How much should I spend on my first car?

[Mr.Meerkat]

On 09/03/2017 at 7:25 PM, DildorTheDecent said:

Just get a heap of a yoke and sell it later on. First car to help pull the insurance down and then get a nice motor afterwards. 

Unless you're in the UK where the cost of insurance between a $500 and $5000 is the same if you are a "first"/17 year old driver  

[Mira Yurizaki]

Your first car, especially if you're a recently licensed driver, I recommend should be cheap enough that you shouldn't care so much if you have an incident and reliable enough so you don't have to worry about it having constant problems. Also consider other factors like how much maintenance will cost, registration fees, or what your insurance premium will be.

 

As far as resale value goes, what matters more is how many miles are on the car than how old the car is. Just as a quick and dirty estimate, I looked up the private resale value of a 4-door Honda Accord in good condition on KBB for the 2012 and 2007 model. The 2012 model I put down as having 200,000 miles on it (a bit extreme, but I'm making a point here) and it was worth about $6050. The 2007 model I put down as having 100,000 miles on it and it was worth about $5,600.

 

So point is, if you drive a lot, you can expect resale value to go out the door.

[PCMasterDebater]

1 hour ago, dalekphalm said:

There are things you're not considering in your calculations:

 

1. A brand new car that's lasted 6 years, will last even longer.

2. A car that was 6 years old when you bought it, won't.

3. Resale value on the car after 6 years:

3a. If you're buying a $3000 or less car, you're basically not getting anything of worth after 6 years.

3b. If you're buying a brand new car, after 6 years you can potentially sell that car for $10,000 or more (depends on many variables)

 

So yes, buying cheap and old can indeed work out better, but buying new (or newer, at least), isn't always a straight wash. A new car will simply last longer than a comparable old used car. It will be worth more if you decide to sell it after 5-6 years.

 

I'm sure there's a sweet spot where you can calculate exactly how new a car should be to optimize resale value vs initial purchase price vs longevity, but there are too many variables to come up with a hard figure that works with every car.

resale value? lets go with that for a sec. you can expect roughly 60% depreciation after 6 years ona new vehicle. $24000 * .4 = $9600 15400 loss. this vehicle im talking about, paid 600, 2400 in repairs= valued @ $3850. my car appreciated, his depreciated. trust me. it never pays to buy new. 

 

lets recap. $32000+ in savings over 6 years. +on top of the 15000 in depreciation.

 

really you guys are still trying to argue? no wonder there are so many people upside down on their car loans. lol

[PCMasterDebater]

1 hour ago, M.Yurizaki said:

snip

hey, someone with brain. welcome!

[Mira Yurizaki]

If you want an anecdotal OP, I bought a used Honda for $7500 out the door. Most of the maintenance was oil changes, with the occasional tire maintenance. Had to replace two of the 100K components because the last owner didn't though. Anyway, it lasted me a little over six years, but probably would've lasted longer had I not nearly overheated the thing (due to forgetting to check the coolant once in a while) and probably caused a head gasket leak (that I opted not to get fixed because the estimate was $3000)

 

So I figure what, ~$1800 per year of cost of ownership, minus the one-off incidents?

[dalekphalm]

16 minutes ago, PCMasterDebater said:

resale value? lets go with that for a sec. you can expect roughly 60% depreciation after 6 years ona new vehicle. $24000 * .4 = $9600 15400 loss. this vehicle im talking about, paid 600, 2400 in repairs= valued @ $3850. my car appreciated, his depreciated. trust me. it never pays to buy new. 

 

lets recap. $32000+ in savings over 6 years. +on top of the 15000 in depreciation.

 

really you guys are still trying to argue? no wonder there are so many people upside down on their car loans. lol

You're either wilfully ignoring some of my points, or you missed them. I quite clearly said new or newer. Most depreciation happens within the first year, then starts to curve off. If you, for example, buy a 2 year old car instead of a brand new car, you still get the life expectancy of a new(ish) car, and still get a comparatively high resale value.

 

The fact that you had a car that "appreciated" was more or less a fluke - most people are not gonna have that happen, nor should they count on it. Furthermore, of those $2400 in repairs, did you do them yourself or pay a mechanic?

 

The point is that if you buy a car that's already 6 years old, and it lasts you 6 years, that means a brand new car of comparable quality will last you 12 years instead, if you want to go down that road.

[DildorTheDecent]

2 hours ago, Mr.Meerkat said:

Unless you're in the UK where the cost of insurance between a $500 and $5000 is the same if you are a "first"/17 year old driver  

Well aware of how hard it is in the UK here. 

 

Especially for guys. We get shafted pretty hard. 

[Mr.Meerkat]

2 minutes ago, DildorTheDecent said:

Well aware of how hard it is in the UK here. 

