to garnish....so good luck to them.

Actually I have $3 million coverage, although it's $1 million on the auto insurance, and $1 million on the house, then another $2 million umbrella insurance covering both for a total of $3 million. There has never been a judgement over $3 million AFAIK. Or if it has happened, it's exceedingly rare. There have been many over $1 million but it's not common. Over $2 million is rare. Over $200000 happens all the time, which is why it's really stupid to just get $200000. Doesn't matter if your net worth is $25000 or -$100000. Just the fact you said that means you should read up more about adequately insuring yourself.

Now if you really don't have any wages to garnish, that sucks. Most people would want to have wages at some point.

As for meteor insurance, yes I have disability and life insurance too. I am the primary wage earner, and I have kids, so it's advisable to have that. If I had no kids I wouldn't buy the life insurance but I most definitely would still have disability insurance.

If you get hit by a meteor and die and have dependents, then they need that life insurance payout. If you get hit by a meteor and die but have no dependents, then the life insurance is unnecessary. If you get hit by a meteor and don't die but are disabled, then good disability insurance will cover you and your family for the rest of your life.

---

So, for most people who have a job in Canada or the US, I would recommend minimum $1 million liability, but getting $2 million isn't a big incremental cost, so it should be a consideration given that judgements over $1 million do happen. My $3 million is probably overkill though.

 

[Vdubchaos]

Clearly, you have every aspect of what if covered.

Good work!

Yes I have wages and children like you. I'm just saying that if there was a freak accident and if I was caught up in the amazing American Justice system, I would either go off grid or just move to another country. Legal system and health system is completely FUBAR, that's why these sort of things cost as much as they do. There is no way in hell I will "cover my ass" for every what if that exists. I have WAY more important things to worry about than "what ifs". I also don't have money floating around to cover those "what if's either".

Heck, in this country, I've seen people have every what if covered and still end up in financial ruin. Here is a great story for you, this can happen to you TODAY.

http://www.channel3000.com/news/woman-taken-to-wrong-hospital-faces-bankruptcy/29648000

It's simply ridicules.

Also I hope you realize that FIRST step of ANY insurance claim (from insurance company perspective) is DENY DENY DENY. You THINK they will cover your ass when and if the time comes, but chances are high they will screw you.

TONS of people are getting screwed by insurance when it's time to pay out......

Hope you read and understand a BOOK of policy agreement with bunch of legal lingo that even lawyers can't understand!!!

 

[Eug]

Clearly, you have every aspect of what if covered.

Good work!

Yes I have wages and children like you. I'm just saying that if there was a freak accident and if I was caught up in the amazing American Justice system, I would either go off grid or just move to another country. Legal system and health system is completely FUBAR, that's why these sort of things cost as much as they do. There is no way in hell I will "cover my ass" for every what if that exists. I have WAY more important things to worry about than "what ifs". I also don't have money floating around to cover those "what if's either".

So basically, you're hiding your head in the sand.

Also I hope you realize that FIRST step of ANY insurance claim (from insurance company perspective) is DENY DENY DENY. You THINK they will cover your ass when and if the time comes, but chances are high they will screw you.

Stuff happens, but you can protect yourself to a certain extent by going with a respected insurance company and going through the details. An insurance broker may be able to help you there too.

BTW, my car was totalled a couple of weeks ago.

The insurance adjuster heard my story, got the police report, and immediately concluded that I was not at fault.

They initiated the damage assessment with their insurance assessor, dealt with the tow company directly, and dealt with the car storage company directly. I didn't pay a cent to either the tow truck company or the car storage company. When I mentioned my daughter was in the car, they asked me if I had child car seats. I said yes and they immediately told me discard my child car seats, and immediately go out and buy new ones, and they would pay for them. They also gave me the name of their preferred car rental company so I could go rent a car at their expense. They also asked me if I or my daughter had any physical / medical issues because if they did we would need to initiate a claim there too, but we didn't.

