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The Car Buying Battle;

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The Globe and Mail

Peter Cheney

15 Nov 2012

There are two ways to buy a car, neither of them good.

First is the rational method, which is based on sound, dispassionate analysis that leads to the purchase of a vehicle so deadly dull that you may contemplate suicide. Then there is the irrational method, which is based on passion and pursuit of a dream that leads to the purchase of a car so useless and financially ruinous that you may contemplate suicide.

I’ve done both. Here is my scientific guide to the unscientific process of car buying.

For most of us, a car is the most expensive thing we will ever sign up for, next to a home (or a divorce) yet few understand how the decision-making process actually works. I thought of this a while back when I sat down with a spreadsheet to calculate the cost of some of the cars I’ve owned.

My formula was simple. The capital cost of the car would consist of the purchase price plus taxes, interest and unscheduled repairs (oil changes and brake services aren’t part of capital cost, but breakdowns are). From this total, I would deduct what I sold the car for at the end. Then I would divide the car’s total cost by the months of ownership.

First, I ran the numbers on our Honda Civic, which my wife and I bought new in 1998 and drove for 14 years. The Civic’s cost was $15,338 (purchase price $12,800, plus loan interest and minor repairs). There was no resale value – the Civic was hauled away to a scrapyard, its body consumed by rust. We had driven the Civic for 168 months. Our net cost: $91.30 a month.

Next, I analyzed our 2002 Honda Odyssey van, which we were forced to sell in 2004 when our house renovation went over budget. Including taxes and interest, the Odyssey cost us $44,200, and we sold it 32 months later for $25,600. (I knew that we’d take a depreciation hit, but our renovation overruns had left us desperate). The Odyssey had cost us $581.25 per month – almost six and a half times as much as the Civic.

It felt crippling, but this was still a bargain compared to some of our friends’ car deals. One couple we knew had leased a new Yukon XL with payments that ran to nearly $1,000 a month. This figure didn’t include their down payment (approximately $25,000) or the buyout at the end. I estimated their cost per month at about $2,000.

A friend who spent time as a car salesman once explained to me that there are two kinds of buyers. One focuses on cost, the other falls in love with a car. Dealing with this second type of buyer involves the same psychology as a drug deal – the dealer has the upper hand.

I’d witnessed this when one of my newsroom companions became obsessed with a customized BMW. It was a beautiful car, but the relationship would prove only slight less ruinous than the one between Michael Douglas and Glenn Close in Fatal Attraction.

My friend (single and childless), bought an M-Series BMW years ago for a figure that would equate to $65,000 or so in today’s dollars, then spent another $20,000 on modifications that included alloy wheels, a race-tuned engine, trick suspension and a low-slung front spoiler that would prove to be a really bad idea. The grand total was more than $85,000, not including interest (of which there would be plenty.) At the time, the cost of my friend’s custom BMW was almost enough to buy a Toronto house.

The honeymoon was short-lived. My friend broke the BMW’s costly front spoiler when he drove into a curb outside a liquor store, incurring a replacement bill of several thousand dollars. (This would happen two more times.) One of the custom wheels had to be replaced after he hit a rock on Highway 401. Then the fuel injection system failed. Since it had been modified, BMW wouldn’t cover it under warranty.

While others bought homes and took sweet vacations, my BMW-buff buddy lived in a skanky bachelor apartment that repelled most of the women he attracted with his hot car. Watching him make his car payments was like witnessing medieval torture, and I wondered how long it would be before he cracked. (About 2-1/2 years, as it turned out.) When he put the BMW on the market, my friend got a punishing lesson on the economics of modified luxury cars – the sale yielded less than a third of what he’d put into his once-prized ride. I estimated his cost per month: just more than $3,000 in today’s money.

When it comes to buying a car, reason only goes so far. As a car journalist, I get more than my share of questions about car purchase decisions. A typical conversation goes something like this:

Caller: “Peter, my wife and I need a new car.”

Me: “How many kids do you have?”

Caller: “Four.”

Me: “What kind of things do you have to carry?”

Caller: “Well, two of the kids take horse riding, so there are some saddles. The others are in hockey. So goalie pads, skates, stuff like that. And we carry the outboard motor back and forth from the cottage.”

Me: “Sounds like you need a minivan. Or maybe that new Prius V. It’s huge inside, and the fuel efficiency is great.”

Caller: (falls silent)

Me: “You there?”

Caller: “….uh, yeah. What do you think of the Porsche 911?”

Me: “What about the four kids, the saddles, the hockey bags and the outboard motor?”

Caller: “We could rent a minivan on weekends, couldn’t we?”

