Better to sell when it is working, get a little money for it and have an easy sale, than to wait until it is shot and then try to donate it to charity.
I was ready to scream.
In general, most modern cars will easily go over 100,000 miles without difficulty or major breakdown. Most will go to 150,000 miles. This means 8-10 years of trouble-free driving. So keeping a car for 8-10 years and 100,000 to 150,000 miles is a good basic target. Yes, you can go longer and drive a car "into the ground" - but that requires a little more effort on your part. And it means a car that you really can't take on long trips, as it might break down and leave you stranded in the middle of Oklahoma - and at the mercy of the nearest garage mechanic.
And yes, there is an insane logic to owning a clunker - but you have to be pretty clever and astute to make it work - economically. For the rest of us, who might not be mechanically inclined, it pays to fish further upstream. Of course, your old Honda or Toyota might make a good hand-me-down car for your kids. Older cars are cheaper to insure, and odds are, a kid will trash the car in short order, anyway. But don't expect your kids to be grateful. Today, the average middle-class teen expects a brand-new car for their 16th birthday. And if you don't buy them one, in a few short years, they'll convince Grandma to co-sign a loan so they can have a "reliable car to get to work." Or maybe weekend Dad will buy them one - out of guilt.
Of course, getting rid of a clunker is problematic. Once they go bust, all you can do is sell them for parts or scrap - or donate them to charity (which is akin to giving it away). But at that point, a high-mileage clapped-out clunker isn't worth much. If you are handy with tools and don't mind driving a piece of crap, the clunker thing could work for you. But most Americans don't have the time and patience for this, so we won't leave it on the table as a realistic option for most people.
Trading in cars every 2-5 years, on the other hand, makes no economic sense whatsoever. To begin with, as I noted in my Hidden Costs of Car Buying, you will have to pay sales tax on each one of those cars. If you trade every five years, instead of every ten, you double your sales tax burden, which on a $25,000 car, can be about $1500 each time. You also are taking the biggest hit in depreciation, in terms of dollars - whether you buy new or used - as the highest depreciation occurs when the car is the newest (as the value is greater). Unless you are really rich and can really afford to squander huge sums of cash, this is not a realistic option, either. And no, you can't "afford" to trade-in or lease new cars every few years, if you are at the same time complaining about being broke all the time or underfunding your 401(k). Let me put it this way - if you are reading this blog, odds are, you can't afford it. So we'll leave this option off the table as well.
So when should you unload a car? Like I said, about 8-10 years and 100,000 to 150,000 miles are pretty good targets. But here are some other criteria you should consider:
1. Have you stopped using the car (boat, motorhome, etc.?) If not, think as to why you are keeping a vehicle you don't ever use - or use rarely. Many people make the mistake of buying a new car and then saying, "Gee, we'll keep the old one, as it still have some life left in it!" But the battery goes dead, and the gasoline in the tank turns to sludge - and the cost of owning an extra car, while not readily apparent - starts to drain your finances. If you have more cars than people in your house, something isn't right. And I know this, as I used have six (cars, that is) and it was bankrupting me. Cars are like fresh fruit - use 'em or lose 'em. Better to have one car and drive it a lot than to have multiple cars and drive them rarely.
2. What is your use of the car? If you are commuting to work, and don't mind being late once in a while (if the car breaks down) then you can afford to have an older car and not worry so much about being stuck. If you have AAA, the car can be towed to your trusty local mechanic (or your garage) for repair. But if you travel long distances, an older car might not be such a smart choice. Breakdowns in remote locations mean than you have less choice as to who is to repair your vehicle - if indeed anyone there is capable of repairing it. For example, driving the X5 in Labrador was an interesting experience - we kept wondering what we would have done if it had broken. AAA might not work in Canada - and spare parts would have to be flown in or take a week to arrive.
3. How Old is the Car? And by this, I mean age in years. Cars rot, like fresh fruit, even if they have "low mileage" on them. And lower mileage cars are not worth a lot more than high mileage cars, as a result. While a garage-kept car might last 15 or 20 years with no difficulty, cars left outdoors after two decades start to look pretty ratty, and many parts start to degrade, just from time and the elements. Things like oxygen sensors wear out over time, as well as mileage. Rubber parts rot, fabrics fade and tear. Very few cars look nice after 15 years.
4. How Many Miles on the Car? Again, mileage is not necessarily indicative of age. A lot of highway miles put little wear on a car, whereas city driving can wear out a car fairly quickly. But again, the odds of you reaching the fabled 300,000 mile club are pretty slim. Most people who drive a car this far, drive an awful lot every year - 25,000 to 35,000 miles, or about double the national average. There are few 20-year-old cars that make it to 300,000 miles, but plenty of ten-year-old cars driven by fools who fail to grasp that they are driving their lives away, 30,000 miles a year.
5. What Condition is the Car? Is the headliner starting to sag in spots or have some tears? Are there nagging issues with trim, accessories, and electronics? Will it be due for tires, brakes, struts, oxygen sensors, fuel filter, spark plugs, or other maintenance and repair items? As I noted in my Fright Pig article, once a car hits about 100,000 miles or so, it may need a lot of repair and maintenance work. Cumulatively, these repairs and maintenance items could end up costing thousands of dollars, particularly if the work is done by a mechanic. Is it worth throwing $5,000 at a car worth maybe $10,000 on a good day?
