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EJ
05-12-08, 06:00 PM
http://www.itulip.com/images/tinycar.jpgHere come the recession bargains: Used cars coming off lease

Buy used and use cash

by Eric Janszen

Back in November 2006 we wrote How much of your car should you finance? Zero percent (http://itulip.com/forums/showthread.php?p=35748#post35748). Back then, a month after we released our forecast of a recession due to start at the end of Q4 2007, the housing bubble fueled economy was only just starting to wind down, and the mainstream press was still in denial about the coming post housing bubble bust. Now that the recession has arrived our advice to buy a car with cash instead of financing is getting a whole lot easier to follow – if you also took our advice and saved cash, too.

Our zero finance article explains that cars depreciate in value, just like flat panel TVs and other consumer goods. The interest that you pay on a loan if you borrow to buy a car is rent on your labor – what economists call economic rent. The banks earn this rent for doing absolutely nothing but loan you money. In the case of a car, by the time to loan is paid off, the value of the car has depreciated significantly. The difference between to total cost of the loan and the remaining value of the car minus the value you have extracted from use of the car is the amount of rent the lender has earned off your labor as you paid off the loan. If, on the other hand, you borrowed money to purchase an asset such as land that appreciates over the term of the loan, the value of the land once the loan is paid off and you own it is more than the total cost of the principle and interest on the loan. That's a good use of credit.

Taking out loans to buy goods that depreciate is selling your future labor at a discount to lenders who are doing nothing for you but taking advantage of your willingness to rent your labor on the cheap.

Now that doesn’t sound very smart, does it? So don’t do it – or at least do it as little as possible. But, you say, you don't have enough money to buy a safe car and you need a car to get to work.

Good news! The US economy is in a recession. Auto makers are getting hammered. Leasing and finance companies are on the ropes. It's your lucky day.
Toyota predicts earnings slide for first time in nine years

With economic problems, a weakening dollar, and surging costs for raw materials, automakers around the world are facing hard times. And now even mighty Toyota -- once seemingly bulletproof -- is predicting financial struggles in the months to come. For the first time in nearly a decade the company has said that its North American volume, operating income, and net income will all decline over the next fiscal year. – May 8, 2008 (Motor Trend)
Recessions mean great deals on new cars and this one is no exception. With dealers offering big discounts, should you buy a new car? We recommend you buy the safest car you can afford to purchase with cash but the median US household has only $5,000 in net liquid savings. Assuming a household is willing to spend its entire liquid net savings on a car, there hasn’t been a new $5,000 car on the market since the 1970s. Buying a car with cash means buying a used car and letting some other dope take the depreciation hit.

New Cars: Always a bad idea, but even worse now

I was one of those dopes the last time I bought a car. I like to make this mistake at least once every ten years: A new car loses on average 20% of its value as you cheerfully drive it off the dealer’s lot, sniffing the sexy scent of new upholstery. In the first year that follows, value fades with the aroma as the car depreciates by another 10%. In total, your shiny new car loses about 30% of its resale value in the first year. What's that in dollars?

The average new car in the US costs $28,400. Losing 30% the first year translates into $8,530 in the first year depreciation as the resale value falls to $19,880. Ugly, but it gets worse. Let’s look at the other side of the transaction, what you still owe on that $19,880 in new car smell value that’s left.

The average new car buyer puts down just 5% or $1,420 for the average car and finances the remaining $26,980 at an average interest rate of 9% for a monthly payment of $560 on a typical five year (60 month) loan. For the average car that means that at the end of the first year you still owe $20,260 on a car now worth only $19,880. You have spent an amount that is not recoverable at resale – ever – over $7,000 on depreciation.

You’re too smart for that. Go used and use cash. Good advice anytime but in a recession if you have cash it goes a long way. The best in terms of value for your cash? Buy a car off lease.

Best used car deals: Cars coming off lease agreements

Want to buy a car that’s nearly as good as new, usually with a full warranty, but with that ugly depreciation already paid by off by someone else? A recession is a bull market in cheap, high quality used cars coming off lease agreements.
Debt collection is big business

And when the economy is down, it's really big.

The industry is growing so fast, Northstar has installed several more rows of calling cubicles to handle the business. They're empty now, but by summer's end, Northstar executives expect them to be filled with new agents. Northstar's chairman, Joel Castle, says business is going to get even better for him, (worse for consumers) this summer when the bottom falls out of the auto leasing market. – April 30, 2008 (CBS News)
Off lease cars are costing dealers and manufacturers money. What happened last time the leasing market crashed during the 2001 recession? Desperate automakers throw the leasing companies under the bus with big discounts, and this time around free gas gimmicks, that wreck havoc on leasing company calculations of residual value. Residual value is an estimate of what the car was going to be worth at the end of a lease. If residual value was calculated during flush economic times when the cars were leased, during economic busts these estimates turn out to be grossly optimistic. According to a safecarguide.com from a report in 2001, here's what happened during the previous bust:
Millions of car leases financed by banks are expiring just as domestic new car prices are falling. In 1998 only 38% of lease customers turned in their vehicles at the end of the lease. Due to aggressive pricing and rebates offered by domestic automakers that percentage has risen to over 56% this year and banks and finance companies are panicking. The result is a gap between what banks expected the vehicles to be worth and what they're actually fetching at wholesale dealer to dealer auctions. In 2000 that gap cost banks about $2,000 per vehicle. This year (2001) losses are expected to rise to between $2,500 & $3,000 per vehicle.
How about this time around?

http://www.itulip.com/images/carlot.jpgUsed-car prices coming down quickly
Used-car prices are hitting the skids in Canada and the U.S., falling in some cases at the fastest pace on record as the North American economy continues to falter, Scotiabank says in its Global Auto Report.

In the first quarter alone, Scotiabank's used-car price index fell seven per cent below a year ago, led by an 11-per-cent plunge in one-year-old models, the weakest performance on record for data going back to 1978.

This is hurting automakers and finance companies, as many of the expired-lease vehicles are being returned to the manufacturer, creating losses of more than $8,000 for each vehicle repossessed, according to one analysis the report quotes.

That's good news for consumers but a blown gasket for manufacturers, as the decline is expected to extend through 2008 and into 2009, and as a flood of vehicles coming off lease pressures auto makers. May 01, 2008 (Canwest News Service)
The sweet spot for leased cars are those with 30,000 to 50,000 miles on them. If taken care of, the average modern car will go for 150,000 miles before it starts to develop serious and expensive maintenance problems; if you drive 12,000 miles a year as the average driver does, that used car off lease will last you more than ten years. So what if it doesn’t smell like new?

Another advantage over the 2001 bust: Internet based car shopping was still in its infancy. Not anymore. Hit the Internet and you’ll find many well constructed competing sites with bargains galore.

Buy a bargain: Buy American

American cars earned a reputation for poor quality during the terrible 1970s and 1980s and have never been able to shake it off, even though statistically many are as good or better than Japanese or German makes with a better quality reputation. The most recent J.D. Power & assoc. study from 2003, of vehicles that had been on the road for 3 years, lists 37 manufacturers in order of the least problems to the most. Here’s the top ten listed best make first.

Lexus
Mercury
Buick
Cadillac
Toyota
Acura
Honda
Jaguar
BMW
InfinityLet’s assume you’re better off than the median household. After all, you are smart enough to be reading iTulip.com. You can afford to buy a car with $10,000 cash. We visited cars.com and searched for used cars for sale under $10,000 with less than 50,000 miles within 30 miles of downtown Boston. The search returned 211 results with some cars under $10,000 with as few as 29,000 miles such as $9,888 for a 2001 Mercury Sable LS Premium with 28,738 miles on it. That’s only a few grand more than the entire loss you’d take buying the average new car and, as an added bonus, you own it free and clear: no payments, no huge excise tax bill, title in the file drawer.

