Friday, May 26, 2006

Do day Numbers


Just bought a Civic. Paid cash. Stupid? Maybe. Let's do da math:

Price $20,000 In a 1 yr CD that would earn 5%: $85/month.

Old car; 17mpg. Civic 38 mpg.
$3.25/gallon 1100 miles per month. Old, $210. New, $94.
Difference $116/month.

There's more to owning a car including depreciation but 4 year old Honda Civics are selling used at 90%+ of retail new. I fully expect the price of a Civic to soar and used prices follow new prices up and down.

Update July 11th 2006

6 weeks and 3600 miles. We've been driving more than we thought and we've tried to put the miles on the Civic as well. So, repeating the calcualtion:

Price $20,000 In a 1 yr CD that would earn 5.4%: $92/month.

Old car; 17mpg. Civic 37 mpg.
$3.25/gallon 2400 miles per month. Old, $459. New, $210.
Difference $248/month.

Looks like a worthwhile deal.

24 comments:

Anonymous said...

a.) they go for about 65% of new.
b.) expecting the price of a civic to "soar" is odd.

Rob Dawg said...

Have you priced a 2002 Civic? About $14k down from a new price in 2002 of $16k.

Why wouldn't the price of durable goods soar? The materials and energy of manufacture and delivery are up only 25% over last year.

Anonymous said...

Yes, I have. Last month in fact. 10 to 11K will buy you a low miles (40 to 50k) '02 civic in good condition from a private party. An autotrader.com search of the LA area will confirm this.

http://www.autotrader.com/fyc/searchresults.jsp?mod_bookmark_id=null&search_type=used&make=HONDA&distance=100&model=CIVIC&address=90025&advanced=&certified=&y=6&max_price=14000&x=81&bkms=1148745960761&min_price=9000&end_year=2002&start_year=2002&isp=y&lang=en&pager.offset=150&first_record=151

Sorry for the huge link.

kbb.com and edmunds.com is another source of useful information.

The resale prices of Civics are obviously at the high end of the used car market, overwhelmingly because of their popularity with younger buyers. With the new model starting at a higher price point, and the styling changes designed to attract an older buyer, it is an open question as to what the resale percentage-of-new this new model will fetch.

My guess is it will be more like a Camry or Accord - about 60% or less for a 4 y.o., low miles, private party purchase.

There are FAR better used car values to be had in the market today, but that's another topic.

Rob Dawg said...

I don't see how a 2dr Si is comparable but your point is well taken. The math assumes a substantial resale value. The 7th Generation Civic follows aworn path of moving upscale over time. I estimated future resale based on inflation seen in other durable goods. A page or two away in your url a 2003 EX was asking 90%+ of original MSRP afet 38,000 miles.

I'm not arguing, this is academic but iwould be interested in your opinions as to better values. I can think of a few specialty vehicles and I could make the case for Euro based manufacturers due to changing exchange rates. I can even predict future best buys like the S2000. What are the save the most buys now?

Rob Dawg said...

I don't see how a 2dr Si is comparable but your point is well taken. The math assumes a substantial resale value. The 7th Generation Civic follows aworn path of moving upscale over time. I estimated future resale based on inflation seen in other durable goods. A page or two away in your url a 2003 EX was asking 90%+ of original MSRP afet 38,000 miles.

I'm not arguing, this is academic but iwould be interested in your opinions as to better values. I can think of a few specialty vehicles and I could make the case for Euro based manufacturers due to changing exchange rates. I can even predict future best buys like the S2000. What are the save the most buys now?

Anonymous said...

The link was not intended to highlight the Si, but to show the large number and variety of low mileage '02 Civics available for ~65% of original cost, and that was but one website. Of course although there are others advertised for more, the reality is that actually selling the higher-priced cars in the open marketplace where buyers have such a large selection and comparison shopping is so easy is very difficult. The Kelly Blue Book trade-in value for a '02 EX sedan is ~$9,600.

As to my comment of better values, I didn't state that clearly at all, as what I meant was better values for buyers. The Honda is one of the best "values" for sellers because they depreciate little, making it not a great value for the buyer. There are MANY excellent used car "values" for buyers who are looking to purchase 2 to 4 y.o. low mileage, one owner, Japanese or German used cars for 40% or less of original cost in private party tranactions. As I think you are more interested in the selling side, I won't bother you with the details.

TRich said...