About a week later they came back with the results of the assessment. Car was totalled - unfixable with frame damage. They suggested my 2004 Prius was worth about $7000 + tax (~$8000), according to comparisons with stuff like Autotrader prices, etc. I told them that $8000 was decent, but that my car had less mileage than average for that age and had an upgrade package that was popular. It turns out the assessor couldn't check the mileage because the car was completely dead, so the adjuster had just used the average for the age. Also, the adjuster had assumed it was a base model. So, I told the adjuster my mileage and the option package upgrade name, and the adjuster right on the spot did a computer reassessment, and came up with about $8000 + tax = ~CAD$9000.

Yesterday I got a check for about $9500, including the above $9000 and the cost of the car seats. This whole process took about 2 weeks.

The only out of pocket cost I incurred here was the cost of 1 week of car rental. The insurance company covered the first week, but then after they informed me of my $9000 amount they said the claim was essentially completed so the coverage of the car rental would be terminated in a couple of days. To me that was reasonable, but since I still needed a car I kept the car rental. Luckily the rental company has a policy in these cases that the customer can continue getting the low company rates that the insurance company would be charged, instead of regular retail rates.

A week later, I bought my "new" 2012 Prius Plug-in.

 

[Insomniator]

Depends on what you value and what you can afford. Personally, I'd spend 25k on a used Porsche all day over a new Accord, given my current position of no kids and enough money to cover costs.

My current used mini s was 11k (04 with 30k miles when i bought it in 2011)... it could practically be considered a lemon with all the work it has needed (front end accident didn't help) but even with ~1k of upgrades and almost 4k of repairs in ~3 years its still only at 16k total. Probably 8k less than a new Mini S, a car I would have like less anyway.

 

[JulesMaximus]

Clearly, you have every aspect of what if covered.

Good work!

Yes I have wages and children like you. I'm just saying that if there was a freak accident and if I was caught up in the amazing American Justice system, I would either go off grid or just move to another country. Legal system and health system is completely FUBAR, that's why these sort of things cost as much as they do. There is no way in hell I will "cover my ass" for every what if that exists. I have WAY more important things to worry about than "what ifs". I also don't have money floating around to cover those "what if's either".

Heck, in this country, I've seen people have every what if covered and still end up in financial ruin. Here is a great story for you, this can happen to you TODAY.

http://www.channel3000.com/news/woman-taken-to-wrong-hospital-faces-bankruptcy/29648000

It's simply ridicules.

Also I hope you realize that FIRST step of ANY insurance claim (from insurance company perspective) is DENY DENY DENY. You THINK they will cover your ass when and if the time comes, but chances are high they will screw you.

TONS of people are getting screwed by insurance when it's time to pay out......

Hope you read and understand a BOOK of policy agreement with bunch of legal lingo that even lawyers can't understand!!!

Um yeah, I'll take my chances with USAA. They've been pretty good to me over the years when I've needed them.

You can take your chances with "off the grid" and/or moving to Peru or wherever you think you can go to escape the reaches of our "fubar" legal system.

 

[Subyman]

I don't know if its already been talked about, but recently I purchased a new pick up truck. For whatever reason decent used trucks hold their value really well. Waiting until the end of the year sale for a new truck brought the price down to around the area of nice, low miles used trucks were. Combine that with the full 5year 100k manufacturers warranty on the power train and I think it was a better decision economically to purchase new. Then there are the improvements to fuel economy on newer model trucks that helps a lot over the course of ownership.

I purchased for work as well, so any repairs would have not only been costly due to the direct cost of the repair work, but the time out of work would have been even more costly for me.

 

[Raduque]

I don't know if its already been talked about, but recently I purchased a new pick up truck. For whatever reason decent used trucks hold their value really well. Waiting until the end of the year sale for a new truck brought the price down to around the area of nice, low miles used trucks were. Combine that with the full 5year 100k manufacturers warranty on the power train and I think it was a better decision economically to purchase new. Then there are the improvements to fuel economy on newer model trucks that helps a lot over the course of ownership.

I purchased for work as well, so any repairs would have not only been costly due to the direct cost of the repair work, but the time out of work would have been even more costly for me.

I just bought a 2013 FX2 w/27k for 28k. A full 11.5k lower than a 2014 FX2, and it has a 7yr/100k Ford CPO warranty.

I'm more than happy with my decision and my truck. Washed, waxed and detailed it on Tuesday.