Still, if you haven't been saving and are in the $5,000 category, there are plenty of used cars for you among the list we found, like a 1986 Mercury Grand Marquis for $4,995 with 22,000 miles driven by an geezer back and forth to the local pub. Actually, we have no idea about the geezer but we do know that if you drive 12,000 miles a year and the Grand Marquis gets 15 MPG while the Mercury Sable gets 22 MPG, at $4 per gallon it’ll take you five years to spend the extra $5,000 that the Sable costs to make up the difference in higher gasoline costs for driving the geezermobile. If you’re not environmentally minded, there are serious bargains among the gas hogs.

http://www.itulip.com/images/SUV.jpg Four dollar gas and the biggest bargain of them all: SUVs

As cheap as used cars are getting, especially big cars like the Marquis, car dealers are practically giving away gas guzzling trucks and SUVs as commuters pretending to be construction workers on the weekends rush to trade them in for smaller vehicles.

Used SUV sales in March were down 14 percent nationally compared to last year according to data compiled by CNW Marketing Research. That follows drops in used SUV sales of more than 8 percent for the first two months of the year, compared to the same months in 2007.

That trend has sent used SUV prices plummeting, giving owners a shock when they try to trade theirs in and find out how little they can get.

“Owners find out they don’t have the trade equity they thought they had and are forced to keep their vehicles or come up with a large sum of cash to make up the difference,” said Chris Denove, a vice president of the auto information firm J.D. Power and Associates. – May 12, 2008 (New Press)
How cheap are used SUVs? You can buy a 1997 Mercury Mountaineer for $6,585 with 61,426 miles on it or a 2003 Mercury Mountaineer with 61,402 miles for $9,988. How’s that for cheap?

No hurry – auto sales plummet during recessions and this one has just begun

If you don't have to buy a car yet, it will pay to wait. Auto sales are historically correlated to unemployment for the obvious reason that the unemployed don't buy cars.


http://www.itulip.com/images/autosalesvsunemployment.gif


We are early in this recession and the good deals are only beginning. October 2007 our analysis told us this recession was going to be worse than the last major recession. Sir Warren Buffett says so now, too.
Buffett says recession may be worse than feared (http://biz.yahoo.com/rb/080428/buffett_recession.html)
April 28, 2008 (Reuters)

NEW YORK (Reuters) - Warren Buffett, the world's richest person, said on Monday the U.S. economy is in a recession that will be more severe than most people expect. "This is not a field of specialty for me, but my general feeling is that the recession will be longer and deeper than most people think," Buffett said. "This will not be short and shallow.
Summary

For low price and value used is better than new, used cars coming off lease are better than other used cars, American makes are a better deal than foreign makes, and SUVs are, if you don’t care about global warming, the best cash deal of all.

You can take that to the bank. But don’t – pay cash instead.

iTulip Select (http://www.itulip.com/forums/showthread.php?t=1032): The Investment Thesis for the Next Cycle™
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don
05-12-08, 07:18 PM
My granddaughter is buying her first car. Thanks, Guys!

Nicolasd
05-12-08, 09:35 PM
Used cars purchased in the US by canadian residents (american, european or japanese make) are gaining popularity here after 5 years of currency appreciation and no price adjustments (until very recently) on new car prices by the manufacturers.

Typically , a one year old luxury car , less than 10Kmiles , can be purchased in the US at 2/3 of the full canadian retail price ! :).The plan is to run the car for a 18-24 month period and resell it locally at roughly the same purchased price and do it again.:p Saving all this ugly depreciation.

Unfortunately , canadian manufacturers are raising non tarrif barriers to limit the exodus of their consumers by making it difficult to obtain certificate letters of compliance to the local regulations or threatening of not honoring the warranties.Another limitation is that foreign purchases can not benefit from favorable financing terms so you gotta have the dough (which is not a bad habit either)

ChessMan
05-12-08, 11:28 PM
What about leasing? I like changing cars every three years. I think leasing might be the only sensible option for those like me because you pay tax only on the lease payments, not the whole value of the car.

hoodoo
05-12-08, 11:46 PM
Hi all,

I've been shopping for a new car to pay for my last all cash car purchase (94 Nissan Sentra) and the advice here is great.

However, in the land of the monthly payment consumer, finding a private party car sale at a decent price in nearly impossible here in Southern California. Here's what I think is happening - J6P drives his new car off the lot and loves it for the first couple of lovely HELOC leveraged years. Then things get bumpy and the car is the first thing to sell off for a decent spot of cash. Unfortunately, the amount of cash paid off toward the note the car is just a few thousand off the price paid when it was new. J6P says - you can have it for what I owe the bank. To which I say no thanks, why wouldn't I just go and buy a new one?

The used car market is not as robust as it has been in the past - at least for private party sales. Carmax is looking like a decent alternative.

Hoo

brucec42
05-13-08, 01:05 AM
First of all, I agree a used CAR is a relative bargain.

But when EJ makes his financial decisions and forecasts, I bet he adjusts his return expectations for RISK. He should do the same with his suggestions on vehicles.

Simply put, a used car in this day and age has more risk than a new one. You can mitigate that with inspections, carfax reports, and buying a used vehicle still under warranty, but there are tons of horror stories about buying used vehicles. Sometimes an older out of warranty "reliable" brand used vehicle bought from a reputable seller still becomes a problem. Sometimes the previous owner did something to void the warranty on the item that breaks. Sometimes you cannot get the clear title you expected, which can be a nightmare. Some sellers will sell a vehicle, accept payment, not pay the bank, and you are stuck with a title-less vehicle. Sometimes your seller doesn't even really own the vehicle! You can forge a lot of documents in the age of cheap PC desktop publishing. Your vehicle may also have been garaged in New Orleans in 2004 and they've done a good job of masking that mildew smell! Sometimes you suffer a massive catastrophic failure of a major component that these cash-strapped buyers simply cannot afford.

Which is better for a person of very modest means, a manageable $150-$250/mo payment on a new or nearly new modest car or an engine/tranny meltdown on a $5000 older car that costs $8,000 to repair? I actually owned one that I got rid of it in time, but other owners of the same model were reporting failures where coolant entered the engine/transmission causing them to junk the $7,000+ used cars when just 4 model years old. Not many broke guys can recover from this sort of thing.

The very people who whose lives will be absolutely destroyed by such a repair bill (you can finance a car at a reasonable fixed rate...try that with an auto repair) are the ones who can only afford to pay $5,000 cash for one.

My advice would be if money is tight, buy a nearly new (the sweet spot in depreciation vs risk is said to be 2 to 2.5 years old) vehicle that meets your minimum needs and finance a part of it if needed.

Example: Take that $5,000 cash and borrow $5,000 on a 2 year old Hyundai Sonata GL with a 10 yr/100K powertrain warranty and 5/60 bumper to bumper and you'll have a safer, more reliable, spacious, efficient, and possibly even CHEAPER ride than paying $5000 cash on a gas hog out of favor or a tiny weak domestic brand econobox you paid cash for. (It should cost about $10,000 from a dealer if you bargain well ) Your modest $110/mo payment for 4 years will allow you to drive mostly worry free for the next 8 years, 4 of which will be sans payment or major repair costs.

Deliver pizzas one weekend a month if you can't swing that. Or simply drive less. The way to save on car costs isn't only buying $5,000 beaters. It's driving less and choosing a vehicle that depreciates slowly and lasts longer.

Sometimes we forget how broke many people are. They are very unlikely to be able to amass $5,000, but even if they could, they are then unable to afford the cost of a significant repair bill.

Maybe if one has a second family vehicle, lives close to work, is self-employed and works from home, this is a good plan. But for those who rely on vehicles to make a living, it's assuming a level of risk which should be compensated by a higher degree of savings than knocking out a meager car payment provides.

For the record, I haven't had a car payment in years and own two recent model vehicles.

zoog
05-13-08, 02:02 AM
First of all, I agree a used CAR is a relative bargain.

But when EJ makes his financial decisions and forecasts, I bet he adjusts his return expectations for RISK. He should do the same with his suggestions on vehicles.

