[JASonic]

If you need one.

I looked at a few cars and Trucks over the weekend. Gas mileage was a concern with the SUV of course. So rather than guess and make assumptions, I did some math to see where I landed on 2 vehicles.

I compared two vehicles that had an original sticker price of about $30,000. One is an SUV and the other is a 4 door car. They both had a little more than 50,000 miles but most importantly, were in comparable condition. The SUV had a few more features like leather but generally, they were equal.

Now, here is some backyard math.

The car was $19,000. The SUV was $10,000.
Assuming a 60 month loan (I'll leave interest out), that means a payment of $167 for the SUV and $316 for the car.

Now, take the gas mileage which is 15 for the SUV and 22 for the car. I will drive the vehicle about 15,000 per year. Gas is about $4.00 per gallon.

With that info, I can estimate my real cost. With the SUV gas will cost me $4,000 per year. The car will cost me $2,728 per year. Divide that by 12 months and you get $334 per month for the SUV and $228 for the car.

Add the vehicle payment and the fuel cost together and the SUV is cheaper.

SUV= $501
CAR=$544

$43 per month or $2,580 over the 60 months of the loan.

With SUV prices as low as they are, it makes sense to figure the overall cost.

[AtlanticBlue99]

Yeah, also consider resale... In 60mo (5yr) the car will be worth appx. 8k, the SUV will be worth appx. 5k... so the difference in 60mo of $2,580 from the resale difference of $3,000 makes the car a better buy by a margin of $420. but factoring in a decent interest rate, this margin will disappear completely.

E.g. a 5% rate:

5%($19,000) = $950 in accumulated interest
5%($10,000) = $500 in accumulated interest

So the $420 difference to make the car cheaper + $450 in added interest = $30 difference.

In all honesty, it will come down to the structure of the loan and your personal preference. If you need the space of the SUV and the capabilities of the vehicle, it really is a good time to buy, given a resale market in the next 5yr.

[TheUNZippee!]

All yer fancy mathematics are all well and good n'shit, but think about the real world week to week finances.

One vehicle requires you to put 20 or 30 bucks in it each time you fill up, the other costs 40 or 50 bucks.

Rough estimate^ not necessarily applicable to your application. But you get my point.

[cigarmanva]

Originally Posted by AtlanticBlue99 Yeah, also consider resale... In 60mo (5yr) the car will be worth appx. 8k, the SUV will be worth appx. 5k... so the difference in 60mo of $2,580 from the resale difference of $3,000 makes the car a better buy by a margin of $420. but factoring in a decent interest rate, this margin will disappear completely. E.g. a 5% rate: 5%($19,000) = $950 in accumulated interest 5%($10,000) = $500 in accumulated interest So the $420 difference to make the car cheaper + $450 in added interest = $30 difference. In all honesty, it will come down to the structure of the loan and your personal preference. If you need the space of the SUV and the capabilities of the vehicle, it really is a good time to buy, given a resale market in the next 5yr.

I can see both sides here but if you don't plan to sell the car before it is no longer economically viable to maintain the car resale doesn't matter

[AtlanticBlue99]

Originally Posted by cigarmanva I can see both sides here but if you don't plan to sell the car before it is no longer economically viable to maintain the car resale doesn't matter

Who would not sell the car? To me, I would never purchase a car without 100% cash. There is not point to pay interest on something that depreciates in value. Also, most Americans own the same vehicle for 5 years average before selling or trading it in. Now if you make a point to never resale, then you need to factor in lifetime maintenance costs, including warranty work and other work needed. But buying a used vehicle, warranties won't generally be greater than 60k miles if you are lucky.

60k miles = 4 years. It makes perfect sense to resale when the loan is up and move on to something newer and safer, especially if you have a family.

[TheUNZippee!]

AB the average working Joe with a house, wife, and children, that also has to commute, does not have the ability to walk out and pay for a car in cash.

[AtlanticBlue99]

Originally Posted by TheUNZippee! AB the average working Joe with a house, wife, and children, that also has to commute, does not have the ability to walk out and pay for a car in cash.

