I have a 2010 Honda Civic Hybrid with about 17,000 miles in pretty good condition with a transferable 5 yr warranty with 3 yrs left (cost additional $1.5k). I also have about 3 years of payments left. I owe $10.2k out of the original $15k loan @ 0.9%. Total cost of car w/ warranty was $25k (sad face). The loan costs me $262/mo. Based on Kelley Blue Book and my own research, I could probably get a trade-in value of at least 15k, probably more like 17k in private party.
Is it worth getting rid of it now given that I'm already sunk the 10k in depreciation, the loan interest rate is very low, the car is reliable and is likely to give me few maintenance issues for the foreseeable future? Whereas having a cheap 10 year old used car could have "mystery problems", require additional maintenance, and would presumably have a shorter lifetime (by 10 years).
On the other hand, if I traded in the hybrid for an older used car in the $5k or under range, I would increase my monthly savings by 262 dollars, and lower my car insurance by dropping collision altogether.
I should mention that when I bought the hybrid, my work commute was about 350 miles a week, and it's now more like 80 a week. Hindsight is 20/20, of course, but I obviously regret paying extra for the hybrid now; I'm not getting the same utility out of it, and with the reduced mileage I'll almost never hit a "break-even" point on the extra money invested. So I kind of got doubly screwed by both the hybrid model premium of an extra $5k over the non-hybrid Civic, plus the regular depreciation on a new car. This makes me want to get rid of it almost out of spite, but it's not like I can get back the money lost, so I dunno.
Not sure what I would get instead, but I'd probably go for another reliable small or mid-size sedan, wagon, or hatchback, except an older, cheaper model. Something like a 2000-2002 Corolla, Civic, or whatever the cheap entry level Hyundai is.
I suppose it's also worth mentioning that I know next to nothing about car maintenance and in the grand scheme of ERE knowledge, this is one thing I'd just as soon not have to learn. Reliability and cheap cost to own are the key factors here.
What do you all think? Is there anything I'm missing in these considerations?
Should I trade down my car?
If you sell your car now, it will have cost you ~$7,000 for the 2 years or so that you owned it. Say $3,500 per year.
Say you keep the car 2 more years and put another 20,000 miles on it. It would then sell for what? $12,000? $2,500 per year then?
Say you keep the car 10 more years, put 200,000 miles on it, and it'd be worth $2,000. That'd be what, $2,000 per year?
So it looks like a pretty expensive car. Compare to buying a $5,000 car that you use for 4 years and sell for $1,000. That's $1,000 per year.
Of course these numbers are just depreciation and there are other things like maintenance, gas milage, insurance, inflation, etc.
If I was driving 80 miles per week to work and had your car, I'd probably sell it and get something cheaper.
Say you keep the car 2 more years and put another 20,000 miles on it. It would then sell for what? $12,000? $2,500 per year then?
Say you keep the car 10 more years, put 200,000 miles on it, and it'd be worth $2,000. That'd be what, $2,000 per year?
So it looks like a pretty expensive car. Compare to buying a $5,000 car that you use for 4 years and sell for $1,000. That's $1,000 per year.
Of course these numbers are just depreciation and there are other things like maintenance, gas milage, insurance, inflation, etc.
If I was driving 80 miles per week to work and had your car, I'd probably sell it and get something cheaper.
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MacGyverIt
- Posts: 19
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What makes this deal different is that I personally would not want the hybrid model. Otherwise, I would keep it as this car will basically last you forever given good care. I would try and pay it off if possible. However you owe 10.2K at a very cheap rate of interest. All I can say is too bad it isn't a standard model, that to me would be a keeper and a car for long term return on investment.
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Spartan_Warrior
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@sky and HSpencer: Is the prejudice against the hybrid just for the battery replacement? The battery does have an 8 yr/80,000 mile warranty. So (assuming I don't get lucky and have it fail and be replaced in that timeframe), I could ditch the car at 7 years and 11 months. However, I believe the battery can be had for around $2000 new (not to mention junkyard batteries from accidents and such), which IS pretty bad, granted, but don't a lot of overpriced car repairs come up around then?
