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I have stumbled upon a new(For me) way to evaluate two cars of varying mileage and age of the same type based solely on the price of driving it, per mile. Using this method, it is almost exactly the same price per mile to drive a new Subaru Outback, base model, final price after everything of $21,661, financed 100% at 2.99% APR, for 60,000 in three years, as it is to buy a three year old car of the same model and features from 60,000 miles to 120,000 miles.

 

The trick is that the car must keep it's resale pretty strong(You have to be able to sell it or trade it for about $13,500 - 15,000), and it has to be in a high mileage situation(20,000 per year).

 

You'll pay about $0.16 per mile with each(not including gas, of course), assuming similar insurance, and scheduled maintainance on the older car, none on the new car to 60,000 miles.

 

The problem is, you will pay up front for the new car with a high car payment, but make it up at the end with the resale, whereas with a used car you'll have the low car payment, but very little resale at 120,000 miles, with a 6 year old car.

 

On top of all that, you'll have the security of a warranty for much of the new car's life, and the insecurity of the Head gasket/warping problem that seems so common now.

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You have forgotten a few fact on you calculation.

 

•Depending on where you live taxes, plates, title fee, etc are much more expensive for a new car.

•The maintenance for a new Subaru from 0-60,000 and from 60,000-120,000 is going to be very close so this is a wash.

•Insurance for a new car will be higher than for a 3 year old vehicle.

•Subaru with 100,000+ still have a market, esp. here in Colorado I see them for sale all the time with over 100,000 even 200,000

 

I did this calculation

 

New Used

Interest Rate 2.990 4.490

Loan Term 36 36

Down payment 0 0

Years you will own Vehicle 3 3

Monthly Maint Cost 30 40

Monthly Insurance cost 80 60

Registration Cost 400 280

Purchase Price 21,661 13,500

 

Average cost per year $5,173 $3,464

Monthly payment $629 $401

First year's depreciation $5,415 $1,890

Total depreciation $9,080 $5,111

Total interest paid $1,012 $954

 

Not trying to talk you into an older vehicle just giving you some food for thought.

:brow:

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..........because your financial projections aren't even close to reality.

 

The first time you put your backside in the driver's seat of your new Outback KABOOM!!!! Over $5,000 of instant depreciation, and it isn't even off the dealer's lot yet.

 

 

KBB shows a peron-to-person value of a three year old Outback with 60,000 miles to be about $12,365. You'll pay almost twice as much per mile from new and 0 to 60,000 miles as you will three years old and from 60,000 to 120,000 miles. If you live in a state with high car property taxes, like I do, a used car is even a better financial deal. Try $900 property tax on a new Subaru Forester OUCH!!

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Two to three year old cars with reasonably low mileage are always cheaper than new cars. The payoff for the new car comes after the loan has been paid off and the car is still being used. If an owner plans on keep the car for years after the loan has been paid, s/he can save a bundle, despite the intial costs of owning the new car in the first couple of years - depreciation. Over the same period, a the person with the used car probably would have bought at least 1 more used car, maybe even two, unless, of course, the person is an ace mechanic who can keep the car running forever. The trick with any car, new or used, is how long it can be kept running after the loan has been paid off and when the owner doesn't have a car payment. That's where the savings come in.

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"The trick with any car, new or used, is how long it can be kept running after the loan has been paid off and when the owner doesn't have a car payment. That's where the savings come in."

 

Tell me about it. Haven't made a car payment in 10 years on the old 'ru. "Run it into the ground theory" works well and it justs keeps ticking.

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The way I see it is car payments equal about 3600 per year - new or old. If you buy a used car and put less than 300 p/month into it -payment and maintainance included - you're money ahead. A new car payment would be right around the same cost ($300 p/m). The insurance is more on a car with a loan on it, so I tend to buy cars that cost less than 3 grand and if I get a year out of them, I'm ahead of the game.

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$3600 a year (over and above oil/fluid changes which you need to perform on a new or used car regardless) is a -lot- to keep an old subaru on the road.

