3.89

[bfrikken]

If you want a new vehicle, buy a new vehicle. Using the gas mileage argument to justify purchasing one is silly though. You are running the numbers backwards, not accounting for risk and other things. I really don't care either way, it is not my budget.

That is your opinion and you are welcome to it. I hardly would call it silly. I'm not going to argue with you if you made up your mind before a conversation.

[jonmulzer]

I had not. With all due respect, you had. I have run the numbers for many people and convinced them not to buy. You completely left out depreciation. The Prius would cost you an additional $18K in depreciation on top of your calculations. You purchase it for $25K plus $3K in interest over the term of the loan, you get $10K (maybe) out of it when you trade-in or sell. So the vehicle has cost you $18K in depreciation, $300/month on average it loses value. The Corolla would be worth about $7K at best five years from now for a total depreciation of over $10K. And you are running your fuel mileage costs based off the EPA estimated highway mileage. You are not going to get that. What were the EPA estimates for your Aztek? More than 19 mpg I would wager.

And you are still not accounting for risk. You mention troubles in the economy and slow times in your sector for reasons of not getting a raise. What if you get let go? Payment on your current vehicle (or one of the same price as an even trade) $0 per month. Payment on your other two options $313 (assuming a 5 year loan) or $466. And since you are looking at month to month cashflow as reasons for changing cable and cell services, either of those are likely to leave you $100-$200 shorter than you are now before you account for depreciation which is an indirect cost.

Financial calculations of this sort need to be ran "forward" and need to account for risk. If not you only include what you need to justify the expenditure and completely forget the risk associated with the purchase.

[bfrikken]

No, I am not using EPA estimates on my calculations. I used them as a guideline to what cars to consider. There is a plethora of websites/forums with people giving real world feedback to the MPG of their respective cars. You can sift through the information to find detailed descriptions of driving habits that mirror mine. That is where I pulled my information from.

The Aztek MPG is estimated at 16-22. Like I said, I have gotten 18-20ish, with a consistent total over the 18 closer to 19. For the sake of my example I used 18, because I don't anticipate it getting better.

I did not entirely leave out depreciation. What I mean is I used brand new cars as an example, and I am not sold on buying new, or even buy another car. I simply said I was investigating it. If i was going to go out and shop seriously, depreciation would be considered more intently and be factored in per vehicle. Besides, I have to be realistic that the Aztek will not run forever and will have to be replaced eventually. My thought represents that impending day, and the investigation of doing that now instead of next year or in two years.

Risk is accounted for in the fact that I keep a responsible standard of living. I don't feel like giving too much detail, but if I lost my job, I'd rely on savings, then subsequently our safety net. Then the race would be on between my wife and I finding another job.

[Kristofor]

I had not. With all due respect, you had. I have run the numbers for many people and convinced them not to buy. You completely left out depreciation. The Prius would cost you an additional $18K in depreciation on top of your calculations. You purchase it for $25K plus $3K in interest over the term of the loan, you get $10K (maybe) out of it when you trade-in or sell. So the vehicle has cost you $18K in depreciation, $300/month on average it loses value. The Corolla would be worth about $7K at best five years from now for a total depreciation of over $10K. And you are running your fuel mileage costs based off the EPA estimated highway mileage. You are not going to get that. What were the EPA estimates for your Aztek? More than 19 mpg I would wager..

Nah, I think you're looking at it like he's a business not a person.

People don’t get to write down their income based on operating expenses, hence there’s no reason (IRS) to build a depreciation schedule.

He's not going to capitalize the purchase then incur the depreciation as an ongoing expense to draw down his taxable income. Rather he's putting the full 'expense' at the front, then calculating/estimating the remainder of the value after 5 years (why he's talking about the residual values).

If you tack on depreciation then you're "paying" twice for the car, which would throw the numbers all off.

[moc]

As long as we're complaining about gas prices...

Now that we're nearing $4/gal, can we finally get rid of the $0.009 in the price? I mean really. Is anyone falling for this trick anymore? Round it up another $0.001 to a whole cent.

In an extreme case (120 miles/day every day of the year @ 12 MPG) this increase will cost $3.65 a year. For me it will cost $0.34/year.

Why yes I have too much time on my hands today, why do you ask?

*moc
ps and don't get me started on the penny

[OpaDC]

As long as we're complaining about gas prices...