I know, but I, personally, will be in the situation to do that.

[TheUNZippee!]

If that's the case, will you marry me?

[AtlanticBlue99]

you know i have the supervisors at work zip... but maybe in a different state we can wed?

[03SonicBoom]

Originally Posted by TheUNZippee! All yer fancy mathematics are all well and good n'shit, but think about the real world week to week finances. One vehicle requires you to put 20 or 30 bucks in it each time you fill up, the other costs 40 or 50 bucks. Rough estimate^ not necessarily applicable to your application. But you get my point.

Using that logic, it's better for me to buy a $50k vehicle and pay it off in 20 years (~$200/month w/ no interest) than to buy a $15k vehicle and pay it off in 4.5 years (~$275/month).

Rough estimate^ not necessarily applicable to your application. But you get my point.

Think about real world. You make $xx amount of dollars per year. No matter how you want to split it, monthly cost, weekly cost, hourly cost, you're still making the same amount of money. Yeah, you might have to put $30 into one and $50 into another each week. The fact still remains the same, you're saving money.

[~C~]

Nice Jake. You are doing your homework. I used a similar way to decide if I should buy a gas saver or not. Turns out it would cost more over the course of a few years to actually buy and use the gas saver. Lots of people dont even look at that, they just think I will be saving gas so I must be saving money.

[graystang01]

Originally Posted by ~C~ Nice Jake. You are doing your homework. I used a similar way to decide if I should buy a gas saver or not. Turns out it would cost more over the course of a few years to actually buy and use the gas saver. Lots of people dont even look at that, they just think I will be saving gas so I must be saving money.

+1
thats wut stopped me from gettin rid of the stang and gettin somethin easier on gas

im just gonna buy a bike over the winter and fix it up for next summer

[TheUNZippee!]

Originally Posted by AtlanticBlue99 you know i have the supervisors at work zip... but maybe in a different state we can wed?

So long as I'm the husband!

Originally Posted by 03SonicBoom Using that logic, it's better for me to buy a $50k vehicle and pay it off in 20 years (~$200/month w/ no interest) than to buy a $15k vehicle and pay it off in 4.5 years (~$275/month). Rough estimate^ not necessarily applicable to your application. But you get my point. Think about real world. You make amount of dollars per year. No matter how you want to split it, monthly cost, weekly cost, hourly cost, you're still making the same amount of money. Yeah, you might have to put $30 into one and $50 into another each week. The fact still remains the same, you're saving money.

My logic said nothing about the cost of the vehicle. My point in that statement was that sometimes it's easy to convince one's self, one way or the other, when working everything out on paper, of which vehicle you should purchase.

My point was that well that is all well and good, and obviously one should work out ALL the numbers involved when making a major purchase such as a vehicle, one should also keep in mind that if the numbers look good at the end of a 3 or 4 year term, at the end of the day if you lean towards the less fuel efficient vehicular conveyance, keep in mind the reality of dropping 50 bucks in to your fuel tank each time you fuel as opposed to say, 30.

You get my point.

lol

[03SonicBoom]

Originally Posted by ~C~ Nice Jake. You are doing your homework. I used a similar way to decide if I should buy a gas saver or not. Turns out it would cost more over the course of a few years to actually buy and use the gas saver. Lots of people dont even look at that, they just think I will be saving gas so I must be saving money.

There are some things that aren't as noticeable. Like, when I was looking for a gas saver I also factored in vacation time I would have to take due to snow during the winter (Mustang = the suxorz in snow) and mileage on my Mustang. Also figure in break even time and some other stuff. It can be as complicated as you want it to be.

But I agree, you should do at least some calculation before you buy. Look at the gas savings vs cost increase on the electric hybrids. The break even time on those is usually about 10 years.