Simply put, a used car in this day and age has more risk than a new one. You can mitigate that with inspections, carfax reports, and buying a used vehicle still under warranty, but there are tons of horror stories about buying used vehicles. Sometimes an older out of warranty "reliable" brand used vehicle bought from a reputable seller still becomes a problem. Sometimes the previous owner did something to void the warranty on the item that breaks. Sometimes you cannot get the clear title you expected, which can be a nightmare. Some sellers will sell a vehicle, accept payment, not pay the bank, and you are stuck with a title-less vehicle. Sometimes your seller doesn't even really own the vehicle! You can forge a lot of documents in the age of cheap PC desktop publishing. Your vehicle may also have been garaged in New Orleans in 2004 and they've done a good job of masking that mildew smell! Sometimes you suffer a massive catastrophic failure of a major component that these cash-strapped buyers simply cannot afford.

Which is better for a person of very modest means, a manageable $150-$250/mo payment on a new or nearly new modest car or an engine/tranny meltdown on a $5000 older car that costs $8,000 to repair? I actually owned one that I got rid of it in time, but other owners of the same model were reporting failures where coolant entered the engine/transmission causing them to junk the $7,000+ used cars when just 4 model years old. Not many broke guys can recover from this sort of thing.

The very people who whose lives will be absolutely destroyed by such a repair bill (you can finance a car at a reasonable fixed rate...try that with an auto repair) are the ones who can only afford to pay $5,000 cash for one.

My advice would be if money is tight, buy a nearly new (the sweet spot in depreciation vs risk is said to be 2 to 2.5 years old) vehicle that meets your minimum needs and finance a part of it if needed.

Example: Take that $5,000 cash and borrow $5,000 on a 2 year old Hyundai Sonata GL with a 10 yr/100K powertrain warranty and 5/60 bumper to bumper and you'll have a safer, more reliable, spacious, efficient, and possibly even CHEAPER ride than paying $5000 cash on a gas hog out of favor or a tiny weak domestic brand econobox you paid cash for. (It should cost about $10,000 from a dealer if you bargain well ) Your modest $110/mo payment for 4 years will allow you to drive mostly worry free for the next 8 years, 4 of which will be sans payment or major repair costs.

Deliver pizzas one weekend a month if you can't swing that. Or simply drive less. The way to save on car costs isn't only buying $5,000 beaters. It's driving less and choosing a vehicle that depreciates slowly and lasts longer.

Sometimes we forget how broke many people are. They are very unlikely to be able to amass $5,000, but even if they could, they are then unable to afford the cost of a significant repair bill.

Maybe if one has a second family vehicle, lives close to work, is self-employed and works from home, this is a good plan. But for those who rely on vehicles to make a living, it's assuming a level of risk which should be compensated by a higher degree of savings than knocking out a meager car payment provides.

For the record, I haven't had a car payment in years and own two recent model vehicles.

I have two friends with a history of buying cars that cost less than $5000, sometimes considerably less. One of them swears that his repair costs are still less than payments on a newer car. I'll have to take his word for it. The other friend has spent far more on major repairs, tune-ups, and every little thing the mechanic has recommended than he did buying the cars. He also has a history of relatively short-term turnover with these vehicles, which just makes the financial picture even worse. There is definitely a breakpoint between car payments and likely repair payments; the exact point varies from vehicle to vehicle.

A few years ago I needed to replace my ailing '89 Accord. It happens that I did in fact have $5000 saved up. My choice was to buy a then four-year-old '99 Civic, "Certified Used" from the dealer. The certification gave me a limited warranty, clear title, the implied assurance of a thorough mechanical inspection, and financing directly through Honda at a fixed rate of 4%. My $5000 covered a little under half the agreed-upon price, leaving me with a very manageable monthly payment in the $150 range and a low fixed rate.

I feel like this was a reasonable compromise for someone who does not have enough cash to entirely pay for a car that meets their safety and reliability standards. There are many ways to play this game. Just like everyone has a different risk / return tolerance with investments, everyone has a different risk / cost tolerance in choosing a vehicle. If I knew how to work on cars myself, I'd be more inclined to buy an older car. If I had not had years of prior experience driving Hondas, with generally minimal repairs and maintenance, I might have chosen a newer, more expensive car. This is not a plug for Honda in particular, I am just saying I chose a car I was comfortable with due to past experience, at a price I was comfortable with. Sure I would have liked to have bought a newer car, but I couldn't responsibly afford it. Sure I could have bought an older, cheaper car, but I'd be afraid to drive it.

As an aside, personally I do not care for the "new car smell". Toxic, that's what it smells like. Happy to let someone else drive it while all that outgassing is going on.:eek:

Wikipedia (http://en.wikipedia.org/wiki/New_car_smell)


A 1995 analysis<sup id="cite_ref-0" class="reference"></sup> of the air from a new Lincoln Continental found over 50 volatile organic compounds, which were identified as coming from sources such as cleaning and lubricating compounds, paint, carpeting, leather and vinyl treatments, latex glue, and gasoline and exhaust fumes. An analysis two months after the initial one found a significant reduction in the chemicals. The researchers observed that the potential toxicity of many of these compounds could pose a danger to human health.

Verrocchio
05-13-08, 02:21 AM
Good on you, Zoog! You bought a reliable automobile at a price that you could afford. My game is to enjoy what I have until I can pay cash for a three- to five-year old beauty. BTW, bruce42, the sweet spot in used car purchasing has moved to slightly older cars now, due to higher quality, longer expected reliability, etc.

Not many people can slice through the fog of MSM easytalk about the economy and also give eminently practical advice on buying a used car. Our EJ can do both!

ddk
05-13-08, 07:57 AM
There is also a scandalous option many Americans forget is available: just don't buy another car.

My wife and I are down to one car. I drive my sneakers to work, and only go shopping on weekends (when I can borrow her car). When we move farther from town, I am going to buy a nice bicycle and a nice raincoat. If we move much farther from town, for an extra $1200 I can get an electric motor for the bike with a 30-40 mile range that costs 3 cents to fill up.

On those rare occasions a second car is needed, friends are always happy to lend us a car in exchange for a favor (nice dinner, fresh loaf of bread, tray of brownies). And if that fails, there is a car rental place nearby, a bus route, a taxi stand, a train station, and the Zipcar program.

The $5000 I did not spend on an "inexpensive" second car will easily pay for a very nice bike with safety lights, and luggage racks (and raingear for me), 10 years of bike maintenance, AND 10 years of car rentals AND 10 years of the occasional public transportation. Over the same period, how much more would the buyer of a $5000 car pay for gas and maintenance? Easily $10,000, for just a local commute...

More than that -- I can't stick to an exercise program if you glue me to it. But I have to get to work every day -- and boy howdy is it nice to walk in the door whistling after exercise while everybody else is spitting nails about crazy drivers and endless traffic.

akrowne
05-13-08, 10:18 AM
Remember: buy a car that is cheap enough that you don't need to finance it. The hidden advantage of doing this is that there's no bank lien on your car, which means you don't need to buy collision insurance (or much of it). In other words, you can leave out the portion of insurance taken out against yourself, as opposed to against other people, or acts nature.

Ann
05-13-08, 10:43 AM
First of all, I agree a used CAR is a relative bargain.

But when EJ makes his financial decisions and forecasts, I bet he adjusts his return expectations for RISK. He should do the same with his suggestions on vehicles.

Simply put, a used car in this day and age has more risk than a new one. You can mitigate that with inspections, carfax reports, and buying a used vehicle still under warranty, but there are tons of horror stories about buying used vehicles. Sometimes an older out of warranty "reliable" brand used vehicle bought from a reputable seller still becomes a problem. Sometimes the previous owner did something to void the warranty on the item that breaks. Sometimes you cannot get the clear title you expected, which can be a nightmare. Some sellers will sell a vehicle, accept payment, not pay the bank, and you are stuck with a title-less vehicle. Sometimes your seller doesn't even really own the vehicle! You can forge a lot of documents in the age of cheap PC desktop publishing. Your vehicle may also have been garaged in New Orleans in 2004 and they've done a good job of masking that mildew smell! Sometimes you suffer a massive catastrophic failure of a major component that these cash-strapped buyers simply cannot afford.

Which is better for a person of very modest means, a manageable $150-$250/mo payment on a new or nearly new modest car or an engine/tranny meltdown on a $5000 older car that costs $8,000 to repair? I actually owned one that I got rid of it in time, but other owners of the same model were reporting failures where coolant entered the engine/transmission causing them to junk the $7,000+ used cars when just 4 model years old. Not many broke guys can recover from this sort of thing.

