I know how to look up the Kelly Blue Book value of my car; and of course I know my monthly payment and current payoff amount. What would be cool is a calculator web site that extrapolates that information – at what point does my car go from negative trade-in value to positive trade-in value; when is its trade-in maximized, etc.
Any links?
No links, but my gut tells me that you will never get the best deal by trading in your car at the dealer.
What I would do, is take the money that you would be spending on a car payment each month, and put it in a good savings account, or CD, or whatever. When your car eventually dies, or gets to the point where it costs you a significant portion of your expected payment, you will hopefully have a decent chunk of change in your bank.
First of all, never pay attention to “Blue Book” prices, those don’t mean anything. Look into a NADA price guide such as at Edmunds. Note the wholesale/trade-in price.
Secondly, if you care about money at all, sell your car privately. Note how much more you can get retail than wholesale.
Thirdly, keep your old car until you start facing several thousands of dollars of repair costs.
Here’s how to do Car Math, an example.
I have a 1987 Mazda 323 with 212K on it. Paid around $7k for it new. Cash, no payments- ever.
I pay $6 a year tag tax vs. $400+ a year for a new car.
My insurance is extremely low. No collision, etc.
I put in a one or two hundred dollars a year “extra” for maintaining it since it’s an old car. It goes thru tires, brakes, etc. just like a new car. So, you don’t even have to have a calculator to see how little I have paid over the years, amortized, to run this car.
If someone gave me a new car, I would have to pay a lot more to keep it. Just having the warranty work alone would be a huge increase over what I am paying now.
The Car Guys recommend you drive a car more or less until its wheels fall off if you want to save money.
So it is very important to note: Any car cost calculator you use will tell you to keep your current car or it’s been rigged by a new car dealer.
Trading in a car just because it’s a few years old is only for people who don’t care so much about money and focus on things like “having the latest” and other money eaters.
You know, I just did a set of calculations for this type of thing for an economics project. To do the calculations, one needed to know thepurchase cost, the yearly rate of depreciation, the maintenance cost per year (I guess and average would do-take inflation into account), as well as MARR rates (minimal acceptable rate of return), and ratios known as the compound amount factors and the sinking fund factors and the capital recovery factor for that MARR rate (often easily found in tables).
The calculations are a bit complicated and required spreadsheets, but there is a way to work it out. It involves determining the Equivalent Annual Cost of the car (the defender) and of a new car (the challenger) and simply comparing these values can tell you the useful lifetime of the defender as well as the best time to replace it with the challenger.
The examples I did for this were straightforward, though, along the lines of constant increase in maintenance every year (example +2–$ per year) and constant MARR and constant rate of depreciation. This might not apply to a car, and I can’t manage more complex calculations than that!
I guess if you can provide values for those things, I can crunch the numbers, but I wouldn’t guarantee that they’d be completely right.
(that should be +200$ per year…sorry for the typos)
Freaky how this subject came up only a day later…!
Even if someone could provide reasonably accurate numbers in these instances(which I doubt), the variability between individual cars and owners is much too vast to draw reliable conclusions about the suitability of one car vs. another from mathematical models, as you have suggested.
On the other hand, a knowledgeable and honest mechanic can look over the vehicles in question and tell you, as closely as can be determined from direct observation, what you need to know. Consider three vehicles, a 1992 Neon, 1992 Eclipse/Laser/Talon, and 1992 Corolla/Prism. All three cost about the same amount to maintain, have the same resale value and the same mileage. After looking over the cars and their maintenance histories, a competent mechanic can tell you, for example, that the Neon is more likely to have an eminent head gasket problem, the Diamondstar coupe needs timing belt changes performed to the letter because it has an interference engine with a bad history of timing belt failure-related damage, and properly maintained, the Corolla will likely be trouble-free for 200K or more. You don’t get this type of specialization with a mathematical model full of assumptions and averaged values.
IMHO, many, if not most, people that scrap a car for a “more reliable” car are looking for a way to justify buying a newer car with better amenities. Not that there is anything inherently wrong with that, it keeps the economy moving, I suppose.
Dammit, the e and im keys on my keyboard are too close together!
Yeah, I know there are just too many factors to consider in this model - my point was basically that it can be done, but you’d have to know very specific things about very specific cars. But as I said, the calculation I know is for very simple things. Car repairs, the cost of insurance on a different vehicle, etc would make the whole thing so much more complex. And besides, I have a spreadsheet all set up already, and believe it or not, I actually had fun learning that stuff
Going to a trusted mechanic probably is your best course of action, though.