Sunk Cost Fallacy - when is it time to give up?

[ATex7239]

I looked at a few CRV's of that vintage here. Super high miles, clapped out and most shipped in from "up north" - AKA quite rusty underneath. Maybe its just here? Yours looks like a winner to me.

I consider tires and brakes required for anything I would buy used. It actually drives me nuts the dealers all put the cheapest tires they can find on used cars so they can sell them as "new tires". I would likely just throw them away since there usually terrible in the rain.

We found my son a high mileage CR-V in good condition for around $5000. Carfax showed a good maintenance history and based on the frequency of oil changes I suspect it’s mostly highway miles.

Tires and brakes are good. Has some cosmetic things due to a very minor fender bender, no rust, needs some fluids changed, which we will be doing here soon, and needed an oil leak fixed. Only needed an oil filter housing gaskets replaced which I knocked out in about an hour. Doesn’t appear to consume much oil if at all. I’d say after about $500-1000 in DIY repairs/maintenance over next few months he’ll have a decent little knock around vehicle.

Got lucky because as you said most weren’t great.

 

[ATex7239]

This. I see people who want to sell a $3k car because it's got problems but they want to move into another $3k car.

In this instance, usually better to stay with the devil you know.

This sometimes comes from taking vehicle advice from media or financial experts in my opinion. They’re looking at the vehicle’s value in dollars and cents on a spreadsheet, but not taking into account the real world application. Bottom line is you need a vehicle to live one way or another. It is not an investment. It is a liability. It is not there to increase your net worth. It is there to provide transportation so you can live your life. I don’t include our vehicles values (despite being a positive) in our net worth assessment. To me that’s like including the food in your pantry as part of your financial assets.

 

[Deamos]

When the cost of a repair event exceeds the ACV or....if the total spent over 12 months exceeds the cost of payments for the replacement vehicle?

The latter will be my measure once my CX5 is paid off, though I think my mental math for my Sorento was "6 months of car payments," which was still quite a bit of money.

Unless I am missing something, though, I should get another 10 years of life out of my CX5.

With how expensive new or even "gently used/CPO" vehicles are these days, a year is likely to make a lot more sense.

 

[JeffKeryk]

I looked at a few CRV's of that vintage here. Super high miles, clapped out and most shipped in from "up north" - AKA quite rusty underneath. Maybe its just here? Yours looks like a winner to me.

I consider tires and brakes required for anything I would buy used. It actually drives me nuts the dealers all put the cheapest tires they can find on used cars so they can sell them as "new tires". I would likely just throw them away since there usually terrible in the rain.

CA cars tend to be rust free. This CRV is very clean. Interior is showroom. But obviously it needed some basic stuff, close to $2K maybe.

 

[thastinger]

When you can't trust it anymore.

That's where we ended up with my parent's 2000 Expedition. You couldn't kill the power train (5.4L 2V with a 4R100 behind it), but it was getting taken out of service by other things pretty regularly at 24 years old and 330 or so thousand kilometers.

You'll live to regret getting rid of a 2V 5.4 with a 4R100 behind it.

 

[OVERKILL]

You'll live to regret getting rid of a 2V 5.4 with a 4R100 behind it.

Our family owned three. First was my parent's 1998 Expedition, which was a lease. They purchased the 2000 and then drove it for 24 years. Unfortunately my mom got scammed on that electronic "rust prevention" thing, that became a running gag between them (dad was a big believer in Krown/Rust Check) where dad would point at rust and be like "but that's impossible!" *pops the hood, point at red light on unit* "because it's PROTECTED!!".

My wife and I bought a used 2002 in around 2008?, drove it for many years (pictures of it are on this board), but, despite getting it sprayed, floor and rockers were eventually shot, mechanic told us it was getting unsafe, we sold it to a guy who worked at a metals company, who was going to use it for a winter beater but I discovered he worked near my work and so I saw the thing used as his daily driver for another several years until his work moved. He may still be driving it for all I know. He clearly fixed the rockers and I assume the floor. It had ~330,000km on it when we sold it, probably has twice that now if it's still on the road.

Dad still has a 2003 Town Car as his "summer car", no rust and has much less mileage on it than the old Expedition.

Yes, that 5.4L 2V + 4R100 combo was beyond durable. It was the decay of the vehicle around it, in both cases, that led to divestiture.

 

[thastinger]

Our family owned three. First was my parent's 1998 Expedition, which was a lease. They purchased the 2000 and then drove it for 24 years. Unfortunately my mom got scammed on that electronic "rust prevention" thing, that became a running gag between them (dad was a big believer in Krown/Rust Check) where dad would point at rust and be like "but that's impossible!" *pops the hood, point at red light on unit* "because it's PROTECTED!!".