And so it goes. Car lust has called countless to the rocks of financial ruin. But then there’s the other side of the coin, where buyers forgo passion and buy after a cold-hearted calculation that inevitably leads to a Hyundai Elantra, Toyota Yaris, or some other stripped-out econobox that makes them feel like they’re trapped in a wheeled Kafka novel.

For the past coupe of decades or so, I followed that model myself. I ran the numbers, gritted my teeth, and bought practical, joyless cars. (Two kids and a money-pit Toronto house will do that to you.)

But this year, I broke down and bought a new Lotus, a car that defies any logical analysis. The Lotus can’t carry a hockey bag. It doesn’t have a cup holder. And you could buy four or five Toyota Corollas for the same amount of money.

But on a twisting road, the Lotus is four-wheeled poetry. And on a summer night, I like to open the garage door, set up a lawn chair, and stare at my beautiful red car. In those moments, it all seems worth it. Strange? Yes. But so is car life by the numbers.

................

Source.

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Best car I had from that perspective was a 1970 Renault 12. I bought it for $50, drove it 12,000 miles in a year and then sold it for $50. I loved that car, in a weird way.Cost per month: $0Second best was my Peugeot 404 sedan. I bought it for $250, put $1000 into it (suspension, door rubbers, Injection engine minor rebuild) and we drove it 5 years and 130,000 km. Scrapped it at the end but I still have the engine and lots of other bits from it. Even at a total loss, the average cost per year was $250, $21 a month.Another good one was the 1984 Renault 5. Bought for $2300 in 1990, with only 25K km on it, I drove it to 151,000 km and then sold it for $800 in 1995. Cost $300 a year, $25 a month.Those were the days. Buying new cars is silly in a financial sense.

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As a general comment, car ownership sucks the life out of you. They hoover up resources and leave you battered and befuddled. The smart car, however, at least gives me a thrill in return for the heartbreak. Kind of like the relationship one might have with a mistress, I imagine."Your mileage may vary." LOL!Bil :sun:

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My best American car was a 1964 Rambler Classic 770. Repairs were nil and the selling price (as I recall) was about ½ of what I paid for it. It was long ago and the memory is a little foggy on actual buying and selling prices but the ratio is about right.

For my best foreign car, it was a tie between my 1979 Honda Accord which I bought new, traded it for a Buick La Sabre, got REAL disappointed in the Buick, went in search and found the old Honda and bought it back. Reliable as an anvil. Finally sold for approximately ¼ of the original buying cost. The other car is a Honda Civic which I bought in late 1988 for a total of $14,000 (taxes in) and still have it 23 years and 492,900 kms later. Actual cost of ownership is only the purchase price so far, since it has needed no repairs other than one exhaust system and 4 batteries. Include the batteries and exhaust and the cost has been about $21 per year for repairs over 23 years.

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My best car and my biggest regret selling was my 2006 smart fortwo, even if it was due for some maintenance outside of regular services if was an amazing vehicle :)Worst car was my 1990 Hyundai Sonata....enough saidI enjoy driving my 2008 Pontiac G5, has an amazing extended warranty for worry free driving but as for that "connection" not so much, it's just an appliance to get me home to work and the outings in-between.

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I'm sure I'd not want to be driving on shock absorbers that have half a million km on them.....or original suspension bushings....

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My most economical car was one I owned while a student in London. It was a Morris mini-van. Economical to run, low road tax because the considered it a commercial vehicle (or something). I bought it for 120 pounds and that included a full camping kit (tent, cooking utensils, etc etc). I sold the camping stuff because I could see no use for it. We travelled all over Britain and made several trips to Europe in that little van. When I left after 12 months, I sold it for 100 pounds. I had one repair - Rear cone spring strut - ten and sixpence. Forget what I got for camping gear, but that car cost me very little!I have had others at the other end of the spectrum!

Edited by Graham

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Our best car is our '93 Jeep Cherokee Sport. Bought it new, dragged a Boler up to MacMillan Pass on the NWT border a month later. We'd have gone farther than the 15 k into the Territories than we did if one of us hadn't had the good sense to say "We're NOT fording that creek." (there were Unimog tracks in it.) The North Canol was beaut!It'll still climb angle-of-repose slopes, and you can still carry on a conversation at normal volume at highway speeds. I think it returned about 26 mpg, probably not anymore.It'd do an indicated 180-185 kmh. Pretty good for something with the aerodynamics of a brick. At 190 horse it'd blow the doors off anything in its class.At 366,000 k the transfer case packed up and the reman seems to be missing the speedo/motion sensor drive. We think that conservatively its got a half a million k on it.It uses oil now, so its retired to dump runs and to town runs when its too cold to use the Smart car.We'll probably get one more car before we completely retire, and it'll probably be a Grand Cherokee, probably not new.Our sensible Civic is just plain boring, and I've always got the cabover for anything I can't fit in a Jeep.CheersCarl

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