 

My 1996 legacy with 93k has run me about $500/yr avg. total since the warranty expired (new tires, belts, shocks, a couple of CV joints). It has been surprisingly cheap to run.

 

To get up to $3600 a year, multiple major systems would need to fail and be rebuilt each year, which so far hasn't happened (knock wood.)

 

The same cannot be said for an old german car that I once owned. The transmission died, and I was out $4k in repairs (ouch).

 

I think subaru had the right idea with the gen 1 & 2 legacies -- nice cars, robust and cheap to live with.

 

 

 

Originally posted by northguy

The way I see it is car payments equal about 3600 per year - new or old. If you buy a used car and put less than 300 p/month into it -payment and maintainance included - you're money ahead. A new car payment would be right around the same cost ($300 p/m). The insurance is more on a car with a loan on it, so I tend to buy cars that cost less than 3 grand and if I get a year out of them, I'm ahead of the game.

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right, i missed that. so the legacy was $17k when i bought it in the beginning of 1996, so it's a bit more than 8 years old.

 

Paid $17k for it, have put in about $2000 total in additional maintenance (over and above oil changes, etc..)

 

$19k/96 months = $197.00 a month

 

As long as the car can continue going without serious mechanical catastrophes, the savings continue to mount. if it can survive another year with only $500 of maintenance:

 

$19.5k/108 = $180.50 a month over its life

 

Even if I need to throw in $2000 over the next year (say a catastrophic engine or transmission issue) --

 

$21k/108 = $194.00 (the average lifetime cost of the car still goes down..)

 

I'm not sure what this proves, other than that subaru does make cars that are cost-effective to keep over the long haul, unlike my previous german experience... that car was eating me out of house and home!

 

 

 

Originally posted by northguy

That includes the purchase price of the car.

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This brings up another question that I have for the experts here --

 

how long can a well-taken care of legacy be reasonably expected to last?

 

As far as I can tell, the body is in perfect shape (no rust), compression in the 2.2 is good at 93k miles, and the EAT doesn't seem to be binding or acting badly.

 

I'm guessing that the water pump and alternator will die sooner rather than later, i hope they don't cost too much to replace.

 

 

 

Originally posted by adwolf1

right, i missed that. so the legacy was $17k when i bought it in the beginning of 1996, so it's a bit more than 8 years old.

 

Paid $17k for it, have put in about $2000 total in additional maintenance (over and above oil changes, etc..)

 

$19k/96 months = $197.00 a month

 

As long as the car can continue going without serious mechanical catastrophes, the savings continue to mount. if it can survive another year with only $500 of maintenance:

 

$19.5k/108 = $180.50 a month over its life

 

Even if I need to throw in $2000 over the next year (say a catastrophic engine or transmission issue) --

 

$21k/108 = $194.00 (the average lifetime cost of the car still goes down..)

 

I'm not sure what this proves, other than that subaru does make cars that are cost-effective to keep over the long haul, unlike my previous german experience... that car was eating me out of house and home!

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Okay, this was the expected response. But I believe with the specifications of 20,000 miles per year for three years, I can prove you all wrong.

 

At 100,000 miles, you need to do a timing belt change, although on my 1997 OB, I had to do it at 80,000 miles, because the front seal was leaking, posing the treat of a potential timing belt slip.

 

$350 - 400

 

Somewhere in here, you'll have to replace the brakes, and it's likely that will include the rotors. If you only have the rotors surfaced, you'll likely find that the brake shops, and even the dealers don't have precise enough equipment to machine them to the specs of the original rotors for flatness, and you'll have a nice brake surge. Fronts and backs- $700

 

Maybe a new clutch if you're driving a 5 speed, depending on who's driving it. $700.