My wife and I bought a used 2002 in around 2008?, drove it for many years (pictures of it are on this board), but, despite getting it sprayed, floor and rockers were eventually shot, mechanic told us it was getting unsafe, we sold it to a guy who worked at a metals company, who was going to use it for a winter beater but I discovered he worked near my work and so I saw the thing used as his daily driver for another several years until his work moved. He may still be driving it for all I know. He clearly fixed the rockers and I assume the floor. It had ~330,000km on it when we sold it, probably has twice that now if it's still on the road.

Dad still has a 2003 Town Car as his "summer car", no rust and has much less mileage on it than the old Expedition.

Yes, that 5.4L 2V + 4R100 combo was beyond durable. It was the decay of the vehicle around it, in both cases, that led to divestiture.

Oh gotcha, rust killed it.
I have a 98 F150 4x4 with that combo in the non rust belt and it is still in great shape. I've painted it once because it lives outside and is black/silver.

 

[Boomer]

I have always felt that the best used car is the well maintained one you are currently driving.

 

[ATex7239]

You'll live to regret getting rid of a 2V 5.4 with a 4R100 behind it.

And this is where that emotional aspect of the Sunk Cost Fallacy rears its ugly head.

 

[thastinger]

And this is where that emotional aspect of the Sunk Cost Fallacy rears its ugly head.

How so? A long block is 3K vs 80k+ for a new truck or maybe 30K for a decent used one.
I use it as a truck, I put 3K miles a year on it now, not my daily anymore but I need a truck to do truck stuff with.
And where I am, property taxes matter.

 

[ATex7239]

How so? A long block is 3K vs 80k+ for a new truck or maybe 30K for a decent used one.
I use it as a truck, I put 3K miles a year on it now, not my daily anymore but I need a truck to do truck stuff with.
And where I am, property taxes matter.

Because he clearly stated the powertrain wasn’t the problem, it was all the other items which led to them moving on. Regret is an emotional response. And I don’t believe one should become too emotionally attached to an object.

 

[svtrit]

1. Rust is popping
2. I have to spend most Saturday's fixing stuff
3. The repair is 1/3 to 1/2 the vehicle's overall value
4. There is more than 2 safety issues

My 2014 T&C fit 3 of 4 of these when I decided to get rid of it and buy new (used minivans are either trash or within $5000 of new). The airbag light was going on and off, the engine was running very badly, probably due to a burned valve or dead cylinder, and the dog leg on the passenger side popped with rust. I had worked on it 3 Saturday's in a row to fix the engine, and the doors that no longer opened and closed automatically (1st world problems, but a major one for my wife).

Oddly enough, my 09 Camry with 250k miles was passed to my daughter, is closer to 275k miles on it now, and has needed nothing that wasn't her fault, like a new tail light or zip ties to hold the front bumper cover on it a couple spots.

I'm not against old cars. I just need them to work and keep my family safe.

 

[mark pruett]

The Sunk Cost fallacy is the fallacy part. Every calculation is going forward. What you spent yesterday is water under the bridge so to speak.

It's basically the idea that once you've spent money on something, your current and future decisions need to be made in light of the current situation, and not in some sort of quixotic effort to "make the investment pay off". The whole idea is trying to avoid letting "sunk costs", i.e. those that have already been done, cloud the decision making going forward.

So if a business buys a big piece of equipment for doing something that costs $$$, and it turns out not to work so well, it's a sunk cost. It's already bought. The decision about whether to repair it, keep it around, or trash it should be made based on the current situation, because how much you already spent on it is irrelevant.

In car terms, if you get to some point in the car's lifespan and it needs repairs, the fact that it cost you a lot of money to buy isn't really relevant to whether or not the repairs are a good choice or not. What is relevant is how much the repairs cost, how much a NEW replacement might cost, and so forth.

To me, my tipping point for when it gets to the point where the breakdown rate starts to accelerate beyond just the normal wear and tear, and random breakdowns. There's a point when stuff just starts to get worn out and stuff starts breaking. It's kind of hard to identify in a formal, rigorous way, but if you've had a few beaters, you start to get a feel for it.

 

[ATex7239]

It's basically the idea that once you've spent money on something, your current and future decisions need to be made in light of the current situation, and not in some sort of quixotic effort to "make the investment pay off". The whole idea is trying to avoid letting "sunk costs", i.e. those that have already been done, cloud the decision making going forward.

So if a business buys a big piece of equipment for doing something that costs $$$, and it turns out not to work so well, it's a sunk cost. It's already bought. The decision about whether to repair it, keep it around, or trash it should be made based on the current situation, because how much you already spent on it is irrelevant.

In car terms, if you get to some point in the car's lifespan and it needs repairs, the fact that it cost you a lot of money to buy isn't really relevant to whether or not the repairs are a good choice or not. What is relevant is how much the repairs cost, how much a NEW replacement might cost, and so forth.