The very people who whose lives will be absolutely destroyed by such a repair bill (you can finance a car at a reasonable fixed rate...try that with an auto repair) are the ones who can only afford to pay $5,000 cash for one.

My advice would be if money is tight, buy a nearly new (the sweet spot in depreciation vs risk is said to be 2 to 2.5 years old) vehicle that meets your minimum needs and finance a part of it if needed.

Example: Take that $5,000 cash and borrow $5,000 on a 2 year old Hyundai Sonata GL with a 10 yr/100K powertrain warranty and 5/60 bumper to bumper and you'll have a safer, more reliable, spacious, efficient, and possibly even CHEAPER ride than paying $5000 cash on a gas hog out of favor or a tiny weak domestic brand econobox you paid cash for. (It should cost about $10,000 from a dealer if you bargain well ) Your modest $110/mo payment for 4 years will allow you to drive mostly worry free for the next 8 years, 4 of which will be sans payment or major repair costs.

Deliver pizzas one weekend a month if you can't swing that. Or simply drive less. The way to save on car costs isn't only buying $5,000 beaters. It's driving less and choosing a vehicle that depreciates slowly and lasts longer.

Sometimes we forget how broke many people are. They are very unlikely to be able to amass $5,000, but even if they could, they are then unable to afford the cost of a significant repair bill.

Maybe if one has a second family vehicle, lives close to work, is self-employed and works from home, this is a good plan. But for those who rely on vehicles to make a living, it's assuming a level of risk which should be compensated by a higher degree of savings than knocking out a meager car payment provides.

For the record, I haven't had a car payment in years and own two recent model vehicles.

You make excellent point, but I don't see how your opinion disagrees with the article. His recommendation of car off lease at 30K is in line with your statement: "the sweet spot in depreciation vs risk is said to be 2 to 2.5 years old" except you go into the risks of buying a used vs used car and EJ probably didn't want to go that far afield into the details. But we can!

Buying a used car is more of an art than buying a new car, for all those reasons you mention and more. I've been successful over the years buying from private sellers, not dealers. Here's my trick!

Buy used cars from people who live in high end neighborhoods and who display persnickety personality tendencies. From the dictionary: Requiring strict attention to detail; demanding: a persnickety job. You can tell because when you go to drive and look at the car you look at them, at their house, and their yard and everything is well taken care of. Guess what? So was the car. That's their nature. Best used car I ever bought was from a surgeon. He was immaculate and so was his car. You can get the same result from buying from dealers that warranty used cars but you pay a premium. I'm too cheap!

Two big thumbs up for the Hyundai Sonata. I've rented them and am a fan. GREAT car! Surprisingly fast and solid yet affordable. Love it.

Ann
05-13-08, 10:51 AM
There is also a scandalous option many Americans forget is available: just don't buy another car.

My wife and I are down to one car. I drive my sneakers to work, and only go shopping on weekends (when I can borrow her car). When we move farther from town, I am going to buy a nice bicycle and a nice raincoat. If we move much farther from town, for an extra $1200 I can get an electric motor for the bike with a 30-40 mile range that costs 3 cents to fill up.

On those rare occasions a second car is needed, friends are always happy to lend us a car in exchange for a favor (nice dinner, fresh loaf of bread, tray of brownies). And if that fails, there is a car rental place nearby, a bus route, a taxi stand, a train station, and the Zipcar program.

The $5000 I did not spend on an "inexpensive" second car will easily pay for a very nice bike with safety lights, and luggage racks (and raingear for me), 10 years of bike maintenance, AND 10 years of car rentals AND 10 years of the occasional public transportation. Over the same period, how much more would the buyer of a $5000 car pay for gas and maintenance? Easily $10,000, for just a local commute...

More than that -- I can't stick to an exercise program if you glue me to it. But I have to get to work every day -- and boy howdy is it nice to walk in the door whistling after exercise while everybody else is spitting nails about crazy drivers and endless traffic.

You are my hero. Wish I could get a job close enough to home to do that.

jimmygu3
05-13-08, 11:03 AM
There is also a scandalous option many Americans forget is available: just don't buy another car.

My wife and I are down to one car. I drive my sneakers to work, and only go shopping on weekends (when I can borrow her car). When we move farther from town, I am going to buy a nice bicycle and a nice raincoat. If we move much farther from town, for an extra $1200 I can get an electric motor for the bike with a 30-40 mile range that costs 3 cents to fill up.

On those rare occasions a second car is needed, friends are always happy to lend us a car in exchange for a favor (nice dinner, fresh loaf of bread, tray of brownies). And if that fails, there is a car rental place nearby, a bus route, a taxi stand, a train station, and the Zipcar program.

The $5000 I did not spend on an "inexpensive" second car will easily pay for a very nice bike with safety lights, and luggage racks (and raingear for me), 10 years of bike maintenance, AND 10 years of car rentals AND 10 years of the occasional public transportation. Over the same period, how much more would the buyer of a $5000 car pay for gas and maintenance? Easily $10,000, for just a local commute...

More than that -- I can't stick to an exercise program if you glue me to it. But I have to get to work every day -- and boy howdy is it nice to walk in the door whistling after exercise while everybody else is spitting nails about crazy drivers and endless traffic.

I ride a bicycle to work myself, but I have my '95 Toyota Avalon for rainy/cold days and special errands. The thing about paying "cash" for me is that anytime I have excess cash in my checking account, I pay down my HELOC. When I bought my wife's car recently at Carmax (better price than private sellers, surprisingly), I wrote a check from the HELOC for $18k, sold the old car for $5000, which went right back to the HELOC, so I financed about $13k. However, I had been hammering away at the balance to the tune of $500/month and I have upped that to $850/mo since the car purchase. The interest rate is currently at 4.5%, and that is tax deductible, so the effective rate is about 3%.

If I look at the entire $850 payment as going toward the car, it will be paid off in 16 months from the time of purchase. If I only count the marginal $350 voluntary increase in my payment, it will be more like 39 months. My total after-tax interest paid will be about $800. The car is under full factory warranty for another 3 years, so maintenance will not be an issue until the car is paid off.

Meanwhile, I could have been paying $250/mo on my HELOC, putting the additional amount into a savings account at 1% until I had enough to pay "cash" for the car, while the HELOC balance stayed high due to the decreased payment, but I would be worse off in the end. I know, 3 lashes with a wet iTulip noodle, but to me, this was the smarter financial move.

Also, edmunds.com has a free service called "True Cost To Own" (TCO), that incorporates financing, taxes, depreciation, fuel, maintenance and repairs. It can be very enlightening, especially for some of the American cars that look like bargains. TCO is much lower for a 1 or 2 year old car due to the first year depreciation. This car is costing us about $100/mo more than keeping our old clunker that we put 2 trannies in.

JayS
05-13-08, 11:40 AM
There is also a scandalous option many Americans forget is available: just don't buy another car...
Yes. Absolutely. I drive my paid-in-cash 1994 Nissan Sentra to work an average of 3 days per week per year. My estimated "monthly payment" (initial purchase + insurance + gas + maint / mnths ownership) is about $97/month at this point. And the beauty of beater cars is that you don't fix problems - you find ways to work around them.

Otherwise I bike the 6.1 miles (one-way). Here's a very thorough article comparing the costs of car & bike ownership:

"Auto Costs Versus Bike Costs (http://kenkifer.com/bikepages/advocacy/autocost.htm)" - Ken Kifer

There are a few external links to additional cost-per-mile studies that are also very interesting.

When I can't keep the Sentra rolling anymore, we're going to try transitioning to a single car household.

Jay

jimmygu3
05-13-08, 02:01 PM
Yes. Absolutely. I drive my paid-in-cash 1994 Nissan Sentra to work an average of 3 days per week per year. My estimated "monthly payment" (initial purchase + insurance + gas + maint / mnths ownership) is about $97/month at this point. And the beauty of beater cars is that you don't fix problems - you find ways to work around them.

