because clarentine (and recession) asked

[kaigou]

Here's how you figure it, or at least, here's the math I've been doing for the past however long. Basic amounts, interest, terms, and whatnot have been adjusted to be equivalent to original; insurance can vary so widely let's just call that even between old & new, since you'd have to pay it anyway.

2-yr old VW Golf, pristine condition, 22K miles: $16K
12-yr old VW Golf, in pretty good condition, 180K miles: $3K

BASE costs regardless of car age:
oil changes, Mobil-1 synthetic, @ $60 ea, 4 annually
annual checkup, $300 avg
--> about $550 annually ($46/mo)

COSTS for new car; assume 20K mileage annually ( = 5K quarterly)
car payments, $15K loan, 48 mo @ 8%: $370/mo
property tax†, virginia rates, $690/yr
fuel, @ 25mpg*, $2.58g, $2065/yr
---> $7195/yr ==> $600/mo

COSTS for current car, all assumptions same
car payments: 0
property tax†, virginia rates, $140/yr
annual fuel cost, @ 31mpg**, $2.58g, $1665/yr
--> $1805/yr ==> $150/mo

† not all states have property taxes, and my current state doesn't, but since I did pay property tax on this car for the first 9 years of owning it, I figure might as well compare. After all, property tax is based on (approx) blue book value, so you are penalized for having a newer car, anyway.
* based on reports by other VW drivers as to actual mpg
** average mpg based on actual driving, heh.

According to the mileage guidelines for the '96, it should get 24mpg (avg) between city & highway; the '10 should get 25mpg. Let's ignore the consumers saying this is accurate, and the fact that the means of measuring mpg is also much more accurate these days. Even if I could hypermile the '10 to match the '96, I would still be looking at roughly $550/mo. Sure, I'm saving $50 a month ($600/yr) by going from 25mpg to 31mpg -- but it's still hardly enough to offset the cost of new car, otherwise.

That $370 monthly payment for the new car is a massive, massive offset, and unless the mileage were to increase tremendously -- as in, say, sixty miles to the gallon or equally ridiculous -- then financially, at this point, it's obviously not worth the expense of new car. (You can see, though, how this can also be used to justify keeping an older, paid-off car with considerably worse gas mileage than a newer car.)

But! Let's say it's one of the years where I have to replace all the brakes, because these things do wear out. When I had to do that, the car was already about 6yrs old, and it cost me -- including the annual checkup that revealed the brakes issue -- about $2500, all told. If I had to do that or an equivalent, this year, that's $210 more for a year's worth of months. So the real question is can you get twelve more months of driving out of the car?

If the answer is yes, then the benefit is obvious even if at the end of twelve months the car is dead and beyond help. Even 12 months at $350 is a savings of $3000 annually -- more than I paid to fix the damn car in the first place. So I'll consider getting new car when one of the following is true:

- repairs > $5400 + car-life < 12 months.
- repairs > $2500 + car-life < 6 months.
- repairs > $1200 + car-life < 3 months.

In other words, the longer you can drive a car after investing X into it, the more it's worth it to do so.

Thing is, even if I do end up paying, say, $5400 for all the repairs possible on the car right now -- and we're talking putting in new speakers and maybe a full detailing and possibly also repainting the hood, to get near to that high of a cost -- if the car has reasonable chance of making it another 40K to 60K miles, that's anywhere from two to three more years of driving it. Practically speaking, this $5400 isn't measured over just the next twelve months, but the next thirty-six months -- because the longer I own the car, the farther my investment goes. It's continuing to save me the money I might've had to spend, if I'd bought a new car instead.

Yeah, okay, so this is a bit of economics conceptry instead of accounting, but hey, what's a little utility among friends?

Comments

[clarentine]

Yeah, that's pretty much the math I've always run on my cars. I finally refused to put a second transmission in my 16-year-old Honda wagon and donated it to charity (and cried when I left it at the auto shop for the wrecker to come pick up), but only then because I'd bought a newer Honda (an Element!) and the wagon, which my son had been driving, had then been left to sit for a few months after he bought himself another car. I might have replaced the transmission that second time and sold the car for a nice sum...but as it stood, I needed to get rid of it anyway and the charitable donation netted me a $1200 tax deduction. Emotional attachment aside, I was satisfied with the result.

I fully expect to have this Element every bit as long - though I'm hoping to avoid two new transmissions!