The point is, as with everything, moderation is the key. Going to extremes trying to keep a car alive forever can be more expensive than buying a new one. And yet many self-styled "frugal" people do this - throwing hundreds of dollars a month at a car for repairs, and ending up with a ride that is uncomfortable, unreliable, and worth very little. A minor fender-bender is often enough to total the car. Or after throwing thousands of dollars in maintenance and repairs, a "big ticket item" like the engine or transmission blows up, and the cost of repair exceeds the value of the car.
Yet many people do this - throwing more and more money at older cars, convinced that "this time, it will be fixed, for good!" Usually, these folks are not car people or people with a background in science or Engineering. They assume that "but for" some worn-out part, the car would otherwise be in perfect condition. They assume that if all the broken parts on an older car can be replaced, it will run like new. They assume wrongly.
Cars, like computers, houses, buildings, appliances, and even people, have a design life. They are engineered to run for a designed service life, and then to be scrapped. Depending on care and the law of probability, some run longer, and some run less, than this designed service life. And a few are taken out of service and become "collector's items" which are not really cars anymore, but talismans of cars.
So you have to know when to quit - at a reasonable time. And one way to do this is to set a goal for yourself. When we bought the BMW X5, it had 50,000 miles on it, and cost $25,900. I figured if we could get about 100,000 miles out of it, that would bring the depreciation down to less than 25 cents a mile. Since it sold for $5700 (about $250 over trade-in or private party sale) the actual depreciation was about 20 cents a mile.
We could have easily gotten an additional 50,000 miles out of it, without much maintenance, I think. The only major component in question was how much longer the clutch would last. Some owners reported getting over 180,000 miles out of a clutch (and still running). But most of the major systems were in good repair, and all the maintenance items (oxygen sensors, spark plugs, ignition coils, fuel filter, fluids, etc.) had been changed out.
But two things gave me the impetus to sell. First, the small repairs on our long trips (which are an annual occurrence) were getting annoying. When a car breaks down in a strange town, it can be stressful. Second, the car had some life left in it, and everything was working on it - so it was a good time to dispose of it. For $5700, it represents a good piece of transportation for the new owner, who can probably put 50,000 miles on it with no difficulty other than putting a new set of tires on it, eventually.
And I am at a point in my life - with no debt and a net worth well over a million dollars - that I truly can afford to buy a car. The insurance cost is negligible, and the dent to my net worth is less than it fluctuates on a monthly basis. So maybe it was time to move on from the X5.
The car also had some practicality issues. While an SUV is supposed to "haul things" you'd be surprised how little you can fit into these vehicles, compared to say, a minivan or pickup truck. With four passengers aboard, there is barely room in the back for luggage for two. So we ended up with a "rocket box" on the roof, which was cumbersome and awkward.
So, what to replace it with? The following criteria had to be met:
1. A Tow rating of at least 5,000 lbs (more than the weight of the trailer).
2. Room for four adults (our other car is a 2-seater, and owning two 2-seaters is not practical)
3. Something that can haul fairly large items (again, the roadster doesn't do this well).
4. Reasonable gas mileage (this conflicts with 1-3). At least 20 mpg for a truck.
5. Simple and cheap. No AWD or 4x4 or fancy gadgets.
6. Has to fit in the garage.
The new medium sixed SUVs are all based on car chassis (the Taurus, Impala, Camry, etc.) and thus have AWD and FWD options. The FWD models are usually a lot cheaper. However, most have very little cargo space and since they are of unibody construction, their tow ratings are limited. SUVs are also very expensive as well - with most topping $30,000 or more, even in base trim - and even with rebates, etc. Used ones are not much more of a bargain.
Like I said, we had been looking at them for three years. And each year, Nissan has lowered the base price of the truck, and added more features to the option packages. What really stopped us from buying one (and I know this sounds stupid) is that they were all either silver or white (neither of which is a color) and when I saw this graphite blue one, at a reasonable price, I decided maybe it was time. Negotiated the price over the phone, checked all the online sources for a "reasonable" price for such a vehicle, and did the deal in about an hour. Was it a smart move? Not necessarily. You never make out buying a car or truck - they are worth less than you paid for them the moment you buy them.
The only "gadget" it has on it was a backup camera and backup sensors. And these are pretty practical gadgets to have (I installed one on the X5 as you can't see out the back of that thing, either). The rest is fairly simple - power locks and windows, remote keyless entry, cruise control. It does have bluetooth and a decent iPod interface on the stereo. But other than that, it is pretty basic.
By the way, Hertz has a lot of these for sale for about $21,000 used, which is not a great price, but OK. Most have 20,000 miles on them and are mid-range loaded SV models. The only thing about buying a used rental car these days is CarFax, which brands your car with the red letter "R" on it. I think they need to tweak their prices a bit, but supposedly, they do offer $1000 off. If you are not concerned about resale value, it might be a good option, as well as looking in the late-model used market.
Sadly, these mini-trucks, like Jeeps, get "modded" a lot, as their primary audience, particularly for the 4x4 models, are young men. They tend to beat on them and add questionable modifications. Thus, it is hard to find a late-model used one (I found only two, 200 miles away, in Florida). The 4x2 models are more "old men's trucks" - the type of ride favored by middle-class retirees. So it is official, I am now an old man.
And there are still station wagons out there - Volvos of course, and the Jetta and Passat Wagons, which are practical cars for hauling people and things. Mercedes has nice ones, too. But after working on my friend's Mercedes, I am not sure I want one. They are a nightmare of complexity.
But who knows? Maybe we'll have this one longer. We'll see. I am not emotionally attached to it, but I guess that means I am getting older.