Outstanding purchase Robert, I've talked my fiance into buying one and getting rid of her horrible Chrysler PT Cruiser (she agrees since she only sees BlueHairs driving them). She still owes about $6500 on it, it gets horrible gas mileage (not much better than my Toyota 4Runner), and the transmission already busted on it. All in all with how much we drive, we'll save around $90 on gas just by getting the Civic.

Unfortunately, we don't have the cash to buy a car. I just graduated from grad school and have a sizeable amount of school debt. But rather than paying off the rapidly declining Chrysler product, I figured get rid of it now, buy a Civic and put that 6500 (and interest) into it because we'd undoubtedly get rid of the PT Cruiser in a couple years anyway after it turned into a money pit. Plus with the fuel mileage advantage, the overall cost per month financing it will be roughly the same.

But the supply on the things is extremely tight, but we should be able to grab one in a week or two.

The resale values on Civics and Corollas are incredible. IMO, those are cars you should buy new under all circumstances because the price differential is so small. I found the same situation when buying the 4Runner, fortunately I got a killer deal because no one was buying them last fall because of the gas prices, and I needed something to tow and haul items with (without getting into something too huge).

Rob Dawg said...

TRich, thanks. That's the point of these exercises. Cars are expensive critters and the choice is not about the economics of car vs no car but the total cost of ownership for a car that meets your needs. Civics and Corollas are exceptional in the field for resale value. New for 06 Civics and the new for 07 Corollas already on the lots will have long model runs so they will do even better IMO. The other vehicle is an Expedition with small V-8 but with three kids and ski cabin it makes sense anyway. We'll be checking out colleges and vacationing in Northern California/Oregon and the size and third row seat will certainly keep the bloodshed to a minimum.

We had to wait 8 days for our Civic and paid inv +$500, the least bargain I've ever negotiated. If you can't pay cash or get really good third party financing I see where the Accord has deep discounts and/or special financing. Worse gas mileage, older model years but the price and interest rates might swing the balance in your case.

TRich said...

I think we'll be able to get financing at or below 6% which is acceptable. The loan I have on my 4Runner is below 6%, and that's pretty good considering I probably don't look like the greatest credit risk with my school loan debt.

I don't mind plunging into a couple new cars right now because it's very possible we'll have both vehicles for around 10 years or more and I like the idea of having two reliable cars that are less likely than most to spring a 2k transmission surprise on us. In addition, it's such a horrible time to buy a house I figure I might as well put my money into other necessities while I bide my time for a couple years.

My 4Runner also has a small V8 (4.7 liter) and it's the same engine Toyota puts into the Landcruiser, and Lexus GX 470 (Lexus 4Runner). Fantastic engine. It will be nice to have the versatility of the Civic and the 4Runner.

BTW, the new Corolla will be out in about a year. I don't think they will be much of a bargain if prices remain high (they'll go down but they will still be well over $2.00). Also, with how the Civics are selling, I expect a pretty hefty price increase for the 2007 model. Right now we're looking at the LX automatic which is 18k. Under the circumstances, that's a good deal.

Rob Dawg said...

TRich, yeah, sorry, the 2007 Camrys are on the lots, the 07 Corollas later this year, early next. My brain said Camry my fingers didn't listen. You are correctly devining the purpose of my posts. Where to put money to best achieve goals. I expect with the Civic sales I'm seeing the new MSRPs will only reflect the current street pricing. The nearest dealer is charging $1500 over MSRP on the sticker although they deal down from that. They also do the real nasty; dealer add ons. $1400 wheels, window security etching $260, etc. So, yes, part of my calculus is that prices for new similar vehicles are going to jump. Used prices track new vehicle prices not original purchase prices. Almost a commodities futures bet. There's another commodity I touched upon briefly; energy. It takes a lot of energy to melt steel, glass and aluminum. Plastic for things like cars comes from the same barrel of oil as well. This has got to be squeezing the manufacturers including those that import. The Civic is built in Tennesse IIRC but the engine/tranny package is done in Japan. This is mostly to export profits without tax but the boats and trains burn diesel. I even found out the entire US distribution is via truck. 10 Hondas from TN to CA at 3mpg in the carrier and 3000 miles is more than $300 per vehicle in diesel for delivery alone.