To me, my tipping point for when it gets to the point where the breakdown rate starts to accelerate beyond just the normal wear and tear, and random breakdowns. There's a point when stuff just starts to get worn out and stuff starts breaking. It's kind of hard to identify in a formal, rigorous way, but if you've had a few beaters, you start to get a feel for it.

Yeah. Another problem with personal financial decisions is that judgement is easily influenced by emotion. Because you can’t treat personal finances like a pure business. If we did, we’d kick all of our children out of the house in short order for not producing an income and high operational costs. At a certain point in any vehicle decision it’s really about keeping your family and life together which might mean fixing an old beater or moving on from it.

 

[SOUNDMAN5000]

Good timing for me OP as you got me thinking....my phone rang this morning from my Daughter with a year and a half to go in College says " Dad, on my way to work my car started making a noise out the back"... I tell her to drop over after work and I will check it out.

Her car was my car, the BEST car I have ever owned to be honest and I have owned many, a 2017 Ford Fusion Loaded SE with the 2.0 Turbo with almost 70K miles on the clock.
Last month the car check engine light came on and after pulling codes and me going to Google I lost a bit of sleep as I found out this that 2017 2.0 has a possible ticking time bomb that may result in the only fix being total engine replacement. In my case last month it was a O2 sensor but now I know that engine does have a design issue that can cause the engine to go POOF in the 60K mileage range... I do know its time for brakes etc...
So her car is long ago paid for so NO car payment and has been a good car but would we do best to keep it or trade it for a new Honda or Subaru or perhaps Mazda? now so my Daughter can be worry free. My Daughter also works full time, she could handle a small car payment and as of now her 17 fusion would offer a small trade amount... Wonder what to do.

 

[Hohn]

I have always felt that the best used car is the well maintained one you are currently driving.

A close friend has a saying: people don’t get rid of GREAT used cars.

Which means one that the devil you know is often not just known, but truly better. At least in his telling. Personally, I think he says that mostly to rationalize buying new all the time. (He buys new and keeps forever, which is a pretty good strategy if you ask me).

In our town (the densest population of mechanical engineers in the USA), there are many vehicles that are lovingly maintained by people who know what they’re doing. So perhaps here you might find some truly excellent used cars that aren’t super expensive. Maybe. But you are going to have to know someone and have a line on the car before it even comes on the market, because most used cars come to market from outside your local area via auction and wholesaling. Forget the dealer even the small mom or pop place. You’re going to have to find it on FB marketplace or some other local B/S/T platform.

Which means that the used car you think is more cost effective than your old beater might just be a more expensive car— but not a better one.

 

[2strokeNorthstar]

Subarus are a great application of this

If I had to actually drop the engine and replace the head gaskets, it would've been in the junkyard years ago, but head gasket sealers actually make them worth keeping

Being able to work on the car yourself vs having a shop do it also changes the equation

Just joined the sealed HG club. Found my Ford supposedly reliable 5.4 2v with a really slow external coolant leak from the head. I was really debating my options. Added some delco coolant pills and the leak stopped almost immediately. It has been weeping oil from the headgaskets for 12-15 years. I guess it rides on.

 

[SwampSurvivor]

That's about where I am with the Grand Marquis.

Over the last year .... I bought new winter tires for it over the summer $500. Replaced the fuel pump twice ($300). Had to throw an intake manifold at it this winter ($350), Wheel bearings ($150) , Complete front and rear suspension replacement with alignment $700 ...

I need to pull the valve covers and timing cover to replace the failed hydraulic tensioners. It needs new rotors.

Cheaper than a payment on a new car. Insurance is very cheap as well. Similar for my truck. Old junkers only work for me because I do my own maintenance and have cheap insurance.

With that said, I'd probably be pretty close to a singular new vehicle if I got rid of the old junkers and bought a new one. But the insurance would kill any advantage.

 

[Paco Pena]

The sunk cost fallacy is the tendency to follow through with something that we’ve already invested heavily in (be it time, money, effort, or emotional energy), even when giving up is clearly a better idea.

Recent Warren Buffet post got me thinking about something. My daughter‘s high mileage Hyundai has needed a few repairs over the years. Nothing major, but as a broke college student to her even a couple hundred dollars here and there seems massive. She asked me if it was time to get rid of her vehicle after some repairs a while back and I said no not yet. She asked what my criteria was and I said a few things 1) it is so much money that the price and effort far exceed the unusable life left of the vehicle - engine, transmission, suspension, etc. 2) it’s breaking so often that it causes a hindrance to your life and ability to work and/or go to school. 3) you have the money and you’re just ready for something new.

Sometimes it’s hard to know when to pull the plug, but I think it’s important not to become emotionally attached to objects. I told her I would let her know when I thought it was time. But we aren’t there yet. What is your criteria for pulling the plug on an old beater?

I thought this post was going to be about marriage.....


Paco

 

[userfriendly]

Yep, we've got an GM EV going through that in the EV forum right now. Been in the shop for 48 days.

When your life is uncomplicated, buy an EV.