 

Especially for guys. We get shafted pretty hard. 

2000+ per year for a fucking 1K car...seriously?  

[PCMasterDebater]

1 hour ago, dalekphalm said:

You're either wilfully ignoring some of my points, or you missed them. I quite clearly said new or newer. Most depreciation happens within the first year, then starts to curve off. If you, for example, buy a 2 year old car instead of a brand new car, you still get the life expectancy of a new(ish) car, and still get a comparatively high resale value.

 

The fact that you had a car that "appreciated" was more or less a fluke - most people are not gonna have that happen, nor should they count on it. Furthermore, of those $2400 in repairs, did you do them yourself or pay a mechanic?

 

The point is that if you buy a car that's already 6 years old, and it lasts you 6 years, that means a brand new car of comparable quality will last you 12 years instead, if you want to go down that road.

I ignored your points because it has little to do with financing your first car.  But lets go do it.

 

We need to make one thing clear though; Life expectancy: has nothing to do with quality.

 

Example.

So lets take a 2017 Cadillac Escalade @ $92,000... that's gotta be a quality piece am I right? Its $92,000, according to you guys: spend more, get more quality, it lasts longer...

A 2017 Ford Focus @ $24,000 - the ford costs roughly 26% that of escalade. Is the Escalade going to last 3.8 times longer then the focus? Of course not but for the sake of argument lets do the math. I got a trade in a few years ago... A 2004 Ford Focus with 571,000 miles on it. Roughly $24,000 new. So 571,000 * 3.8 = 2,168,800 miles. So according to this quality = life expectancy. We can expect the escalade to go over 2 million miles.

 

It doesn't work that way, so that argument is right out the window.

 

So now a 6 year old car will only have 6 more years? How does that work? Where did you come up with that?  Are we assuming cars only last 12 years now? I'm looking outside right now and my neighbor has a 1999 Pontiac Sunfire that he drives everyday. Did he not get the memo or something? Yup. that argument is also out the window.

 

Did I miss anything?

 

 

 

[PCMasterDebater]

1 hour ago, M.Yurizaki said:

If you want an anecdotal OP, I bought a used Honda for $7500 out the door. Most of the maintenance was oil changes, with the occasional tire maintenance. Had to replace two of the 100K components because the last owner didn't though. Anyway, it lasted me a little over six years, but probably would've lasted longer had I not nearly overheated the thing (due to forgetting to check the coolant once in a while) and probably caused a head gasket leak (that I opted not to get fixed because the estimate was $3000)

 

So I figure what, ~$1800 per year of cost of ownership, minus the one-off incidents?

That's not bad But Lets not forget we are talking about someone's first car.

[Mira Yurizaki]

2 minutes ago, PCMasterDebater said:

That's not bad But Lets not forget we are talking about someone's first car.

That was my first car, that's why I put it up there. I was also young enough and was considered a "new enough" driver that my insurer probably considered me a liability.

[PCMasterDebater]

2 minutes ago, M.Yurizaki said:

That was my first car, that's why I put it up there. I was also young enough and was considered a "new enough" driver that my insurer probably considered me a liability.

Did you finance it?

[dalekphalm]

4 minutes ago, PCMasterDebater said:

I ignored your points because it has little to do with financing your first car.  But lets go do it.

 

We need to make one thing clear though; Life expectancy: has nothing to do with quality.

 

So lets take a 2017 Cadillac Escalade @ $92,000... that's gotta be a quality piece am I right? Its $92,000, according to you guys: spend more, get more quality, it lasts longer...

A 2017 Ford Focus @ $24,000 - the ford costs roughly 26% that of escalade. Is the Escalade going to last 3.8 times longer then the focus? Of course not but for the sake of argument lets do the math. I got a trade in a few years ago... A 2004 Ford Focus with 571,000 miles on it. Roughly $24,000 new. So 571,000 * 3.8 = 2,168,800 miles. So according to this quality = life expectancy. We can expect the escalade to go over 2 million miles.

 

It doesn't work that way, so that argument is right out the window.

 

So now a 6 year old car will only have 6 more years? How does that work? Where did you come up with that?  Are we assuming cars only last 12 years now? I'm looking outside right now and my neighbor has a 1999 Pontiac Sunfire that he drives everyday. Did he not get the memo or something? Yup. that argument is also out the window.

 

Did I miss anything?

 

 

 

You're making ridiculous assumptions. Not once did ANYONE state that cost intrinsically means better quality. I've no idea why you're comparing a luxury full size sedan to an entry level mid-size. Frankly, the Focus will probably last longer, but it could go either way.

 

Now, I didn't even say you should finance a first car - personally, I don't think you should. It's generally a better option to save up and pay in cash. But that rule of thumb is just a generalization, and cannot encompass all possible scenarios in which a person is buying their first car.

