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Do cars stop depreciating after 200K miles?

As I examine my options about replacing my 10 year old Honda Accord with a more fuel efficient alternative, I stumbled upon an interesting fact. I was playing with Kelley Blue Book estimate of my car value by changing the number of odometer miles and observing the changes. What turned out is that after 200,000 miles the car value stops decreasing. Which implies that if I wanted to sell the car now, it wouldn’t have made a difference if I had driven it more than 20K miles a year.

Is it just a bug in the KBB algorithm that calculates the value, or does the value really stops going down? I think what really happen is that at this age the car condition becomes the prevailing factor and the miles don’t mean that much any more since the modern engines are designed to go well past 200K miles and it is often rust or problems with interior (power windows not working?) that lower the car value, and these usually come with age, not miles.

This brings me to an interesting conclusion. If you own a car and put up around 20,000 miles on it, from the financial point of view there is no reason to try to save miles by renting a replacement for those long trips. You are not really gaining much except for the headache in having to deal with the rental. This of course is not the case if you don’t plan to hold on to the car for very long, or don’t put enough miles to reach the threshold.

Check your VIN number, are you driving a bargain?

lucky VIN numberThe last 6 digits of your car’s VIN are a production sequence number, or serial number. This number is usually assigned by the manufacturer in the increasing order starting from “000001” and up as cars go off the assembly line.

I have heard from somewhere that lower number often means that the car has better quality and will last longer. The assumption is that the manufacturer has an incentive to pimp up the quality of the first shipment of cars of a particular model which often goes to companies/individuals writing auto reviews, car enthusiasts or other persons of interest who can impact the acceptance of the model by the broader consumer.

Although there is probably no way to prove this rumor, it makes a perfect sense to me and my own car is a living example that this rule works. With 135K on the odometer I have not had a single (not accident related) repair, nor any rust on the body. The VIN ends with “000929” which means it is one of the first Accords made by Honda in 1997.

What does your VIN number end with? Have you been lucky with your car?

Can you really afford that car? Find true cost to own

Chervolet AveoI wrote before about bargaining techniques you can use to get the lowest price on a new car. I even mentioned how you can get a car for free. The price you pay for a car is certainly an important part of a good car deal however bargain hunting doesn’t stop there. You need to look beyond the sticker price if you truly want to find the best car for your money.

Edmunds, an online market place for car buyers, has come up with a formula to calculate what the car is really costing you during the first five years of ownership. They call it “True Cost to Own” and it includes a few factors that together reflect total cost of car ownership.

The Edmunds Inc. True Cost to Own (TCO) pricing system calculates the additional costs you may not have included when considering your next vehicle purchase. These extra costs include: depreciation, interest on your loan, taxes and fees, insurance premiums, fuel costs, maintenance, and repairs.

Use this online tool to enter your car model and you will be able to see the estimate of the total amount of money you will have lost provided you sell the car after 5 years.

While I don’t trust the numbers to estimate what MY costs will be since it is something highly dependent on individual circumstances, however I find the tool very useful for comparing cars to each other. Edmunds have realized it as well and started a monthly roundup of “low cost” cars. Below are some of last month finalists from the categories that attract me. Go to Edmunds TCO results for the complete list.

Sedan Coupe Wagon
Under $15,000 Chevy Aveo Kia Rio
Under $20,000 Honda Fit Ford Focus Toyota Yaris
Under $25,000 Toyota Prius
Under $30,000 Toyota Camry Hybrid Subaru Legacy Honda Accord

Another thing I noticed while playing with the tool is that the cost to own a used car on average comes lower than a similar new car, which I expected. You spend more money on repairs but you save much more on deprecation, taxes and loan finance charges.

What car do you have? Did you buy it new or used? Are you likely to consider Edmund’s “True Cost to Own” when choosing your next purchase?

Free books, Free merchandise, Free car?

Thousands of full-text free books

There might really be thousands of them but they are mostly public domain books or well known classics that you can easily get in any library. Yet, the website is very good for those who like reading books online. I only wish they also offered these books in downloadable files so I could read them off of my PDA. Here are just a few titles that caught my eye:

For many more books head to FreeBooks.com

Free merchandise for women

A new website has launched that tests waters in viral marketing and specifically targets women. I have not tried it and don’t know anyone who did but the business model sounds very interesting.

How does it work? You sign up to the network, receive free products (yes, you get to keep those), try them out, send back your feedback, and then receive relevant product samples and coupons to share with your friends.

SheSpeaks — have you used it or know anyone who did?

Free car for two years

It is not a joke. You can get one for free from FreeCarMedia and it will be yours to use for 2 years. All you need is a clean drivers license. Of course there is a catch. Your car is paid for by advertisers and will have ads all over the body. So ultimately you may end up driving a huge Coca-Cola can on wheels, or something like that. If this is not something to discourage you, head on to the sign up page to see if you get lucky.

Source: How would you like a free car? at WiseBread

SAAB owners — check your odometer

If you happen to own an old SAAB (and by old I mean “really really old” :-) ) that you are the original owner of, check out this promotion from SAAB, you might be getting a free car replacement.

Convinced of the jet-like performance and endurance of its products, Saab Automobile USA is announcing that it will offer a free new Saab to any U.S. customer who covers the distance of one million miles (or more) in a Saab that he or she originally purchased new.

The offer is valid from December 15, 2006 through December 31, 2007 and you will have to verify that the vehicle’s odometer hasn’t been tampered with.

This whole deal sounds like a joke (or a smart PR move) but somehow I am ready to believe that there are a few SAAB’s out there that have (or are close to) that magic number on the odometer.

Feeling adventurous?

Let’s do a brain exercise and calculate what would it take for a SAAB owner to catch up with the limit if they were determined to do so at any cost. For simplicity let’s assume that the car has 200,000 miles and it’s value is insignificant. Lets also assume that a SAAB on a test stand is capable to spin its wheels at 80 mph with fuel efficiency of 60 mpg (any auto mechanics out there that can confirm this?).

800,000 miles at 60 mpg will burn 13,333 gallons. At the current national average gas price of $2.25 it would cost $30,000 to cover the “trip” which leaves us with roughly $8,000 left in our pocket (the offer is for a new 2007 Saab 9-5 Aero MSRP $38,735). Not bad, huh?

There is one problem though. It will take us over a year to “cover 800,000 miles” at 80 mph even if we run the car 24 hours a day 7 days a week. And then, how about those trips to the gas station, oil changes, and most importantly, is it really THAT reliable? Well, sounds like not this time, SAAB. Meanwhile I will stick to my Honda. ;-)




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