Otherwise I bike the 6.1 miles (one-way). Here's a very thorough article comparing the costs of car & bike ownership:

"Auto Costs Versus Bike Costs (http://kenkifer.com/bikepages/advocacy/autocost.htm)" - Ken Kifer

There are a few external links to additional cost-per-mile studies that are also very interesting.

When I can't keep the Sentra rolling anymore, we're going to try transitioning to a single car household.

Jay

That's a good article. Gas prices have apparently tripled since he created the cost comparison chart at 6.8/mile. Probably closer to 20/mile these days.

mikedev10
05-13-08, 04:07 PM
i just bought 48 qts of synthetic, new sticky summer tires, and an extra set of brake pads. i get around 3 mpg when i take my car to the track, i do autocrosses and track days. looks like this hobby is going to make my most expensive summer yet!

ax
05-13-08, 04:49 PM
Following on some of the earlier advice and growing up with a father who took a sinister pleasure in haggling with/abusing the car salesman, I can concur that buying a used car is the way to go. I bought a used Lexus for my wife on the theory that it would hold up another 10-12 years in S. Florida. I got a 1.9% interest rate which was not being advertised at the time, and left paying approx. 60% of the new model on a car that had 20K miles on it. Remember that you have the power in these negotiations. You can always go to a competitor and let it be known that you are not attached to the make or model.

flintlock
05-13-08, 06:44 PM
I'm a big fan of buying 2-4 year old used cars. Most of the heavy depreciation is behind you, and they are still new enough that the owners didn't treat them like a junker. Most modern cars can go way over 100k with no major problems, so buying one at 50k miles really isn't like it used to be.

The more complex the vehicle, the newer I'd want it to be. Most vehicles today are very complex compared to say, 20 years ago. And they tend to be harder to work on, and require more expensive parts. Its really just a crapshoot. But if you shop wisely, it can be a good move. I'm handy with tools and can do all but the most major work on my vehicles. So I factor in how easy a certain model is to work on and get parts for. Some of the cheapest cars out there also are made to be almost disposable. They work great up until 100k miles or so, but then the repair costs become prohibitive. So the cheapest vehicle isn't always the best long term.

There's definitely a sweet spot to buying used cars, and its different for every type of vehicle. But generally speaking, I think its 2-4 years and about 20-60k miles. If you don't drive much, then even older vehicles are not a bad choice. The only used cars I wouldn't buy are the sub $5000 cars. There are exceptions of course, but generally speaking, those have seen their best years, and routine repairs expected to crop up at any time can easily exceed the cost of the vehicle. You also have to weigh in the cost of calling in late 4 times a month because your car won't start. :D

Charles Mackay
05-13-08, 07:48 PM
This will probably be iTulip's most popular thread this year! Cars... hey, we're more American that we know!

I think it's a very tough time to be shopping cars right now because of the technology that has already been implemented but is just not available in the U.S. yet. I was at the auto show and there was a VW Polo diesel that gets 60 mpg... not available in the states till 2009. And both Honda and Toyota promise a plug in hybrid in 2009 that should be far better than the existing hybrids.

BUT, if you are worrying about what will happen when TSHTF, then you should just get a small 4x4 SUV. A person who lived thru the Argentinian crisis says that you have to do U turns, run over sidewalks, and drive down embankments in order to avoid carjackings there. He even advises having spikes in the back of your small SUV in order to back up and ram the car behind you and take out their radiator when they are working as a team to carjack you. Do I expect it to get that bad here? Depends on how bad the dollar tanks.

metalman
05-13-08, 08:46 PM
This will probably be iTulip's most popular thread this year! Cars... hey, we're more American that we know!

I think it's a very tough time to be shopping cars right now because of the technology that has already been implemented but is just not available in the U.S. yet. I was at the auto show and there was a VW Polo diesel that gets 60 mpg... not available in the states till 2009. And both Honda and Toyota promise a plug in hybrid in 2009 that should be far better than the existing hybrids.

BUT, if you are worrying about what will happen when TSHTF, then you should just get a small 4x4 SUV. A person who lived thru the Argentinian crisis says that you have to do U turns, run over sidewalks, and drive down embankments in order to avoid carjackings there. He even advises having spikes in the back of your small SUV in order to back up and ram the car behind you and take out their radiator when they are working as a team to carjack you. Do I expect it to get that bad here? Depends on how bad the dollar tanks.

i'll join the mad max subthread of the fire economy endgame recession series car buying thread. :D

a recession that goes on and on with inflation, too... folks get desperate once they run out of family heirlooms to hawk and pissed off when they figure out that they've been had... the formerly law abiding turn not so law abiding.

early signs? look for graffiti... nothing says 'fuck you! i'm broke and bored and pissed off!' like spray painted public walls.

next signs? vandalism... broken windows, smashed cars, etc. nothing says 'fuck it!' like random acts of destruction.

next? reports of break-ins. this is more constructive. at least there's a point... they're trying to get some money to pay for food or drugs.

the carjackings come later. that's high stakes. someone is going to get hurt. for that, if that happens... get a humvee. why fuck around?

now that i've scared the crap out of you, try to imagine how long it takes to get there from here.

ten years? you've left by then. you're living far away and reading about it on some web site and shaking your head.

ddk
05-13-08, 09:12 PM
You are my hero. Wish I could get a job close enough to home to do that.

We moved. :D

GRG55
05-14-08, 12:10 AM
Following on some of the earlier advice and growing up with a father who took a sinister pleasure in haggling with/abusing the car salesman, I can concur that buying a used car is the way to go. I bought a used Lexus for my wife on the theory that it would hold up another 10-12 years in S. Florida. I got a 1.9% interest rate which was not being advertised at the time, and left paying approx. 60% of the new model on a car that had 20K miles on it. Remember that you have the power in these negotiations. You can always go to a competitor and let it be known that you are not attached to the make or model.

I sold cars one summer to put myself through engineering school. Interesting experience. The above is really wise advice. I would refine it a bit with this suggestion: Do your shopping around to find what you want, but before you start any serious negotiation to purchase your first choice of used vehicle make certain you know your own bottom line, and always, always, always have an alternate second used car choice firmly in your mind. As in any negotiation for anything, you have to be the one that wants the deal less to really have the power in the negotiation. A predetermined second choice helps put you in that position.

sadsack
05-14-08, 01:46 AM
Predominantly continuing with Metalman's Mad-Max subthread, but acknowledging several other posts emphasizing maintenance/reliability costs, one can maximize long-term savings by picking a very maintainable car.

I.e., the more things that can be fixed "under the shade tree," the better.

Honda's have the advantage that there are several gazillion of them on the road; therefore, junkyard replacement parts, as well as superior legitimate aftermarket options, are readily available.

In my case, I bought a Subaru several years ago. Yes, I looked around for a late model used, but I'd rather pay $1-2K more for a full warranty (at 0% interest as well).

For any gearheads out there - longitudinal engine layouts rule! I could, if I had an engine hoist, change the clutch in my 5 speed by myself, if so inclined. If I want to change the oil filter, I only have to reach under the front bumper and twist it off by hand.

I suppose my point is that for the somewhat mechanically inclined, there is an additional tradeoff. A "very reliable car" may need very expensive specialist maintenance in the instances when required, mostly because, although it is a "reliable" vehicle, it nevertheless very hard to work on.

A more maintenance-intensive car may be the better choice because the maintenance, while more frequent, is considerably more convenient to perform.

Skills - the more and various one has, the more likely one is to be well fed under virtually any circumstances.

mfyahya
05-14-08, 05:32 AM
ten years? you've left by then. you're living far away and reading about it on some web site and shaking your head.

This could be a topic for a separate thread. Where would you go if TSHTF as you describe? I live in the UAE and there are thousands of American expats, and I've seen many lie and say they're Canadian or Irish, even though this is probably the most US friendly country in the region.

