Is there a way to calculate the relative cost of buying an older used car vs a later-model one?

October 26, 2009 9:45 PM

Is there a way to calculate the relative cost of buying an older used car vs a later-model one? Taking into account depreciation, maintenance costs, etc.

I'm looking to buy a small, inexpensive car, most likely a Toyota or Honda (although later-model Kias seem appealing as well). I've had two mid-90s Toyotas with high (140K+) miles and was planning to do the same thing again. But it occurred to me that both of those cars, while fairly reliable for their age, actually had a lot of problems - I ended up spending about $1K/year for repairs on both. And having had each for less than a year, one I ended up selling for parts and one I sold for $1k. Also, finding a decent older used car takes a lot of time, something I have a lot less of now than used to. I started thinking that spending a bit more might actually yield better value in the long run.

So now I'm thinking about taking the $3k I'd budgeted for a rustbucket and using it as a down payment on a later-model used car in the $8K range. Some examples of what I'm thinking about: a 2003 Toyota Corolla with 70K miles, a 2004 Kia Rio with 60K miles, or a 2003 Honda Civic with 90K miles, or a 2005 Hyundai Elantra with 50K miles. These examples are all based on asking prices I saw on kbb.com.

So now I'm trying to figure out how I can accurately crunch the numbers and figure out the true cost/value of buying a newer car vs buying an older one. I know that you can never be certain about whether a car will last for 1 year or 10 years, or whether you'll have to replace the head gasket after a year, but there's got to be some information out there that can help me figure out some expected values.

Is there a website that keeps information about things like average yearly maintenance costs, depreciation, etc? Or has some kind internet soul posted a calculator that helps you figure all this stuff out?

posted by lunasol to travel & transportation (8 comments total)

I remember reading at one point that in calculating depreciation and maintainence costs over time that cars are best in one mileage range. It was approximately between 30,000 and 90,000 miles. In essence, purchasing new is a bad idea as it depreciates the instant you drive it off the lot and buying over 90,000 miles increases the chances of high costs down the line. At ~30,000 miles the blue book value drops and then the car depreciates slower until around 90,000 miles.

Now this is not an axiom but it is useful to think about. I will have to try and track down the article so you have it from a source rather than a random person on the internet ;D

Look into manufacturer warranties as they have different policies on second owner, etc. I know that Hyundai covers a nearly full warranty up to 60,000 miles, not sure about the others.
posted by occidental at 10:01 PM on October 26, 2009

It's not precise enough for what you want, but Consumer Reports posts reliability over time for many makes, models, and years of vehicle. Grab a copy of their annual guide and look up the cars in question.
posted by zippy at 10:14 PM on October 26, 2009

Devils advocate: $3k downpayment on a new 2010 Corolla or Civic. Granted you'll have higher monthly payments and insurance premiums, but then you'll have a good powertrain warranty and probably some kind of included maintenance plan. You'll also have something that will still have value as a trade in 5 years later. I drove old used cars for ten years before buying new, and even with the hit in depreciation (which is less now for good cars like Hondas and Toyotas than it was in the past), it's been so much nicer than having to deal with the replacements and routine maintenance that an older car requires.
posted by Burhanistan at 10:31 PM on October 26, 2009

You can also check how likely most of your anticipated models will be reliable here.
posted by birdsquared at 10:44 PM on October 26, 2009

The term you're missing here is "total cost of ownership", which takes into account not just your car's down payment and loan costs (if any), but also expected maintenance bills and eventual lifetime replacement.

Consumer Reports actually had an article about just this comparison within the last year but I've apparently mislaid the issue. The gist is that some people have religiously maintained cars and made them last on the high side of 200K miles, and when the numbers are crunched they come out way below typical costs for new or for used with less aggressive maintenance.

I like your thinking, especially the '03 Corolla which I'd personally jump on. But even the Kia and Hyundai would have reliability surpassing anything you could buy for $3K cash.

My dad used to buy all these Chrysler minivans, which are inexpensively available used, but tended to have maintenance issues out the wazoo. (It's a part. I read the manual.) And at the age that my parents owned them, they were always on the CR "Used Cars to Avoid" list! When the last minivan failed this year -- and fortunately family transport needs have diminished -- I found a nice Honda Accord from a dealer that came with a limited warranty. Not to mention it sips gas like hot tea.

Anyway, CR has a "CR Cars Best Deals Plus" service that will let you search their database extensively while you shop -- looks like it's a bargain at $13/year.
posted by dhartung at 11:48 PM on October 26, 2009 [2 favorites]

It's definitely something to consider. I bought my 1998 Eclipse GS-T with 91,000 miles on it four years ago for about $8,500. It now has 142,000 miles. It hasn't had any major breakdowns, but I needed to replace the clutch and motor mounts (and whilst in there, a few other small things) that was about $1,400. I just did the timing belt as well (along with a camshaft leak, and all drive belts) for $750.

Unfortunately, a lot of small things are starting to show their age. The passenger door handle came off. The headliner sags. The mirror switches fell into the door (though they're still reachable, this is annoying to say the least). And on and on.

The car runs strong and blows amazingly cold AC so I have no compelling reason to do anything but drive her into the ground, but I've also resolved that the timing belt is the last piece of major maintenance I think I'll do with her.

(I might swap out the blow-off valve because the non-stock one the previous owner put on is driving me crazy, as it causes the car to stall out when I take my foot off the gas if I don't feather it down.)

This is all by way of saying that, for the 50,000 miles I've gotten out of my car, I've had to pay an additional $2,500+ in maintenance and other costs. About $800 of those I would've had to pay in any other car (thinking tires/oil changes here). I doubt I would have had to pay them in a 30,000-50,000 mile car, but then, the timing belt usually comes up right around 60,000 miles, etc, etc.

On the other hand, none of the "smaller" issues were like this when I bought the car. It depends on what you really want to drive, but there's definitely a sweet spot and it's probably a good 30,000 in front of the 90,000 mark. :-)
posted by disillusioned at 2:10 AM on October 27, 2009

I'm with the 30K to 90K crowd. I also keep a car fund, a separate account I fund with direct deposits or transfers at a rate of around 25 bucks a week and half of any windfall amount I get (tax returns, side jobs). For me, every five to six years or so this works out to be enough cash to buy a newer used car.

I know I read that the 30 K was the "sweet spot" to buy a car at one time, but this last car buying experience (last year) I found the prices didn't drop off as precipitously as previously, making me wonder if cars were becoming that more reliable or there were enough people doing what I was doing to be a market force.
posted by readery at 4:21 AM on October 27, 2009

Thanks for all the advice. I wound up going with a 2008 Certified Toyota Corolla with 45K miles. I've only had it for two days but so far I'm very happy. I think I hit that sweet spot between reliability, cost and value.
posted by lunasol at 2:11 PM on November 2, 2009