Thursday, June 14, 2007

Economics of Used Cars

So, I did a post about politics so, I thought I could also to a post of money and economics.

By far the best thing I ever bought was our 1994 Saturn SL2. We bought the car about 4 years ago for $2,900. It has only 61K miles on it and included just about everything we needed or wanted: AC, Power windows and locks and cruse control, and tape deck, automatic transmission. According the the sticker price the car new cost $15,360. So the original owners put had the car for about 8 years and 61K miles which translates into $1,557.50 a year or 20.4 cents a mile. Now, that is just for the car not counting tax, insurance, repairs, oil, or gas. The car now has 135K miles on it. I have spent about 750 for tires, breaks, and other small repairs for a total cost of $3,650 which translates into $912.50 a year or just under 5 cents a mile. Another advantage is having a low value car is that you don't have to pay to have to car itself insured, just insurance to drive the car. (By the time you pay a $1000 deductible and the extra premiums, it's not really worth insuring.) Another important thing to remember is driving low priced used car is having it paid for in full, no car payments! A used car does have more risk of needed repairs but not 12 thousands dollars worth. According to reviews on the web many 94 Saturn Owners have their car last over 200k miles. At this rate with assuming another $750 in repair to get to 200k, the price per mile drops to just under 3.2 cents per mile or 488 a year. Ok that is a lot of assuming but oh well :-)

Incandescently, the advertised MPG was 23 city 32 highway. I'm still getting 25-29/31-39mpg. Which is very good even by 2007 standards, one would think that in 13 years the MPG would have increased to 30/60+ ok I guess that Honda's and Toyota's can get that.

Bottom line financial tip. When buying a car look for a older model car with lower millage if you look, you can find them. By and large price drops with the age of the car and reliability drops with millage. Use this paradox to your advantage. Just think, No car payments, much lower insurance, much lower license and tax charges. But it does help to have a friend that in knowledgeable about car repairs :-) Do your homework and check out the reliability.

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