FRED
05-14-08, 08:50 AM
This could be a topic for a separate thread. Where would you go if TSHTF as you describe? I live in the UAE and there are thousands of American expats, and I've seen many lie and say they're Canadian or Irish, even though this is probably the most US friendly country in the region.

atreyu42 started a thread called When to escape the US (http://itulip.com/forums/showthread.php?t=4022)?

c1ue
05-14-08, 01:13 PM
Don't forget 'Man of Fire': Kidnappings for ransom

algerwetmore
05-14-08, 09:36 PM
I own a 2002 Ford Escape and I agree with the one person's observation of buying someone's elses trouble. I was lucky on the Escape, having enough cash set aside to pay for it without financing.
But my strategy with cars is to buy and hold, and even with declining depreciation, if I own a car for 8 years, I think I can come out ahead.
I am investigating the hybrid Escape, but have been told by several salesman, that because I am retired and most of my driving is highway driving that I probably wouldn't recover the initial cost differential between the escape hybrid and the conventional model.

c1ue
05-15-08, 02:03 PM
One problem with Hondas: Most stolen vehicle.

http://www.statefarm.com/learning/be_safe/road/learning_besafe_onroad_cartheft1.asp

All those cars do need spare parts, and there are enough people willing to buy 'pirate' ones.

ax
05-15-08, 03:36 PM
I own a 2002 Ford Escape and I agree with the one person's observation of buying someone's elses trouble. I was lucky on the Escape, having enough cash set aside to pay for it without financing.
But my strategy with cars is to buy and hold, and even with declining depreciation, if I own a car for 8 years, I think I can come out ahead.
I am investigating the hybrid Escape, but have been told by several salesman, that because I am retired and most of my driving is highway driving that I probably wouldn't recover the initial cost differential between the escape hybrid and the conventional model.

2008 Ford Escape XLT 4dr SUV 2008 Ford Escape Hybrid 4dr SUV $4,161 $568 7.3 (years to break even)

Taken from http://www.cnbc.com/id/24500819/

hope this helps.

zoog
05-15-08, 05:18 PM
One problem with Hondas: Most stolen vehicle.

http://www.statefarm.com/learning/be_safe/road/learning_besafe_onroad_cartheft1.asp

All those cars do need spare parts, and there are enough people willing to buy 'pirate' ones.

That's the only thing that worries me about mine. I miss having a garage to park it in.


The National Insurance Crime Bureau (NICB) has compiled a list of the 10 vehicles most frequently reported stolen in the U.S. in 2005.


1991 Honda Accord
1995 Honda Civic
1989 Toyota Camry
1994 Dodge Caravan
1994 Nissan Sentra
1997 Ford F150 Series
1990 Acura Integra
1986 Toyota Pickup
1993 Saturn SL
2004 Dodge Ram Pickup

Who on earth would steal a 1994 Dodge Caravan?:eek::p

FRED
05-15-08, 05:31 PM
That's the only thing that worries me about mine. I miss having a garage to park it in.

Who on earth would steal a 1994 Dodge Caravan?:eek::p

Note that these are all common and popular cars = big market for stolen parts.

Here's another list: (http://www.crimedoctor.com/autotheft2.htm)

* 1. 1989 Toyota Camry
* 2. 1990 Toyota Camry
* 3. 1991 Toyota Camry
* 4. 1988 Toyota Camry
* 5. 1997 Ford F-150 4X2 Pick Up
* 6. 1994 Honda Accord EX
* 7. 1995 Honda Accord EX
* 8. 1996 Honda Accord LX
* 9. 1990 Honda Accord EX
* 10. 1994 Honda Accord LX
* 11. 1994 Chevrolet C1500 Pick Up
* 12. 1992 Honda Accord LX
* 13. 1991 Acura Legend
* 14. 1995 Ford Mustang
* 15. 1987 Toyota Camry
* 16. 1990 Honda Accord LX
* 17. 1995 Honda Accord LX
* 18. 1989 Chevrolet Caprice
* 19. 1988 Honda Accord LX
* 20. 1991 Honda Accord EX
* 21. 1992 Honda Accord EX
* 22. 1995 Dodge Neon
* 23. 1991 Honda Accord LX
* 24. 1989 Honda Accord LX
* 25. 1996 Honda Accord EX

Shows 14 out of 25 are Honda, 15 if you count the Acura.

GRG55
05-16-08, 02:16 AM
Note that these are all common and popular cars = big market for stolen parts.

Here's another list: (http://www.crimedoctor.com/autotheft2.htm)

* 1. 1989 Toyota Camry
* 2. 1990 Toyota Camry
* 3. 1991 Toyota Camry
* 4. 1988 Toyota Camry
* 5. 1997 Ford F-150 4X2 Pick Up
* 6. 1994 Honda Accord EX
* 7. 1995 Honda Accord EX
* 8. 1996 Honda Accord LX
* 9. 1990 Honda Accord EX
* 10. 1994 Honda Accord LX
* 11. 1994 Chevrolet C1500 Pick Up
* 12. 1992 Honda Accord LX
* 13. 1991 Acura Legend
* 14. 1995 Ford Mustang
* 15. 1987 Toyota Camry
* 16. 1990 Honda Accord LX
* 17. 1995 Honda Accord LX
* 18. 1989 Chevrolet Caprice
* 19. 1988 Honda Accord LX
* 20. 1991 Honda Accord EX
* 21. 1992 Honda Accord EX
* 22. 1995 Dodge Neon
* 23. 1991 Honda Accord LX
* 24. 1989 Honda Accord LX
* 25. 1996 Honda Accord EX

Shows 14 out of 25 are Honda, 15 if you count the Acura.

Thinking like a "free-market" economist [is that an oxymoron?] this data would suggest that parts for Honda's must be plentiful what with all these vehicles being chopped, and therefore cheap. Enterprising thieves should therefore be redirecting their efforts to steal and dismantle those vehicles where the parts [and their own margins on effort expended] are worth much more. That logically leads to a coming collapse in the number of Honda's being stolen. Right? :p

GRG55
05-16-08, 02:31 AM
2008 Ford Escape XLT 4dr SUV 2008 Ford Escape Hybrid 4dr SUV $4,161 $568 7.3 (years to break even)

Taken from http://www.cnbc.com/id/24500819/

hope this helps.

This is the part that concerns me:


"...This hybrid study assumed the vehicles were sold for the Edmunds.com True Market Value(R) price and will achieve the Environmental Protection Agency's reported mileage for combined city and highway driving..."
For someone who drives mostly on the highway the primary energy consumption is to overcome parasitic drag, which increases as a square of the velocity of the vehicle. Hybrid or no-hybrid, the ultimate source of this energy is the gasoline you pump into the fuel tank. That little gasoline engine in a hybrid is running continuously [that was what the console display was showing in a friend's Prius on a several hour highway cruise we did recently] and working pretty damn hard to overcome the parasitic drag. I seriously doubt that a hybrid driven primarily on the highway will come anywhere near meeting the fuel economy figures touted for it. That is why I don't think there is any payback for drivers in that situation [compared to urban/suburban commute, drive the kids to school and soccer sort of usage where the hybrid is probably more viable, especially those with regenerative braking]

Would be interested in feedback from anyone out there with some real data on this.

FRED
05-16-08, 09:38 AM
This is the part that concerns me:

"...This hybrid study assumed the vehicles were sold for the Edmunds.com True Market Value(R) price and will achieve the Environmental Protection Agency's reported mileage for combined city and highway driving..."
For someone who drives mostly on the highway the primary energy consumption is to overcome parasitic drag, which increases as a square of the velocity of the vehicle. Hybrid or no-hybrid, the ultimate source of this energy is the gasoline you pump into the fuel tank. That little gasoline engine in a hybrid is running continuously [that was what the console display was showing in a friend's Prius on a several hour highway cruise we did recently] and working pretty damn hard to overcome the parasitic drag. I seriously doubt that a hybrid driven primarily on the highway will come anywhere near meeting the fuel economy figures touted for it. That is why I don't think there is any payback for drivers in that situation [compared to urban/suburban commute, drive the kids to school and soccer sort of usage where the hybrid is probably more viable, especially those with regenerative braking]

Would be interested in feedback from anyone out there with some real data on this.

From the iTulip research team:

Makes perfect sense and that's what we expected, too. But that's not what our research has found. In fact, the opposite.

