New Forester or not- Does my math make sense?

[Joe1]

I was considering selling my '05 Forester and buying a new 2014 model, but after running a few numbers, I decided to hold on to the current vehicle for 3 additional years. My analysis for keeping it is below. I'd like feedback on it from those who are inclined to do so

My current Forester has 136k miles and is a base model with a 5 SP manual. The book value is about $5,500. If I keep it for three more years, I assume it will be worth $2000 with 175k miles. In addition, the cost for insurance on a new car will be about 600 per year additional as I'd probably keep full coverage on it for the first few years. Currently, I only carry liability insurance. Also, I am budgeting in 1800 for repairs,tires, brakes etc on this car over the next three years. To date, the car has been very reliable and has only received scheduled maintenance with no unexpected repairs.

I assume a new car would depriciate by 6500 (base model that will cost about 23k after tax) after 3 years and 36k miles. In addition, I will assume the new car will get 2mpg better at most. If I invest the 23000 on a tbill and get 2.5%....that would be about $1500 in lost interest income over 3 years

Depreciation:

6500-3000= 3500 more for new car over three years

Insurance: 1800 additional for new car for 3 years

Repairs: -1800 less with new car

Gas: -300 less with new car over 3 years

Lost investment Income: 1500 more for new car

+3500
+1800
-1800
-300
+1500
Total: 6500 more for new car over 3 years or 180 a month for 36 months.

My preliminary analysis is that I will save 6500 by holding on to my current vehicle for three years. The major variable is repairs in excess of what I have budgeted. Also, I can total the car tomorrow and not get a penny for it because of the minimal coverage. I realize it is nearly impossible to calculate the precise value because of the many variables involved, but the above is my best scientific guess

Although I'd like a new car, my utility of demand is not worth the additional $180 per month at this time. If the number was about half that, I might give it serious consideration.

 

[bullwinkle]

It's almost always cheaper to keep an older vehicle than buy a new one. I've already told my wife that we're keeping her '05 xB until the body rusts off-then I'll find another body, transplant her drivetrain, then she can drive that one until IT RUSTS OFF!!

 

[Danh]

I think you're on the right track, but I think any new car, even a Subaru, will depreciate more than 25% in the first 3 years.

 

[gathermewool]

I'd consider a new '13, since you can probably get it at invoice and it's currently being offered with 0% financing.

 

[kam327]

Aren't you forgetting that if you sell your '05 for $5,000 now, that'll help pay for most of the depreciation the new car? Seems like you're ignoring that $5k on a cash flow basis.

 

[JHZR2]

The best economics are to keep a car to the end of its usable life. Does not sound like youre there yet. Id hold on, then buy the new one when the time comes. Nothing wrong with buying new if youre holding on like you are. In fact, at that point, depreciation is irrelevant.

 

[JimPghPA]

Driving the 05 has some other advantages and hidden possible problems.

When you have an older vehicle you don't worry as much about the little things like a kid causing a minor scuff mark by hitting it with a snowball, football, or a Frisbee, or the small scratch from a stone thrown up by the truck in front of you on the highway. When they really get old things like sitting on the hood with the windshield as a backrest during a fireworks display might even be something you could do and not worry about dent or scratches in the hood.

On the other end without proper prevention you could end up with a major clogged cooling system causing over-heating or lack of heat from the heater core. Or a blown head gasket. Sometimes these things happen even with proper preventive maintenance, but not as often.

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Some people really skimp on anything that cost money. One of the worst vehicles I ever saw was an old car a friend of mine who buys and sells cars got from a college economics professor. That thing had a totally clogged up cooling system and a large amount of crud under the valve cover. That person really ran that thing into the ground and put the absolute minimum amount of money into it. It basically was a totally worthless piece of metal sitting on 4 bad tires. It was amazing that it lasted as long as it did.

 

[Joe1]

Originally Posted By: kam327
Seems like you're ignoring that $5k on a cash flow basis.


Originally Posted By: JHZR2
In fact, at that point, depreciation is irrelevant.


Originally Posted By: Danh
but I think any new car, even a Subaru, will depreciate more than 25% in the first 3 years.


All good points! Thanks.

 

[bepperb]

I am in a similar boat with our 04. I think your assumptions are really biased towards the new car and still you see the cost difference. 1800 is a lot of repairs, and the "new" car will probably need tires after 3 years as well. Also, with 175,000 miles 2000 is probably a little low, though after selling my Accord I understand that people shy away from manuals (sadly).