[cigarmanva]

Originally Posted by AtlanticBlue99 Who would not sell the car? To me, I would never purchase a car without 100% cash. There is not point to pay interest on something that depreciates in value. Also, most Americans own the same vehicle for 5 years average before selling or trading it in. Now if you make a point to never resale, then you need to factor in lifetime maintenance costs, including warranty work and other work needed. But buying a used vehicle, warranties won't generally be greater than 60k miles if you are lucky. 60k miles = 4 years. It makes perfect sense to resale when the loan is up and move on to something newer and safer, especially if you have a family.

i've never gotten rid of a car with less the 100k on it. I don't change cars every few years, i can see why people do it, just not my thing.

[AtlanticBlue99]

You are pretty much setting a ceiling for your current standard of living if you do not draw in more income in the next 5yrs. So you need to ask yourself: are you going to have kids, start them in school, sports, or anything they are not currently enrolled in? Do you want to max out your budget with only 8-10% savings or do you want to have discretionary income to live a better lifestyle?

[TheUNZippee!]

Originally Posted by 03SonicBoom There are some things that aren't as noticeable. Like, when I was looking for a gas saver I also factored in vacation time I would have to take due to snow during the winter (Mustang = the suxorz in snow) and mileage on my Mustang. Also figure in break even time and some other stuff. It can be as complicated as you want it to be. But I agree, you should do at least some calculation before you buy. Look at the gas savings vs cost increase on the electric hybrids. The break even time on those is usually about 10 years.

Yup very true. Quite often we go one way or the other, only to realize at the end of the term, there really would only be a small difference.

There are exceptions though, and obviously the farther your commute, the greater the potential for savings (or higher cost). I drive 500 miles a week, every week, so every mpg counts for me. Oddly enough, as we have this little debate/discussion, I am in need of a new winter beater, and am weighing the differences between purchasing another 20 year old beater that is less fuel efficient, and say leasing something like a new Kia Rio for 180 bucks a month but gets 50 mpg on the highway.

I knew I should have stayed in school and studied math! lol

[cigarmanva]

I am looking at a wrangler for my next car...though the not having to fill up every week while driving this yaris is nice

[gooberhead320]

my parents were looking at getting a new truck a little bit ago. they found out that with all of the 'rebates' and the cash back and all that stuff that a brand new 08 f150 with a 5.4l engine and pretty much fully loaded would be about 25,000 . then they looked at the lincoln trucks and they were only a couple thousand more bucks.

[JASonic]

Great posts. Thinking these things out and weighing the real options. Thanks for all the opinions on this. It just seems like every dealership I went to this weekend was pushing gas mileage down my throat and unfortunately, that is not the only cost of ownership when it comes to a vehicle. I did not want to fall into that trap. I realize their are many other factors such as cost of insurance, tags, maintenance etc. But for the most part, these were the two most influencial pieces of the cost puzzle for me personally.

It just makes me wonder how many people are driving around in $40,000 cars they bought for the "gas mileage" thinking they were getting the deal of a lifetime.

Even if you paid in cash for the vehicle, the opportunity costs for myself would need to be considered. If I paid 19k for a car or 10k for a car in cash. I define opportunity cost as the opportunity that I "lost" to make money off the $10,000 over 5 years. With the market shitty and investment returns low, I would assume without looking into it that my opportunity cost (loss) would be minimal. Now 10 years ago, it would have been a different story. Simply put, I dont think I could make enough money off the money I used to purchace it outright to justify not financing it at a good rate.

Say I get an average rate of interest. On a $10,000 loan we'll say the payment was $250.

Now we will say that (in imagination land) I have $10,000 in cash to buy it outright.

If I gave the dealership my $10,000, how much money would I really be losing? Its not $10,000! Its more than that because of the "opportunity" that $10,000 could gain me if I still controlled it.

So if we look at financing and I gave the bank $250 in the first month.... that would still leave $9,750 in my control to invest. The second month would be -$250 but add in any money my "cash" made me. Sorry if Im confusing you ... never was a good teacher.

Boiled down ... I pay $5,000 in interest over 5 years with financing BUT how much of it can I make back with good sound investments? Verses giving all my cash to the bank?


What do you guys think about that??????