Hybrids perform below EPA mileage estimates in city driving
"Data from independent product-testing organization Consumer Reports indicates that hybrid cars get less than 60 percent of EPA estimates while navigating city streets. In Consumer Reports' real-world driving test, the Civic Hybrid averaged 26 mpg in the city, while the Toyota Prius averaged 35 mpg, much less than their respective EPA estimates of 47 and 60 mpg. Hybrid cars performed much closer to EPA estimates in Consumer Reports' highway tests."
Hybrids perform close to EPA mileage estimates of highway mileage
Honda's Civic Hybrid is rated by the EPA to get 47 miles per gallon in the city, and 48 mpg on the highway. After nearly 1,000 miles of mostly city driving, Blackshaw was getting 31.4 mpg.

- Hybrid Mileage Comes Up Short (http://www.wired.com/cars/energy/news/2004/05/63413)
A Mini Cooper and Toyota Corolla get 40 and 41 MPG respectively. Even if you are a mostly highway driver, with the additional cost of a hybrid the extra six or seven MPG that a hybrid gets on the highway will take a long time to earn back.

Our theory of why this is the case is that the regenerative braking and other means that hybrids use to recover kinetic energy work great on paper but poorly in real world city driving. Perhaps they are not efficient or the added weight of the batteries and energy recovery gear of a hybrid cancels out many of the benefits. The Prius weighs 2932 compared to 2502 for a Corolla; having to haul around the extra 400 plus pounds probably accounts for the lower then expected relative fuel mileage performance.

We believe that hybrid gas mileage is better on the highway because the car is running off the tiny gasoline engine. Once up to highway speed, the amount of energy required to remain at speed is relatively low, so a small engine will do that more efficiently than a large one. Energy needed for passing is delivered by the batteries. (Note: the torque curve of electric motors is the opposite of internal combustion, or IC, engines'; the former deliver maximum torque at zero RPM vs the latter which deliver high torque at high RPM. A pure electric then is a rocket off the line, but a slug in highway passing. The ideal car is electric off the line, IC for passing.)

The other major factor is how the car is driven. A car that gets 30 MPG at 55 MPH will get 25 MPG at 70 MPH. As a general rule, each 5 mph that a car is driven over 55 mph reduces mileage by approximately 5%.

The mileage advantages of hybrids is marginal. Our real beef is not with hybrids but with new cars. More than 50% of the total environmental pollution that a car produces during its life cycle occurs when it is manufactured, although 90% of emissions occur from driving it.

iTulip Bottom line: Prius vs Pious

If you want to say "I'm eco friendly but I'm not poor" buy a heavy new Prius or new hybrid. If you want to reduce pollution, drive a one or two year old basic light Corolla or Civic, standard transmission with a small engine. Slowly.

GRG55
05-16-08, 12:26 PM
From the iTulip research team:

Makes perfect sense and that's what we expected, too. But that's not what our research has found. In fact, the opposite.

Hybrids perform below EPA mileage estimates in city driving

"Data from independent product-testing organization Consumer Reports indicates that hybrid cars get less than 60 percent of EPA estimates while navigating city streets. In Consumer Reports' real-world driving test, the Civic Hybrid averaged 26 mpg in the city, while the Toyota Prius averaged 35 mpg, much less than their respective EPA estimates of 47 and 60 mpg. Hybrid cars performed much closer to EPA estimates in Consumer Reports' highway tests."
Hybrids perform close to EPA mileage estimates of highway mileage

Honda's Civic Hybrid is rated by the EPA to get 47 miles per gallon in the city, and 48 mpg on the highway. After nearly 1,000 miles of mostly city driving, Blackshaw was getting 31.4 mpg.

- Hybrid Mileage Comes Up Short (http://www.wired.com/cars/energy/news/2004/05/63413)
A Mini Cooper and Toyota Corolla get 40 and 41 MPG respectively. Even if you are a mostly highway driver, with the additional cost of a hybrid the extra six or seven MPG that a hybrid gets on the highway will take a long time to earn back.

Our theory of why this is the case is that the regenerative braking and other means that hybrids use to recover kinetic energy work great on paper but poorly in real world city driving. Perhaps they are not efficient or the added weight of the batteries and energy recovery gear of a hybrid cancels out many of the benefits. The Prius weighs 2932 compared to 2502 for a Corolla; having to haul around the extra 400 plus pounds probably accounts for the lower then expected relative fuel mileage performance.

We believe that hybrid gas mileage is better on the highway because the car is running off the tiny gasoline engine. Once up to highway speed, the amount of energy required to remain at speed is relatively low, so a small engine will do that more efficiently than a large one. Energy needed for passing is delivered by the batteries. (Note: the torque curve of electric motors is the opposite of internal combustion, or IC, engines'; the former deliver maximum torque at zero RPM vs the latter which deliver high torque at high RPM. A pure electric then is a rocket off the line, but a slug in highway passing. The ideal car is electric off the line, IC for passing.)

The other major factor is how the car is driven. A car that gets 30 MPG at 55 MPH will get 25 MPG at 70 MPH. As a general rule, each 5 mph that a car is driven over 55 mph reduces mileage by approximately 5%.

The mileage advantages of hybrids is marginal. Our real beef is not with hybrids but with new cars. More than 50% of the total environmental pollution that a car produces during its life cycle occurs when it is manufactured, although 90% of emissions occur from driving it.

iTulip Bottom line: Prius vs Pious

If you want to say "I'm eco friendly but I'm not poor" buy a heavy new Prius or new hybrid. If you want to reduce pollution, drive a one or two year old basic light Corolla or Civic, standard transmission with a small engine. Slowly.

Interesting info. It's well known that the EPA fuel economy figures are rarely met by any vehicle in real-world use, and are most useful for comparision purposes rather than an absolute indication.

I did not see anything in the referenced article specifically about hybrid highway driving economy. Reading between the lines of your comments it seems that the small gasoline engine is an economical solution to overcome the parasitic drag at "reasonable" highway speeds, however neither the little gasoline engine nor the electric motor provide much reserve for passing ("...The ideal car is electric off the line, IC for passing..."). And extended periods of highway driving provides no opportunity for the regenerative braking system to come into play [until you hit that exit ramp].

I said "reasonable" highway speeds as my totally unscientific and brief encounter with the Prius was a 70 mph trip on Highway 2 (flat terrain) between Calgary and Edmonton. That little engine seemed to be pumping pretty hard, but we did not measure the volume of fuel actually used. My impression was the engine was overtaxed at that speed and would do much better at 55 to 60 mph.

Just out of curiosity, it would be interesting to hear from any iTulip hybrid owners who have measured the performance carefully over different driving conditions.

But the iTulip point about buying good used is well taken.

c1ue
05-16-08, 02:46 PM
Kudos to the iTulip research team: the function of highway mileage is completely due to relative drag (i.e. slip ratio) and engine size.

Having a large engine means much more wasted gasoline once speed is achieved. This is why there are several 12 cylinder cars composed of 2 - 6cylinder engines; once speed is achieved just turn one engine off.

This approach actually makes lots of sense - the engine control systems and what not are more than sophisticated enough to manage this.

As for mileage figures - I think there is a big loophole that might be getting exploited: charge state of car battery in a hybrid.

Similar to the wheat germ in the dog/cat food scandal, just going into a 'test' with a full battery would yield an apparently high MPG; I really wonder if the EPA actually checks before and after battery states as opposed to just gallons of gasoline used.

Not that the gas only MPG estimates were any good; as any serious highway driver can tell you - drafting behind a large vehicle can double your actual mileage. In the city, you can also improve performance just by understanding the traffic light system and minimizing the actual stops.

The EPA mileage tests were all performed by professionals who understood and used all of these tricks - ranging from minimal brake use to optimal gasoline useage speeds, timing lights, etc etc.

In SF, for example, there are certain streets where the traffic lights are synchronized such that hitting a certain speed will get you nearly all the way across the city without stopping.

brucec42
05-16-08, 09:38 PM
There is also a scandalous option many Americans forget is available: just don't buy another car.

My wife and I are down to one car. I drive my sneakers to work, and only go shopping on weekends (when I can borrow her car). When we move farther from town, I am going to buy a nice bicycle and a nice raincoat. If we move much farther from town, for an extra $1200 I can get an electric motor for the bike with a 30-40 mile range that costs 3 cents to fill up.