 

[Artem]

Money aside, It all boils down to: do you want to roll around in a new whip or your old POS (piece of Subaru) ???

Life is short after all...

 

[KrisZ]

Originally Posted By: Artem


Life is short after all...


Tell that to all the broke retirees that work as Walmart greeters so that they have enough for bingo and pills.

 

[SF0059]

Hopefully your Forester treates you better than mine has. New A/C unit, alternator, uses oil like mad and the differential whines like it is going out of style. Similar mileage, we have 137,000 on ours.

With 0% financing available I would go with the '13 if I had the money.

 

[mrsilv04]

Drive what you have for three more years.

Then, buy a 3 year old Forester, that has already depreciated by your estimated $6500, to replace it.

NOW we're talking some smart value...

I never buy new. Let someone else be the sucker to take that first three years of depreciation.

Late last year, Sis bought a 2003 Outback with 77,000 miles for $7200, to replace a 1998 Outback that died with 242,000 miles on the odometer.

You could probably take yours on up to 200,000 miles with little need for worry. You know how it has been maintained.

 

[Stanley Rockafeller]

Originally Posted By: Artem
do you want to roll around in a new whip or your old POS (piece of Subaru) ???


I like this

 

[NMP]

I ran a fleet of Class 8 tractors and trailers for years and crunched the numbers regularly. I learned that depreciation was always the big expense. Once a truck was paid for (depreciated to zero) the maintenance cost never went up enough to equal a new truck. Some of my tractors were 25 years old. The only time we disposed of a truck was if it was unrepairable (like a frame rail broke) or it no longer worked in the operation.

That said, I buy new for my personal vehicles and then follow the replacement guideline (unrepairable or unsuitable). I don't like to buy used because I don't know what maintenance has been done prior to my buying it. Besides, new means I get EXACTLY what I want.

 

[fisher83]

I have to agree with those telling you to hold onto your car. Save some money in case something happens and you need to replace it sooner. That way if something happens unexpectedly like an accident or a major mechanical issue then you can replace the car. If the car has been well maintained, I would not even be starting to worry about replacing a 2005 with 137k miles. I'd put the money in the bank as if you were making car payments and keep driving it until it's no longer reliable. That way when your car does bite the bullet you can just sign the check and call it a day.

 

[surfstar]

Originally Posted By: mrsilv04
Drive what you have for three more years.

Then, buy a 3 year old Forester, that has already depreciated by your estimated $6500, to replace it.

NOW we're talking some smart value...

I never buy new. Let someone else be the sucker to take that first three years of depreciation.


This is the best way to go (although I usually end up going even older, as I keep talking myself down "Is a newer car really worth that much more to me") If you can detach yourself from it emotionally and realize it's not, nor should be a status symbol, then you can make a better decision. (assuming you care about your long term economics more than bluetooth/satellite radio)

Visit a country where the simple fact of owning a car - one that is 15+ years old - is considered 'wealthy'. Then realize that its just something that gets you from point A to point B.
Yes, I realize cars can be lots of fun - I enjoy driving, but not enough to spend an additional 5 years working to own something newer. Me and my cheap rides will be retired and doing fun stuff while others are driving their new cars to work in their 60s.

 

[Spector]

Depreciation over 3 years is almost always in the 40-50% range on most cars. New cars have to be kept 10 years to make a purchase worthwhile whereas a 3 year old has a huge chunk of the depreciation already gone and a low mileage 3 year old car is a no brainer for cost effectiveness

 

[Pop_Rivit]

Originally Posted By: Artem
Money aside, It all boils down to: do you want to roll around in a new whip or your old POS (piece of Subaru) ???

Life is short after all...


If you need a new "whip" as a crutch for a shallow ego and personal insecurities, then by all means that's good advise.

Otherwise I think the original poster would do well to get additional time and mileage out of his current vehicle. It's my no means an old "POS" yet.

 

[KrisZ]

Originally Posted By: Pop_Rivit
Otherwise I think the original poster would do well to get additional time and mileage out of his current vehicle. It's my no means an old "POS" yet.


I don't know OP's car condition, but with any decent care by no means it should feel like an old POS car.
My Mazda 3 is one year younger than OP's with a hair over 100k miles and to my amazement it drives better or the same as some of the recent, newer models I drove from the same class. 100k miles is nothing these days with some care.