Now that we're nearing $4/gal, can we finally get rid of the $0.009 in the price? I mean really. Is anyone falling for this trick anymore? Round it up another $0.001 to a whole cent.

In an extreme case (120 miles/day every day of the year @ 12 MPG) this increase will cost $3.65 a year. For me it will cost $0.34/year.

Why yes I have too much time on my hands today, why do you ask?

*moc
ps and don't get me started on the penny

IT'S MY PENNY, AND I NEED IT NOW!!!

[tewilk]

what I did...

I'm not going to run number for you but I reacted about 3 years ago to the rise in gas prices.

I wanted the Prius but a friend of mine put something in simple terms for me. If you want the Prius then that is what you should buy but not to save money by the increase in mpg. His logic was to buy a car that got in the 30mpg range and pay less because by buying the Prius @ $25 would take forever to recoup the saving. Agreeing with him I bought a Nissan Sentra that gets about 31mpg new for 12k. Only thing I wish I would have done was to look at the used market before going straight for the "new" one. The new car is alway great because you know how it is treated but it never fails based on income to debt ratio how long it takes to pay the darn thing off. Found out based on user feedback that the Prius are averaging 41mpg so not that big of a difference.

[jonmulzer]

Nah, I think you're looking at it like he's a business not a person.

People don’t get to write down their income based on operating expenses, hence there’s no reason (IRS) to build a depreciation schedule.

He's not going to capitalize the purchase then incur the depreciation as an ongoing expense to draw down his taxable income. Rather he's putting the full 'expense' at the front, then calculating/estimating the remainder of the value after 5 years (why he's talking about the residual values).

If you tack on depreciation then you're "paying" twice for the car, which would throw the numbers all off.

No, I was just accounting for it at the front instead of at the back. Just a different perspective. Most people consider depreciation at the backend, which only makes you think about it when you sell or trade-in. I try to make people think about it at the front, as it happens. You drive the vehicle off the lot, as soon as it crosses the curb you just lost a few thousand dollars and are upside down already if you have not put down a substantial down payment (most don't). If you drive most cars for a week, assuming a purchase price of $30K, you would have to pay $3K+ to sell it. Why would anyone buy your car from you for list when they can go to the dealer and have a wider selection for just a bit more that they can easily finance?

I also try to sway anyone from buying a new car. It is financial suicide. If you finance for 60 months it works out to about 33-36 months into it before you are in the black on the loan. At any point up to that you will pay to sell it. And if month to month cashflow is the problem then taking on a ~$400 car payment to save $190 on gas makes no sense whatsoever. You are spending a dollar to save .475 cents. And all your calculations have to account for risk. If two business opportunities are even money long-term but one has you leveraged and the other does not then the choice would be clear to a savvy investor.

[bfrikken]

No, I was just accounting for it at the front instead of at the back. Just a different perspective. Most people consider depreciation at the backend, which only makes you think about it when you sell or trade-in. I try to make people think about it at the front, as it happens. You drive the vehicle off the lot, as soon as it crosses the curb you just lost a few thousand dollars and are upside down already if you have not put down a substantial down payment (most don't). If you drive most cars for a week, assuming a purchase price of $30K, you would have to pay $3K+ to sell it. Why would anyone buy your car from you for list when they can go to the dealer and have a wider selection for just a bit more that they can easily finance?

I also try to sway anyone from buying a new car. It is financial suicide. If you finance for 60 months it works out to about 33-36 months into it before you are in the black on the loan. At any point up to that you will pay to sell it. And if month to month cashflow is the problem then taking on a ~$400 car payment to save $190 on gas makes no sense whatsoever. You are spending a dollar to save .475 cents. And all your calculations have to account for risk. If two business opportunities are even money long-term but one has you leveraged and the other does not then the choice would be clear to a savvy investor.

I don't disagree with what your saying if month to month cashflow is a problem. It is not really a problem, just a concern. I try to minimize any outgoing cash(debt) over time. I do not consider my scenarios depreciating the vehicle at the end, but in the beginning. Basically if you look at my example, I look at the total cost of the loan (principle+interest+taxes&fees) and set that amount as my debt. In other words, I basically say instead of depreciating it over time, I'm going to do it all now. Don't really consider the vehicle an asset in my situation as I will expect/plan on little to no residual value. If the vehicle became a problem, I'd square up the debt with cash at any time from savings. I'd just rather keep the cash in my savings and not have to pull any money from investments to cover. I don't live paycheck to paycheck. But I do look at putting the most of my paycheck into savings and maintaining savings/investment/rainy day funds.