Though lately, I have been seeing the 2015's driving around town and man... they are some nice looking trucks.

 

[Jumpem]

If you live where they use road salt I would always buy new if it is affordable. Cars rust here in central NY. I drive them for three winters and get something else.

 

[kitatech]

Back to OP's question...and its relation to insured value...

I have always bought used...and my rule of thumb is to pay no more than the "average condition" trade-in value for a used car....this way I'll always have a car worth more retail (the insured valuation) than I paid or it...

Got my 05 Camry with 100k miles (the 50K mile mark of a 20th century used car) for "average" t-i-v and even took a cheap CU loan ($11/mo interest) out on it...2.5 years later it's retail worth is 3-4x the outstanding loan (1.5 years left)...so I pay for my $250 deductible for collision.

...my last car, a 13-year old Altima, got totaled @ 195k miles and I got $2500 for it after the deductible...a nice dp on the Camry...and after owning it for 10 years I estimated that my cost of the Altima was the typical out the door cost of the car when new...so I figured I saved the cost to maintain and repair the car for 10 years and 150k miles....@ 5¢/mile for maintenance/repairs, that's $7,500 saved, $750 per 15,000 mi/yr, or $60/mo.....

So, one has to consider the increased maintenance/repairs to an older car that will inevitably occur when running past 100 and 150k miles....and 10 years out the showroom....accepting gratefully/graciously those costs as the "price paid" for a low initial payout goes a long way to justifying the purchase of a used car.

 

[Spicedaddy]

If you live where they use road salt I would always buy new if it is affordable. Cars rust here in central NY. I drive them for three winters and get something else.

Yeah, that's something to consider. If I lived in Florida, I'd probably buy my cars and keep them for 8 years. But I live in Quebec where roads are full of holes and the sand/gravel/salt in the winter will sandblast your car and make it rust earlier.

So I invest my money instead of putting a down payment or having equity in a car. I lease and get a new car every 2-4 years. It might cost more in the end, but I like cars and it's worth it to me.

 

[slashbinslashbash]

This is key.

On a cheap car, its not much about replacing it, as the price of the car might only be 2-3x your deductible. Full coverage protects you from putting someone else (even someone in your own car) in the hospital and getting taken to court for said judgment. To me, a small amount per month is WELL WORTH this piece of mind.

Uh, no. (Speaking of the US here)

Liability = required by state law. Liability = covers other person's medical costs and vehicle repair costs. (Note: while medical costs can indeed be ridiculous in the US, the injuries that happen in an automobile accident aren't exactly equal to years-long cancer treatment. So it makes sense to go high but not ridiculously high. We're currently at $100k per person / $300k per accident, which is well above the state minimums but I'm debating going up to $250k/$500k just to be on the safe side.)

"Full Coverage" = "Comprehensive" (stuff that happens to your car when it's not being driven, such as a hailstorm, vandalism or a tree crashing on it) + "Collision" (stuff that happens to your car in an collision while it's being driven, if the driver of your car is at fault) = optional if you own your vehicle outright, but required by lenders if you have a loan on your car. Covers repairs to your own car. Doesn't have ANYTHING to do with medical bills for yourself, your passengers, or people in other vehicles.

My wife and I drive beaters, and we have great liability coverage, and uninsured/underinsured coverage (so if we are hit by an uninsured/underinsured driver and it is their fault, we will still be covered... both medical costs, car repair costs, and unearned wages... up to $300k) but if we cause an accident and it is our fault then any repairs to our own vehicles will be coming out of pocket. But we do NOT carry comprehensive/collision/"full" coverage because it's not worth it when we both drive cars that can be replaced easily with $3000.

The "$500k judgment against you in a lawsuit" just ain't happenin' unless A) you've already got a lot of money (you're rich, or you've got good insurance that will pay out the $500k, or you were driving for a company with a lot of money and good insurance), or B) you were being super crazy negligent like driving drunk the wrong direction on the highway and the DA effed up the prosecution so you're not going to jail so some lawyer decides to make a name for themselves by going after the guy that the whole town hates because he killed 3 kids. A big judgment for a normal traffic accident where both parties are behaving semi-reasonably/non-grossly-negligently (and neither party has a big target on their back so a lawyer is willing to take a swing at the case on the chance of a big payday) just doesn't happen. Lawyers don't take contingency cases where the defendant is a Joe Schmoe nobody who will be having his wages garnisheed for 20 years if they win. Just ain't worth their time.