@C40: At my current rate I estimate I'm putting about 6500 miles on it per year. It'll be even less when I retire in ten years. Battery notwithstanding, the car could last me 20+ years (closer to 30, assuming a lifetime of 200,000 miles). That was my thinking when I bought it. A 20-year lifetime would make the cost per year about 1250. Even if I replace the battery out-of-pocket twice in that timeframe, it would be about 1500 per year. That's still ignoring other costs like insurance and such, but when you compare that to your example of a used car held for 4 years, it actually doesn't seem that bad. Of course, if I bought a ten year old car with 100,000 miles at $5k and kept it another 10 years instead of 4, it's only 500 a year.
The only problem with that is that buying an older used car seems to introduce more risk that the car won't last as long, since you never know how it's been treated or maintained. I have "insider knowledge" on my current car that I wouldn't have with the others. So maybe 4 years per used car is the better assumption?
@C40: At my current rate I estimate I'm putting about 6500 miles on it per year. It'll be even less when I retire in ten years. Battery notwithstanding, the car could last me 20+ years (closer to 30, assuming a lifetime of 200,000 miles). That was my thinking when I bought it. A 20-year lifetime would make the cost per year about 1250. Even if I replace the battery out-of-pocket twice in that timeframe, it would be about 1500 per year. That's still ignoring other costs like insurance and such, but when you compare that to your example of a used car held for 4 years, it actually doesn't seem that bad. Of course, if I bought a ten year old car with 100,000 miles at $5k and kept it another 10 years instead of 4, it's only 500 a year.
The only problem with that is that buying an older used car seems to introduce more risk that the car won't last as long, since you never know how it's been treated or maintained. I have "insider knowledge" on my current car that I wouldn't have with the others. So maybe 4 years per used car is the better assumption?
Sell it and start taking the bus. That way, you will not fall into the same trap of having an expensive car.
If you are not into that or unwilling, then buy a 4-5K car that is a similar brand and start using it for out and about stuff, like driving to the park and ride and around town, short distances. And start taking the bus or train to work.
If you are not into that or unwilling, then buy a 4-5K car that is a similar brand and start using it for out and about stuff, like driving to the park and ride and around town, short distances. And start taking the bus or train to work.
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Wolfpaws58
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Here's my opinion for what it's worth to you. I say what it's worth to you because this is strictly my opinion based on my personal situation and preferences. 1)I am not a fan of public transporatation as it exists in my area so I want my own transportation / freedom to come and go when and where I choose. 2)I personally like having a nice vehicle that I can rely on. (I've been having issues on this since my 2010 F150 has been having transmission issues for over a month due to obvious poor quality and service from Ford). 3)I am not a fan of being a guine pig so I would not personally have bought a hybrid. 1 responder mentioned replacement of batteries. How long they last will depend on your usage, physics and the quality of the batteries to begin with. 4)I am not a fan of using credit to obtain depresiating assets. Reason: As you pay interest, your vehile dpresiates taking you down twice. Even 0.01% interest is taking you in the wrong direction from your goal of retirement.
If I were you which I am not, I would get rid of the hybrid and get out of debt and buy what I could afford to pay cash for after a carefuly researched selection process. If I found my tastes were excess of what I can pay cash for I would save for a while before strating the entire transaction process.
Your weekly commute went from 350 to 80. I would apply any savings granted by this reduction to either paying down the debt on my car or saving to offset any difference in what I have saved VS what I want to buy.
I am not for reducing life to mere existence for the sake of money. I drive a very nice truck and a very nice car as well as a very nice motorcycle and I depreciate them regularly. I consider them as worthless in terms of my retirement goals and net worth.
One thing I would consider is that every time you make a transaction to change vehicles there are expenses involved, but I think the eventuality of $5,000 to $7,000 for a new battery would motivate me to get rid of the hybrid and let someone else who thinks buying green saved then anything take the hit. Did you get some kind of tax deduction for buying a hybrid? If so you have to work that into the equation as well when it comes to establishing your actual cost of ownership.
To me a vehicle is 100% loss, like buying a new toaster but then if you like toast you should have a toaster. Some people may not like toast but i have never met one.
Good luck with your decision. I would take the option that would get me out of debt and make me happy at the same time, whatever that happened to be and then decide to never again used credit to buy a depreciable asset unless I discovered I had a terminal disease in which case my outlook on the future would be different.
