When it comes to cars, I buy used. By the time I sell, my autos are very used, usually averaging 150,000 miles on the odometer, with most of the mileage gained the hard way as local travel along alternately dusty or muddy country roads. I sell when we can save $5,000 in the first year, and more ongoing. I look at the following factors:
Maintenance Required: I decide to sell when my car requires or is close to requiring expensive repairs, but is still running. These repairs may be the result of a bad transmission, engine problem, or multiple smaller problems, such as electrical or electronic defects that will take extensive shop time to problem-solve. The typical repair bill on a car that I sell is about $3,000.
Low Gas Mileage: The gas mileage on my cars always degrades with time. What starts out as a 20
mpg vehicle ends up as a 10 mpg car during the time I own it. When I buy, I aim to get the 20 mpg or higher gas mileage again. That difference of 10 mpg or more is worth about $2625 per year at current regular gas prices and my annual 15,000 mileage. Since I aim to keep my next used car about 3 years, and the next used car will see similar degradation over time, I expect to save a minimum of $4000 in gas over the next three years by upgrading to a newer vehicle.
Insurance Costs: Insurance costs are usually a wash despite upgrading to a newer vehicle. Since I buy vehicles that are 5 to 7 years old and sell vehicles that are 8 to 10 years old, the insured value of these vehicles is normally only minimally different. In addition, my family keeps two used vehicles at all times and we rarely sell both in the same year. As one is sold and replaced with a newer vehicle, the other is getting older. This strategy tends to make our insurance costs about the same after we sell and buy as they were before.
Financing Costs: We sell and buy our used vehicles on a strict cash-only basis. As a result, we do not net any savings (or expense) on financing throughout any of our vehicular transactions. If we don’t have the money for a cash buy, we simply won’t sell our old car, no matter how bad it is. After all, we do have a second vehicle to ensure we can get where we need to go.
Sales and Purchase Prices: I normally try to sell my very used vehicle for $2000-$3000, depending on various factors such as age of tires (which have a cash value if new) and functionality of the four wheel drive, a necessity in our rural area. Sometimes I get my price and sometimes I don’t, but we never take less than $500. I rarely can trade in due to the age of my used vehicles. I typically try to buy my new used car for $6,000-$10,000, depending on the make and model. My savings in maintenance and gas ($7000 over three years) plus the sales price of my old car pays for my new vehicle.
This Car Is Ripe for Sale: Right now, I have a 2004 AWD Chevy Venture with a mileage of 140,000. I have had it for three years, it runs well, and has a good transmission and engine. It has a myriad of odd problems, which are more than annoying; some of them could represent safety issues under the right circumstances (examples include a van door that doesn’t open and a cantankerous window that may or may not close if opened). In addition, the air conditioning doesn’t work and the heat stays on all year. Various electronics don’t work, including the DVD player, the OnStar system and associated gizmos. The car has a shake over 50 mph, the clasps on the rear windows won’t close so the rear windows stay open a crack, and it has dash warning lights that stay perpetually on. Need I say more? I have already been told by my mechanic that just the electrical system problems with this vehicle will cost over $2000 for repair.
Come spring, my car will be sold to the first handyman-mechanic that comes along. In selling and upgrading, I expect to gain peace of mind, as well as a savings of about $8000 which will be spent on a carefully chosen vehicle at a reputable local car dealership that offers a warranty on a car in my price range. As with all of my previous cars, I will pay cash for my new used car with the savings gained from the sale of my old one. The cycle of car life continues…