On those rare occasions a second car is needed, friends are always happy to lend us a car in exchange for a favor (nice dinner, fresh loaf of bread, tray of brownies). And if that fails, there is a car rental place nearby, a bus route, a taxi stand, a train station, and the Zipcar program.

The $5000 I did not spend on an "inexpensive" second car will easily pay for a very nice bike with safety lights, and luggage racks (and raingear for me), 10 years of bike maintenance, AND 10 years of car rentals AND 10 years of the occasional public transportation. Over the same period, how much more would the buyer of a $5000 car pay for gas and maintenance? Easily $10,000, for just a local commute...

More than that -- I can't stick to an exercise program if you glue me to it. But I have to get to work every day -- and boy howdy is it nice to walk in the door whistling after exercise while everybody else is spitting nails about crazy drivers and endless traffic.

We almost went that route ourselves a few years back when our schedules permitted. I was gonna drop my wife off at work and then pick her up at the end of my day. But before it came about, the job situation changed and it became impractical.

As for riding a bike to work, you need to compare the cost of a modest car to the cost of major reconstructive cranial surgery and long term disability care after that dually pickup with the large tow mirrors pops you as it drives by. Most places I've been to are simply not optimized or culturally ready for cycle commuters. The stats on cyclists hurt by drivers is appalling. Curiously, the road in front of my house, steep and populated with speeding (50mph+ downhill around a bend) pickups, out in the country, is a mecca for recreational cyclists for some reason. They pedal by constantly. So far none have wound up in a ditch, but on the same stretch there have been two accidents and my mailbox has been accidentially hit and destroyed twice in the 3 years I've lived here. So they're probably not aware how dangerous it is.

A quick survey of how many drivers you can count with a cell phone plastered to their ear as they drift around in a haze should dissuade many from the idea of cycling to work. A fender bender in a car is one thing. On a bike you may be the one getting bent.

brucec42
05-16-08, 09:59 PM
Very good point about picking a simple, easy to maintain/fix yourself ride. They will break less often on average, and are usually cheaper to buy parts for as well. Unfortunately, some of the easiest to work on are domestic pickups, which are less fuel efficient.

As for saving cash, ultimately the most bang for the buck is acheived by simply not driving as much. I've complained about it before and will now again. My work takes me through the suburbs during work hours, and the streets of bedroom communities are clogged with vehicles that are patently not engaged in commerce (an suv with kids in it pulling into McDonald's at 10am). I have to assume that there aren't so many salespeople and service industry workers out conducting business at 2:30pm on a Wednesday that it requires one to wait in traffic through 3 light cycles to get through an intersection 35 miles north of Atlanta, so I'm making the leap of logic that many of these are purely pleasure/shopping/optional trips.

I'm sure many of them are the gaudily nuevo riche' out doing what they do best (shopping) , but I also hear complaining about gas prices in the news and elsewhere from housewives who live 3 miles from their child's school and most every type of shopping one could imagine, yet also manage to put 12,000 mi a year on their family truckster. My work vehicle doesn't amass that many miles, and I hit 10 different locations a day.

I think if more people sat down and did a mileage budget, they'd see that they or their spouse are burning up a lot of dollars. Even my long retired parents who live 10 miles from anything and less than a mile from 90% of what they need, manage to put 10,000 miles a year on their vehicles.

I think a lot of driving is done out of boredom.

brucec42
05-16-08, 10:13 PM
Tying into the hyperinflation fears , what about this?

If a new midsize sedan costs $25,000 today, and a comparable sedan will cost say $50,000 in 5 years, due to massive inflation, and presumedly used sedans will also rise proportionally (maybe more, since fewer will be able to afford new?), would buying a new car today with 12 years of good reliable service in it for $25,000 actually be cheaper in real terms than buying a series of escalating-cost used sedans over those 12 years? What if each is good for 4 more years of reliable service but your 3rd one costs $35,000? Remember, your car loan is fixed at 5.75% today. What if when rates better reflect inflation fears, a car loan is 15% in a few years?

I'm not advocating it, but assuming you are going to buy more than a $5,000 type car anyway, perhaps buying a solid car now might pay off in that you are paying off that loan with debased dollars.

Again, I pay cash. But it's interesting to ponder the effect of owning a tangible (though depreciating) asset vs dollars, which may depreciate even faster.

c1ue
05-17-08, 11:32 AM
Bruce,

I've heard this argument in multiple forms.

It might work, but first consider the other possibilities:

1) In inflationary times, liquid assets become scarce. Not cash per se, but an amount of money sufficient to purchase something. While spending cash to buy a fixed asset may seem like a good idea now, what value would that same amount of cash used to fix your purchasing power outside of the dollar do for you in the future? Other arguments include: If hyperinflation occurs, wouldn't I be better off buying a gigantic house now since the mortgage would inflate away? A: Jobs go down. Bills/Insurance go up. Demand goes down. Can you afford the gigantic house for the next 15 years or more if necessary? If so, then it could be worthwhile.

2) There are something like 240+ million passenger cars in the US. Cars clearly are not scarce. While in a 10 year span generally cars need to be replaced, in the meantime it could be said there is a glut. If hyperinflation occurs and commodity costs outpace income - just how much demand will there be for cars? Given that there are probably enough already around to meet everyone's needs? Prices may not go up.

3) Maintenance: As demand goes down, maintenance costs also go down after an initial uptick. When times are tough, people discover new skills like changing their own oil.

phirang
05-17-08, 11:02 PM
That's the only thing that worries me about mine. I miss having a garage to park it in.

Who on earth would steal a 1994 Dodge Caravan?:eek::p

excellent dead hooker storage :D

FRED
05-18-08, 12:16 AM
excellent dead hooker storage :D

We try to keep this place a small oasis in a sea of contempt, including for hookers.

GRG55
05-18-08, 12:54 AM
...Even my long retired parents who live 10 miles from anything and less than a mile from 90% of what they need, manage to put 10,000 miles a year on their vehicles.

I think a lot of driving is done out of boredom.


Get them a subscription to iTulip. No boredom here. That'll keep 'em off the road and safe in the yard... ;)

raja
05-19-08, 10:25 PM
Just out of curiosity, it would be interesting to hear from any iTulip hybrid owners who have measured the performance carefully over different driving conditions.


I've been driving a Prius for two years, with a mix of city and highway driving.
If the onboard efficiency computer is to be believed, I've been getting an overall 45 mpg.

c1ue
05-22-08, 03:54 PM
My onboard computer tells me the 1999 1/2 Audi gets 19 MPG city, 25 highway, but in reality (odometer vs. gallons in tank) it is more like 17.3 and 21.8. EPA estimates 17 and 21, but I'm all about the drafting and timing lights.

The 2003 is supposed to be 15 and 19; in reality I'm getting 15.2 and 17.6.

Measure gas vs. miles driven, then factor for state of on board charge.

Over time, the last item can be ignored.

GRG55
05-22-08, 08:29 PM
My onboard computer tells me the 1999 1/2 Audi gets 19 MPG city, 25 highway, but in reality (odometer vs. gallons in tank) it is more like 17.3 and 21.8. EPA estimates 17 and 21, but I'm all about the drafting and timing lights.

The 2003 is supposed to be 15 and 19; in reality I'm getting 15.2 and 17.6.

Measure gas vs. miles driven, then factor for state of on board charge.

Over time, the last item can be ignored.

Agree. Unless the hybrid is being charged externally the energy in the battery has to originate from the gasoline in the fuel tank.

What my simple mind is having difficulty with is the concept of losses with every stage of energy conversion. Using gasoline in an internal combustion engine to drive a generator to charge a battery to run an electric motor to drive the wheels would seem a convoluted way to move the vehicle.

Diesel-electric locomotives do something similar, but train tracks are very flat (grades are usually less than 2%, even in the mountains) and they get huge returns from regen braking going downhill, and do not stop/start the way automobiles are required to do (using energy to accelerate the vehicle, occupants and mass of the batteries to speed over and over again on a trip).

phirang
05-22-08, 08:51 PM
Honda and A123 both have very interesting hybrid batteries under production...