If I were you which I am not, I would get rid of the hybrid and get out of debt and buy what I could afford to pay cash for after a carefuly researched selection process. If I found my tastes were excess of what I can pay cash for I would save for a while before strating the entire transaction process.
Your weekly commute went from 350 to 80. I would apply any savings granted by this reduction to either paying down the debt on my car or saving to offset any difference in what I have saved VS what I want to buy.
I am not for reducing life to mere existence for the sake of money. I drive a very nice truck and a very nice car as well as a very nice motorcycle and I depreciate them regularly. I consider them as worthless in terms of my retirement goals and net worth.
One thing I would consider is that every time you make a transaction to change vehicles there are expenses involved, but I think the eventuality of $5,000 to $7,000 for a new battery would motivate me to get rid of the hybrid and let someone else who thinks buying green saved then anything take the hit. Did you get some kind of tax deduction for buying a hybrid? If so you have to work that into the equation as well when it comes to establishing your actual cost of ownership.
To me a vehicle is 100% loss, like buying a new toaster but then if you like toast you should have a toaster. Some people may not like toast but i have never met one.
Good luck with your decision. I would take the option that would get me out of debt and make me happy at the same time, whatever that happened to be and then decide to never again used credit to buy a depreciable asset unless I discovered I had a terminal disease in which case my outlook on the future would be different.
Well, just to share my situation/perspective:
I have a 2006 Honda Accord EX-L 4cyl w/ 48K mi on it that looks/drives like brand new. We paid $21K for it all-in cert pre-owned, 4yr loan @ ~4%. $450/mon pmt. We owe $9.5K on it and the market value is ~$14.5K for yr/cond/miles.
I want to sell it and buy something used for ~$3.5K; bank the remainder.
We only need (want) a car for occasional trips for groceries, etc. My wife uses it to get to school, but she could easily take the bus. We are starting the family planning process, so we probably want to keep having a car, but something cheap is likely good enough. If we need a nicer car for a long road-trip, we can rent.
So even though the Accord will likely retain a relatively high-value and be low-cost for maintenance, I still think it's better to just get by with something basic for transpo unless you really need something bigger/nicer for your work situation (like being a realtor who drives people around).
I say sell it and get a late-90's Civic to replace.
I have a 2006 Honda Accord EX-L 4cyl w/ 48K mi on it that looks/drives like brand new. We paid $21K for it all-in cert pre-owned, 4yr loan @ ~4%. $450/mon pmt. We owe $9.5K on it and the market value is ~$14.5K for yr/cond/miles.
I want to sell it and buy something used for ~$3.5K; bank the remainder.
We only need (want) a car for occasional trips for groceries, etc. My wife uses it to get to school, but she could easily take the bus. We are starting the family planning process, so we probably want to keep having a car, but something cheap is likely good enough. If we need a nicer car for a long road-trip, we can rent.
So even though the Accord will likely retain a relatively high-value and be low-cost for maintenance, I still think it's better to just get by with something basic for transpo unless you really need something bigger/nicer for your work situation (like being a realtor who drives people around).
I say sell it and get a late-90's Civic to replace.
For me, I am striving to be in a position where my stuff (house, car, clothes, furniture, tools, etc) is worth no more than 10% of my net worth. Expensive cars are hard to fit into this equation.
You have different financial objectives. A long as the car fits into them, keep it. If it doesn't, go for something else.
You have different financial objectives. A long as the car fits into them, keep it. If it doesn't, go for something else.
Don't worry about sunk cost. I know it's hard, but it really shouldn't factor into your decision.
You aren't really sure what else you would get, but I think you absolutely have to compare the current car to another specific car to run the numbers. So figure out what the alternative is.
I think there is much to be said about the fact that you know this car, and its condition, inside and out. When people buy used cars, it's pretty hard to determine if they've been treated well (mechanically). So people tend to assume a certain level of neglect. Therefore, you won't reap the benefits of treating the car well unless you keep it.
Likewise, I agree that it could be dicey to buy a random 10 year old car from a stranger. If you had a relative or friend with an old car for sale, that would be preferable.
