Calculating True Cost of a car

General Discussion
41

Depreciation is a cost. Bing has no idea what he’s talking about. You either paid cash for that car or borrowed cash that you have to pay back. Every year that car loses value. You could have sold it for more cash a year ago. Thats a real loss of cash.

I’m a CPA. I worked for a bank. I know where money comes and goes. If you want to be wealthy you don’t spend it on depreciating assets. You invest it in appreciating assets. That what the rich do.

I always was cheap with cars. That’s why I’m now spending a month in Europe on vacation. With the money I saved I can afford nice trips in retirement. It’s your choice.

42

Given the choice of asking for advice I will choose Bing over JohnLump everytime.

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43

Depreciation is typically the single biggest cost of owning a car.

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44

Suit yourself. He’s completely wrong on depreciation. It’s a cost. A real cost. It’s just a cash cost spread over time. If you don’t understand that you know nothing about accounting. That’s taught in ACC 101.

45

Oh boy. Yeah I’ve had a few accounting course. I bought a new car for $10,000. Kept it for 15 years and sold it for $200. Didn’t matter that in year 3 it was worth $2000 because I didn’t sell it until year 15. Explain how depreciation was an out of pocket expense in year 5 or 10? It’s a paper entry with meaningless cash impact. So bought a house for $150,000 and now worth $500,000 but I have no more cash until I sell. And yes a house is a depreciating asset even though market value increased. Apples and oranges. I’ve known guys that had to take their CPA exam three times before passing.

No argument if you walk everywhere and don’t spend money on a car or trips or anything else and save the money. You’ll have more money. But then at some point you ask what is the purpose of money? Count it, look at it, or do things enjoyable with it?

Depreciation from year 1 to year 3, $8000. Depreciation from year 3 to year 15, $2000. Average $700 a year. Who cares? What difference does it make?

46

Most folks would rather buy a car that loses, say, 50% of it value than 80%, don’t you think?

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47

Makes no difference what it loses if you don’t sell.

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48

It’s not real until it’s realized. He’s saying it doesn’t matter if one has a more linear slope and the other has a hockey stick. Kept long enough, they intersect. :smile:

49

Here are some factors that will skew all your calculations for cost of ownership… In 1985, my wife bought a new Toyota Corolla LE for $7,100. We kept that car for over 40-years and donated it to Eggleston Services (the Disability Employment Services Company).

Here is the posting for that donation…

https://community.cartalk.com/t/eleanor-has-gone-to-a-new-home/198494/1

Now, here is where this car, and our 2019 Toyota Corolla, and 2020 Honda Fit, skew your calculations…

We bought these cars from two dealerships that give Lifetime Oil Changes and Lifetime State Inspections (and other perks too…).

The '85 had over 50-oil changes over 230,000 miles, and 40-state inspections during our ownership. If you figure the oil changes 40-years ago cost about $30 and today’s oil changes cost about $80, then the average cost works out to about $50 each times the 50 (or so…) free oil changes that that saved us about $2,500.

The '85 had about 40-state inspections and back then they cost about $10 and they cost $20 today for an average price ot $15 times 40 free state inspections saved us an additional $600, for a grand total of $3,100 ( and that does not even count the all the Free Coffee and donuts, they often served…

If you glanced at the included link, you would have noticed that the car sold at auction for $4,500 and if it had been a private sale or at a Vintage Car Auction, it might have gotten $6,000 or more…

So, the moral is: Shop Smart, get lots of Free Perks from the dealer, and take care of the car.

Granted, the cost of gas, tires, insurance, etc… are not included in these calculations, but the final sale price, $4,500, and the Dealer’s Free Perks, $3,100, actually add up to more than what the car cost new…

PS: the wife named the car " Eleanor…"

50

Inquiring minds want to know. Was she naked in the car, or named the car?

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51

That is bad news for people who buy $50,000 SUVs or $60,000 minivans. Doesn’t matter if they sell the vehicle after 5 years or 10, the money is gone.

The most I have paid for a vehicle (used truck) was $6,000, sold it 9 years later for $2,500.

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52

Right…

And naked wasn’t redacted but test was…

Oh, I see test was finally removed from the bad word AI police… :grin:

Just picking LoudThunder, we know you fat fingered the K… lol

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53

A few courses makes you an expert? Ever had a job as an accountant? Or taught accounting at a university? I have. 40 years as a CPA. 10 at the largest accounting firm in the country. 20 as Director of SEC Reporting for a multi billion dollar publicly traded company. 20 years part time teaching accounting at a large private university.

Depreciation is a cost. And it’s the highest in the first year of a car. So I recommend buying a one year old car and save 20% and invest it.

Most people finance a car. If you buy a one year old car for 20% less that’s a real out of pocket savings every month because your car payment is 20% less.

If you don’t understand that it’s because you are simply not telling the truth.

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54

Depreciation reflects what you paid for it when you bought it. A car depreciates very fast in its first year. So buy it after the first year and save 20% every time. You really don’t get it do you?

55

Smart man you are Nevada.

56

I am suspicious of a 1 year old vehicle being for sale as to why it is for sale. Just because we buy new vehicles does not mean we don’t get it.

You are so proud of yourself than why is your profile hidden.

57

I lost count of the number of kids I went to college with who dropped out of the Computer Science program and went into accounting because they couldn’t handle the advanced math. When I worked on my MS in applied mathematics I taught a couple undergraduate classes. 2 of the classes I taught was Calculus 1 (for engineers) and the other was Calculus 1 for (Non engineers - mostly nurses and accountants). Basically the same material, but one was dumbed down.

I could easily have bought real expensive cars then my Toyotas, Hondas and Nissans. But being cheap isn’t always being SMART. Buy a good decent car and keep up the maintenance and you’ll be able to run it for hundreds of thousands of miles.

As for buying used cars today. Have you actually checked the price of used cars from Toyota, Honda. They are NOT a lot less than a new car unless it has a ton of miles on it. The used car market for Toyota’s and Honda’s is very very hot.

58

Darn Autocorrect… Named… You get a Thumbs Up from me for that catch!

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59

As I mentioned to Bing, I gave you a Thumbs Up… Fat Fingered or Autocorrect, it’s all the same, “misstakes”, “miss stakes”, or mistakes, it all comes out the same…. :rofl:

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60

I have almost always, when buying a daily driver, bought a 1, 2 or 3yo vehicle, most of the time they still had part of the 3 year/30Kmileage warranty left on them and most of the time I saved a lot of money doing that, but my 10 month old Tacoma was not much cheaper than a brand new one, I just didn’t want the new 4th gen truck… I could probably sell it for what I paid for it now, very hot market for them…

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