Tag Archives: used vehicles

Your Email Questions

Two email questions from the Okanagan in the last few weeks that are worth talking about. After all, if one person takes the time to email a question, there’s a rule of thumb that 100 others are wondering the same thing.

The first one is from someone asking if she can use the simple $20 will kit from Staples. She’s single, but has ‘complicated assets’ as she describes it.

Yes, that kit should be fine. The will is your wishes of who gets what asset or what percentage of your total estate, whether it’s complicated or not. The second part is that it decides on an executor. That’s the quarterback, with the help of an estate lawyer to make sure it’s all legal and correct, who steps into your position. In other words, that person now has control of liquidating the assets, keeping them in place, etc. Complicated or not isn’t really part of your will. It’s picking the person to do that and deciding where your estate goes. (if complicated is a mixed family, businesses, partnerships, a trust, or the likes, spending a few hundred bucks with a lawyer will be well worth it, instead. Better safe than leaving your loved ones sorry…)

The second email is a really good question. The person has a used SUV with 188,000 km on it. Should he trade it now for another newer-used vehicle or keep driving it? Now remember that I always only answer questions of what I would do, because I never have all the information, details, and other factors.

There’s kind of a psychological wall at 200,000 km. That’s when it seems to buyers that the vehicle is really really used. Under 200k, means you’ll likely get a few more bucks if you do sell it. Dealers aren’t interested in something that old. Trade ins have to go through their service department, and the little things, the safety inspection, etc. are too expensive to recover. They also don’t want the reputational hit of selling something that old. In other words – never trade something older than five or six years old. Dealers will just call a wholesaler to get rid of it immediately and it’ll end up on what’s called a mud-lot – a very very used car independent dealer.

My main decision factor is whether my vehicle is reliable. That’s my number one concern. If you’re not sure, have a mechanic check it out. That $100 or so doesn’t guarantee another few years of driving, but it’ll help you decide what you should do. The other question is what would you replace it with? If you can sell yours privately for $6,000 and get a newer one with 100,000 less km on it for $1,500 or so – that may be worth it. If you’ll just end up spending more money on another one with mileage just as high – that wouldn’t make sense. So there isn’t a black or white answer, and I sure wish there was a guaranteed predictor of reliability. But even if you need some repairs, Consumer Report uses the rule of thumb that it’s fine to spend about half the value on repairs before you should bail and replace it.

George Boelcke – Money Tools & Rules book – yourmoneybook.com

What’s the Real Cost of Your Vehicle?

Last week, I bought a new car. No, it isn’t new, new. It is a 13-year old Buick, but with 160,000km, it’s a major upgrade from my Chrysler, which I retired after 308,000km.

Anyone who has ever read the vehicle chapter in the It’s Your Money book knows that I am not likely to buy a brand new model. No matter what the incentives, there is no chance I want to pay for the average 20 to 30% depreciation in the first year. And low-rate financing doesn’t interest me, because adding interest costs to a car makes things worse, and more costly. Even at zero percent financing, I would be giving up the alternative of a rebate, and would now have monthly payments. That isn’t going to happen, because a car payment is the biggest monthly cash flow robber, and I would always be financing something that is worth less and less each month.

For anyone who does want to consider a new vehicle, www.edmunds.com has a great calculator which estimates the true cost of ownership over the first five years. They include gas, depreciation, insurance, and a host of other factors. Before heading for the dealership, it’s well worth a trip to their site. While it is U.S. vehicle prices and costs, the comparison between vehicles alone is very insightful.

In my case, since new wasn’t really new, I was happy to just write a cheque for $2,400 for my Buick. I’ll let you know in a couple of years what it’s actually costing me.

What I did want to figure out, without attempting to be smarter than a fifth grader, or doing more than a few minutes of math, is the real cost to drive my old Chrysler. In my case, the car cost me $133 a month. That’s an amount I can live with, even though my brother is quite a bit better off than me, at $71 a month, with his old Olds Achieva!

If you believe that a vehicle is a status symbol, you are likely destined to be broke. If, however, you think of a vehicle as basic, reliable transportation, you will likely be way ahead of millions of people, financially.

First, however, you need to know what your current vehicle is costing you per month, or per km. You can easily calculate your cost below, and do send me a note if you can beat my figure, which is used as an example on the worksheet. And remember three other points which will help you to avoid making your vehicle into a money pit:

• Avoid having a finance payment on your vehicle at all costs.
• If you have one, keep the vehicle after it is paid off and re-direct the same payments to a savings account. You won’t miss the money – you’ve been paying it all these years. But now it’ll grow for you, instead of going away.
• If you are in a lease – get out. There is very little chance you will ever have any equity and all those payments are just treading water before you’ll likely be giving the vehicle back to the dealer.

Vehicle Cost to Drive:

Original cash price of the vehicle: $10,200 $__________
The total of all payments:
(add up all the monthly payments, because
this will include the interest you paid to
finance the vehicle) n/a $__________
On a lease, add the monthly payment with
taxes AND the end of lease buyout amount n/a $__________

Add the rough total of any repair bills: $ 3,600 $__________

Do not include insurance, gas, basic maintenance, such
as oil changes, tires, etc. Yes, they have to be paid, but
they won’t be too different between vehicles.

Subtract the current value of the
vehicle, or the actual sale price: $ 2,300 $__________

Equals the total cost to own: $11,500 $__________

Number of months you owned the vehicle: 86 months __________

Total km you have driven:
(That is the mileage right now, less the
mileage when you purchased the vehicle) 212,000 __________

Your cost per km: 18 cents/km __________
(Divided the total mileage you’ve
driven by the total cost to own)

Your cost per month: $133 __________
(Divide the total cost to own by the
number of months you’ve owned it)