I don't have the same worries about hybrids as others here. Battery technology is advancing pretty steadily, and electric cars/hybrids are becoming for more prevalent. At the end of your 8 year warranty, there will probably be a very competitive market for a replacement battery. Also, I assume the car can in fact operate without a battery (in a low-hp mode). The electric assist only adds like 15hp. Maybe that's wishful thinking on my part, but that's how I would design the car.
You aren't really sure what else you would get, but I think you absolutely have to compare the current car to another specific car to run the numbers. So figure out what the alternative is.
I think there is much to be said about the fact that you know this car, and its condition, inside and out. When people buy used cars, it's pretty hard to determine if they've been treated well (mechanically). So people tend to assume a certain level of neglect. Therefore, you won't reap the benefits of treating the car well unless you keep it.
Likewise, I agree that it could be dicey to buy a random 10 year old car from a stranger. If you had a relative or friend with an old car for sale, that would be preferable.
I don't have the same worries about hybrids as others here. Battery technology is advancing pretty steadily, and electric cars/hybrids are becoming for more prevalent. At the end of your 8 year warranty, there will probably be a very competitive market for a replacement battery. Also, I assume the car can in fact operate without a battery (in a low-hp mode). The electric assist only adds like 15hp. Maybe that's wishful thinking on my part, but that's how I would design the car.
I think he still has the same car. He mentioned in a recent post that he has a hybrid car so I'm guessing it's the same one. (Posting this because I think he's taking sort of a break from posting here because he got frustrated with recent forum slowness issues and some of his posts getting confused with spam)
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squashroll
- Posts: 25
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dot_com_vet
- Posts: 603
- Joined: Mon Jan 31, 2011 2:07 am
I agree that it's nice to have a reliable car that will last. The car hobby guys might sort of like having a car you have to continually work on, but for most it's a source of worry.
I bought a new car my first year out of college. One of the biggest financial mistakes I made. (among a list of 5 or so).
I spent $18k on the new car when I could've bought a 2 year old used car for $10k. If the car is good for 15 years, I get only 15% more life out of the new car for 80% more price. Ouch!
In retrospect, $8k over 15 years is not that big of a deal... if I put numbers to a 'financial mistakes' list, that wouldn't actually be all that high.
I bought a new car my first year out of college. One of the biggest financial mistakes I made. (among a list of 5 or so).
I spent $18k on the new car when I could've bought a 2 year old used car for $10k. If the car is good for 15 years, I get only 15% more life out of the new car for 80% more price. Ouch!
In retrospect, $8k over 15 years is not that big of a deal... if I put numbers to a 'financial mistakes' list, that wouldn't actually be all that high.
We have a 2006 hybrid civic with 91K miles on it. Paid $23K new. It's been paid off for 4 years now.
We just had the hybrid and the regular battery fail. In certain states (MA included) the hybrid battery warranty is covered for up to 150,000 miles. So we got the $3K battery replaced a few weeks ago for free.
I wouldn't buy it again (I'd have gotten a cheaper car), but keeping it is now the strategy, because it's so reliable and the mileage is fabulous.
We just had the hybrid and the regular battery fail. In certain states (MA included) the hybrid battery warranty is covered for up to 150,000 miles. So we got the $3K battery replaced a few weeks ago for free.
I wouldn't buy it again (I'd have gotten a cheaper car), but keeping it is now the strategy, because it's so reliable and the mileage is fabulous.
Watch out for 1998-2002 Corolla. Most are great, but many suffer from plant error in piston size and drink oil... I wouldn't rule them out but I'd insist on a 50 mile+ test drive to be sure oil consumption isn't a problem... A huge plus for this generation is they are on timing chains, not belts, which don't require replacing ($500 maintenance item).
I prefer the one gen early 93-97 Corolla (or less expensive Geo Prizm), one of the best reviewed cars I know of... Purchase + repairs on mine was under $2k. It gets 33-38mpg. Permanent plates were under $150 and insurance is under $20/mo.
If you can find one in good shape with less than 150k miles for less than $2-2.5k I would snag it.
I prefer the one gen early 93-97 Corolla (or less expensive Geo Prizm), one of the best reviewed cars I know of... Purchase + repairs on mine was under $2k. It gets 33-38mpg. Permanent plates were under $150 and insurance is under $20/mo.
If you can find one in good shape with less than 150k miles for less than $2-2.5k I would snag it.