The 4Runers are nice. I can't use them because my kids have long legs, just an observation. They are built tough like the Landcruisers as you note. Not all Toyotas are like that. I another couple years our 'bets' will tell. Anon seems to think normal deprecitation will erase any investment aspect. I respect that perfectly reasonable differing opinion, I just think otherwise.

Your DX/LX/EX conundrum has my maximum sympathy. I hated doing that math. We bought the EX because the standard side airbags were not an option in our opinion and the 4w disc brakes were almost as important. The difference twixt LX with optional side air bags isn't much less than the EX and with the imputed added value of 4w discs makes the two equal priced. The sun roof and all the other fluff were free after we got what we wanted. Toyota is worse. Their "packages" are just incomprehensible. Want alloy wheels? $600 or part of the trim package for $800 that includes variable wipers or some such and about 20 other things. I don't even want to revisit that nightmare.

My EX 4dr/auto cost $18,160 inv + $500 for $20,300 out the door tax license etc. I suggest the 4dr for lower insurance and more potential resale market even if the 2dr meets your needs.

Anonymous said...

I agree that Hondas hold their value well compared to many other autos.

Still, the new model of honda has just hit the market yet a quick search of just one website yeilds a private party offer for a '06 EX, 4 dr., 2k miles, navigation, etc. for $15,900, which is above trade-in value and ~ a 20% depreciation hit at drive-off.

Rob Dawg said...

Huh? I used cars.com and 75 mile radius and of the 11 used '06 EXs 3 were more than I paid and the only two less than 90% MSRP were 2drs.

Anonymous said...

Hi Robert,

On autotrader.com offered from the LA area all the way up to Sacto.:
’06 EX, 1k miles, 2 dr., manual, $15,499
’06 EX, 2k miles, 4 dr., navigation, auto, $15,900
Plus these from a dealer:
’06 EX, 21 miles, 4 dr., auto $16,999
’06 EX, 28 miles, 4 dr., auto $16,999
’06 EX, 143 miles, 2 dr., auto $17,999

On cars.com offered from the LA area:
’06 EX, 2,300 miles, 2 dr., auto, $14,900

I know you've got the 4 door, but the invoice for the 2 and 4 door models are the same, hence I threw them in the mix. I tossed in one stick as well. Navigation adds about $1.4k.

I'm in no way picking on your car or your decision to buy a new vs. used. Both of your choices were sound.

Rob Dawg said...

I don't feel picked on. I appreciate your input. Those all look like what I expected and saw when I researched except the 4dr w/Nav has got to be a typo/salvage or something.

Anonymous said...

I hear ya. I've learned that a picture is not worth 1,000 words. What you see is not always what you see when you get there. I also would not be surprised if it is as advertised. I've learned over the years that great deals pop up all the time in the LA to Sacto market for any and all makes and models.

testing324 said...
This comment has been removed by a blog administrator.
VirtualChris-OC said...

I bought an 2006 Accord EX 4 door automatic for $20,500 flat from carsdirect.com. They delivered it to my work no charge. this was my second purchase from them. I bought the same car in '00 for 19K'ish back then. I think I got an even better deal this time.

-VC

Holgs said...

Can't go wrong with a 'vic.

Right now I'm driving an '85 civic and loving it... It's been in my family since the I was 11 and the thing costs me $500/yr for insurance, barely anything for maintenance (oil changes, brakes, etc.) and is still a gas miser. It's on its last legs and totally worthless, but I'll take that over a '90s or '00s N. American beast anyday...

Anonymous said...

Should I get a copy of my credit report before I look for a car? I thought there were places that would give you a car loan no matter what your credit score was like this place - Refinance Car Loan

Rob Dawg said...

No, the auto dealership will do it for you for free. Any dealer that doesn't share isn't someone you want to do business with anyway. Too many credit inquiries in a short period are sometimes a negative hit to your score.

If you need to finance then consider the TCO, Total Cost of Ownership. Low interest rates can buy a lot of gas, as can lower insurance.

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Liberty said...

That's an odd post. Car prices cannot soar. Unit sales are down 2 million. Secondly, incomes are not rising. So, if sales rise, units will diminish even further. ie, Commodities is a bubble and car sales are likely to fall.

Your math on an ROI wouldn't pass muster if you were presenting to a CFO. 38mpg? Wanna bet you don't get that? Those tests are done an a dynamometer at constant speed. ie, They don't represent real world numbers.

Liberty said...

sorry, if prices rise..