 

[exar333]

Uh, no. (Speaking of the US here)

Liability = required by state law. Liability = covers other person's medical costs and vehicle repair costs. (Note: while medical costs can indeed be ridiculous in the US, the injuries that happen in an automobile accident aren't exactly equal to years-long cancer treatment. So it makes sense to go high but not ridiculously high. We're currently at $100k per person / $300k per accident, which is well above the state minimums but I'm debating going up to $250k/$500k just to be on the safe side.)

"Full Coverage" = "Comprehensive" (stuff that happens to your car when it's not being driven, such as a hailstorm, vandalism or a tree crashing on it) + "Collision" (stuff that happens to your car in an collision while it's being driven, if the driver of your car is at fault) = optional if you own your vehicle outright, but required by lenders if you have a loan on your car. Covers repairs to your own car. Doesn't have ANYTHING to do with medical bills for yourself, your passengers, or people in other vehicles.

My wife and I drive beaters, and we have great liability coverage, and uninsured/underinsured coverage (so if we are hit by an uninsured/underinsured driver and it is their fault, we will still be covered... both medical costs, car repair costs, and unearned wages... up to $300k) but if we cause an accident and it is our fault then any repairs to our own vehicles will be coming out of pocket. But we do NOT carry comprehensive/collision/"full" coverage because it's not worth it when we both drive cars that can be replaced easily with $3000.

The "$500k judgment against you in a lawsuit" just ain't happenin' unless A) you've already got a lot of money (you're rich, or you've got good insurance that will pay out the $500k, or you were driving for a company with a lot of money and good insurance), or B) you were being super crazy negligent like driving drunk the wrong direction on the highway and the DA effed up the prosecution so you're not going to jail so some lawyer decides to make a name for themselves by going after the guy that the whole town hates because he killed 3 kids. A big judgment for a normal traffic accident where both parties are behaving semi-reasonably/non-grossly-negligently (and neither party has a big target on their back so a lawyer is willing to take a swing at the case on the chance of a big payday) just doesn't happen. Lawyers don't take contingency cases where the defendant is a Joe Schmoe nobody who will be having his wages garnisheed for 20 years if they win. Just ain't worth their time.

I also like to protect my own passengers. Are your's protected? I don't live in a no-fault state anymore and nothing is guaranteed. A few extra dollars is worth-it to me. In my opinion, only having liability is short-sighted and cheap.

More reading if you want it:
http://www.netquote.com/auto-insurance/auto-insurance-coverage-for-passengers.aspx

 

[slashbinslashbash]

I also like to protect my own passengers. Are your's protected? I don't live in a no-fault state anymore and nothing is guaranteed. A few extra dollars is worth-it to me. In my opinion, only having liability is short-sighted and cheap.

More reading if you want it:
http://www.netquote.com/auto-insurance/auto-insurance-coverage-for-passengers.aspx

More reading, huh? Interesting. Did you read anything I wrote? I don't "only have liability". But I don't pay for "Full" coverage (i.e. "Comprehensive" + "Collision" coverage -- which covers the vehicles only, not passengers!) because it's not worth it for my cars. I don't live in a no-fault state either.

 

[Subyman]

I just bought a 2013 FX2 w/27k for 28k. A full 11.5k lower than a 2014 FX2, and it has a 7yr/100k Ford CPO warranty.

I'm more than happy with my decision and my truck. Washed, waxed and detailed it on Tuesday.

Though lately, I have been seeing the 2015's driving around town and man... they are some nice looking trucks.

I bought a 2014 GMC Sierra 4x4 Z71 Double Cab with tow package and V8 for 35.4K tax title and license included. Sticker was 44K. Best part was that I didn't tell them about my trade in until we haggled as low as I could go on the price. Ended up getting direct book for my car, so I came out pretty happy.

I've seen a few 2015 F150s, but I think they still need to grow on me some more.

Now that the weather has finally warmed up, my truck needs a huge detail job.