 

Futhermore, the 6 year old + another 6 years was of course a generalization. The Mileage of a car is of course the number one indicator of how long it'll last and how much wear it's had. There are other indicators, and there is of course the fact that in some cases you simply won't be able to tell how a car was treated - though an inspection from a quality mechanic can mitigate that.

 

Additionally, I did not say that a car lasts only 12 years. You made that assumption. A car, if maintained properly, can last 20+ years. There are certainly 80's and 90's cars still on the road today, in varying forms of function. My point was simply that if a used car will last x years, a newer car of similar quality will last the same amount of years, plus however many years newer it is.

[Mira Yurizaki]

1 minute ago, PCMasterDebater said:

Did you finance it?

I bought it outright.

[TopDollar]

On 3/15/2017 at 0:46 PM, PCMasterDebater said:

Thanks for the response Top. Your math is wrong but we can go with it. $5600 x 6 = 33,600

 

335.6 per month

330 a year tax

40 registration renewal (what about the first year?)

$300-$500 maintenance

= $4697  - you must of forgot the monthly payments.

We'll go with $200 a month. - $2400 a year. (only amounts to $14400 so this can't be right)

Actual cost $7097+ a year x 6 years = $42582

 

Lets assume its somewhere in the middle of 33,600 and 42582 shall we?  = $38091

 

4x $1200 is $4800 for the purchase of the car. One and done. $33291 left over the life of 6 years. A $4800 car would cost less to register and insure but for the sake of the argument. We will go with the same numbers. $4697 a year. = $32,982

 

38091 - 32982 = This leaves us with a minimum savings of  $5109 over 6 years.

or

42582 - 32982 = $9600

 

But really. we know a 4800 car wont cost 4697 a year.

 

So lets do it one more time.

 

$175 a month insurance

$200 a year registration

$80 a month gas

$500 a year maintenance

= $3760 * 6 years = 22,560

 

38091 - 22560 - $15531 saved over 6 years.

or

42582 - 22560 = $20,022 saved over 6 years.

 

 

$15k-20k is a down payment on a house.

Or a second car.

Or the cost of a wedding

Or the cost of having kids.

 

If you still don't see it. Again, Your my favorite type of customer   ;p 

 

Since you were honest I will be too.

 

I make good money. I'm not here to brag so I wont say how much but I drive a car I paid $600 dollars for. I put $2400 rebuilding the car the first year I owned it. All new suspension, ignition, tires, paint, etc. That was 4 years ago. So I have $3000 into a car. Insurance $25 a month full coverage $100 deductible.  registration cost $167 dollars a year. = $467 a year. after 6 years = $5802 dollars over 6 years.

 

$38091 - $5802 = $32,289

or

$42582 - $5902 = $36680

 

 

So I have $32,289 - $36680 more then you at the end of 6 years and my car is arguably more reliable then yours. It essentially requires zero maintenance for 4-6 years.  

 

Do you see what I'm saying now?

Buying your first car cash straight up, is the best way to go.

 

Per year ownership cost is different than total cost for the life of the loan. I made the assumption that all initial costs (title/registration fees, delivery fee, sales tax, etc.) are rolled into the $17,500 financing (which is an accurate assumption). The initial $6500 down payment (trade-in + cash) is also not factored in for the same reason. Additionally, value of the vehicle (appreciation/depreciation) is not taken into account here either since I am only looking at pure cost to own and operate the vehicle.

 

I'll freely admit that I don't think buying a new car is worth it when it comes to value. I personally think a car less than 5 years old with less than 40,000 miles is about the sweet spot for value in my price range ($40k out the door is about the limit I'd be willing to look at for a vehicle at the moment). I bought a new car mainly to have the experience of doing it at least once since I had finally reached the point of financial independence. I also bought a Ford Fiesta, so not the best choice when it comes to depreciation.

 

Anyways, looking at my numbers:

 

Monthly payment ($17500 @ 1.99% for 72 months):

A = P * (r(1+r)^n)/((1+r)^n-1) where

 

A = monthly payment

P = initial principal ($17500)

r = interest per month (1.99%/12 = 0.1658% = 0.001658)

n = term of loan (72 months)

 

A = 17500 * (0.001658(1+0.001658)^72) / ((1+0.001658)^72)-1)

A = $258.05 ~= $258

 

Loan repayment: $258/month x 12 months/year = $3096/year

Registration: $40/year

Maintenance: $500/year

Insurance: $335/half year x 2 half year/year = $670/year

Fuel: $80/month x 12 months/year = $960/year

Tax: $330/year

 

Total: $3096 + $40 + $500 + $670 + $960 + $330 = $5596 ~= $5600