[jonmulzer]

I see what you are saying, and we are not really disagreeing, I am just conveying my point poorly. Also, you are a big boy and can do whatever you wish. It is just that most people think of it at the backend. That is why we find out country in the shape it is right now in the financial markets.

You do say that month to month cashflow is a thought so that you can save and invest as much as possible though. If you save $200 in gas and spend $400 on a car payment you still have $200 less to put towards investing and saving for rainy days though. That should certainly be a thought. And in regards to risk let me propose a scenario for you. If you lose your job, are you going to immediately sell your car? Most likely not. Your gas savings will be diminished because you will not be driving 600 miles a week but the car payment still needs to go out. It will be using up your savings more rapidly than a paid for car no matter what it is. And if you do find yourself in this situation within the first three years then you will have to take a chunk out of savings to get rid of the debt. Debt is always a risk and needs to be accounted for.

I do this sort of stuff all the time. I have tons of people who come to me for financial advice, so I have thought most of this out. I have the benefit of being able to look at it from the outside in though. You are inside of the situation. If you wish though, I will shut up and not say another word about it. This is your thread afterall.

[mdutch]

What REALLY is ridiculous is the whole concept of depreciation. I've given up on new cars completely and plan to buy only "vintage" steel and recycle them. I've got a 1974 Jensen Healey for fun, and a 1996 Jeep Cherokee that I will probably convert to LP when the engine goes.

See, if you are careful about what you buy, build, customize, etc. and don't build "another Camaro" you can actually get a **** of a great ride for 10k.

I'm currently looking at a 1968 Dodge Dart to restore as a commuter car. Perfectly sized sedan, indestructible engine, no emissions problems. I'm looking to convert to LP for in-town driving, trick the interior with leather and a nice stereo, ghost up a paint job and have myself a great little in-town city ride. Those old Dodges have enough room in the engine compartment and are so cheap to buy parts for, that you can retrofit them with a bio-diesel, hybrid, or even all electric if you are so inclined. Think of it. A car you buy for $500, spend $10-15k fixing it up and painting it, it's brand-new and custom, and you get to drive a nice clean eco-car with no safety inspection or retro-fit issues, since the whole thing grandfathers in before emissions standards even applied.

[bfrikken]

I see what you are saying, and we are not really disagreeing, I am just conveying my point poorly. Also, you are a big boy and can do whatever you wish. It is just that most people think of it at the backend. That is why we find out country in the shape it is right now in the financial markets.

You do say that month to month cashflow is a thought so that you can save and invest as much as possible though. If you save $200 in gas and spend $400 on a car payment you still have $200 less to put towards investing and saving for rainy days though. That should certainly be a thought. And in regards to risk let me propose a scenario for you. If you lose your job, are you going to immediately sell your car? Most likely not. Your gas savings will be diminished because you will not be driving 600 miles a week but the car payment still needs to go out. It will be using up your savings more rapidly than a paid for car no matter what it is. And if you do find yourself in this situation within the first three years then you will have to take a chunk out of savings to get rid of the debt. Debt is always a risk and needs to be accounted for.

I do this sort of stuff all the time. I have tons of people who come to me for financial advice, so I have thought most of this out. I have the benefit of being able to look at it from the outside in though. You are inside of the situation. If you wish though, I will shut up and not say another word about it. This is your thread afterall.

Nope I have appreciated the comments so far. This "consideration" is much more deserving of a conversation rather then back and forth message posting. I tend to think things to death before I act anyways. I mean, I own an Aztek, so you should be able to tell I don't run out and buy on impulse

[jonmulzer]

Everytime I see an Aztek, I think of this webpage. Not that I really think of them this way, but I do find it humorous.

http://www.thebestpageintheuniverse....gi?u=ugly_cars

[drumpriest]

My only comment on this is that I'm surprised you are getting 18mpg in your Aztek. I get from 21-25 depending upon the type of driving we do.

[germdoc]

Here's a couple more thoughts for ya:







Course with the increasing price of corn and animal feed this may not be such a bargain either. But think how much you'd save on fertilizer...