 

Oil Changes, assuming you do it yourself for about $8 every 3,000 miles , $160 (With the Warranty, the dealer provides oil changes to 36,000 miles, so it only costs $64 for the new car)

 

Tires will need to be replaced once in the used car, but maybe not with the new. $350

 

The myriad of other things that could go wrong with a used car but not with a new car include AC repairs, battery, alternator, radiator and even serious engine/tranny work. (I know, as my 97 is down with just such a $3200-4000 repair) I will set these items aside for the purpose of this comparison, because I know you'd would all argue that your cars have never needed a replacement of these parts. Sure Wilbur.

 

At the moment the rate is 7.25% at banks around here, though I would imagine you could do better on the internet, so let's go with 4.49%, as was posted by Richard. The only two 2001 Outback wagons with between 60-70K miles that I found within 250 miles of me(Zip 54703, via Cars.com) are selling for $15974 and $17, 902. Let's knock $1500 off the lowest one, and add back a modest 5.5% tax(My local tax rate, yours are probably higher), or $796, and another $56 for title transfer, and $25 for plates, and wisconsin's flat $45 registration fee. The final price on the car is $15396.

 

Finance that at 4.49% on a FOUR year loan, and drive the car $20,000 miles per year for three years. Your costs are:

 

$1351.95 interest

$11,284.52 Principle

$1,800 in Repairs

$160 Oil Changes

$350 Tires

_________

 

$14,946.47 Subtotal

 

Now comes the tricky concept of the resale, which apparently is a seller’s paradise in Colorado, but not so much in Wisconsin. Let’s depend on an independent source for our resale values, such as Edmunds.com. Now, we either have to choose the trade in price, the private party price, or the dealer’s price on this resale. Let’s pick the middle one, private party. This assumes that the car is in “Clean” shape, instead of their top rating of “Outstanding,” as the car is after all six years old. Unless you stored it in a vacuum, it isn’t going to be perfect anymore. With 120,000 miles on it, the private party price is $5575 in my zip code. From the cash you get off the sale, you still have to pay off the remaining loan balance, which is $4111.48. You now have $1463.52 in cash left over.

 

Subtract that from the subtotal of costs above(($14 946.47 - $1463.52) and you have paid $13,482.95 thus far for $60,000 miles of transportation. You’ve paid $0.2247 per mile. I’ve set costs I expect to be the same for both, such as gas, and incidental items like broken windshields aside, because they are the same. Items that are not the same(Insurance) will be added to the cost of the new car when I do that comparison next. Depreciation differences are built in to the resale price.

 

Now for the new car. I price one out last week, and it is being held at the dealer for pick-up on Monday. My final price after taxes title and license is $21,661, and I have been approved for 2.99% financing on a 4 year loan(I’m keeping it for three, but using a four year loan to . I am assuming no maintenance costs from zero to 60,000 miles, other than $64 for oil changes. Again, incidentals such as flat tires can happen to any car, and are no more likely on a new on than an old one, and therefore can be excluded from this comparison. The car is under warranty to 36,000 miles, and still has the powertrain warranty to 60,000 miles, so what expenses shall I include?

 

My costs are:

 

$1,255.99 Interest

$16,000.82 Loan Principle

$64 Oil Changes

_________

 

$17,320.81 Subtotal

 

Now, of course the insurance is higher on the new one right? I’ve got a clean record, and I called my insurance agent for the differential. My insurance will go up by $68 per year, or $204 total for the three years.

 

My subtotal is now $17,524.81. Again to Edmunds for our independent pricing(Using a three-year old car, a 2001 with 60,000 miles on it) for resale value, assuming the car is again only in “Clean” condition, same as above, to be fair, and the private party resale is only $11217 in my zip code. From this I subtract what I have to pay off on the loan, ($5,660.18) and I have $5556.82 left over. I then subtract this cash from the subtotal of what I spent above($17,320.81 – 5,556.82) and I have spent $11,763.99 to drive 60,000 miles on a brand new car, or $.1960 per mile. That means over the 60,000 miles I save $1718.01 by driving a new car.

 

You could argue I would need tires on the car, fine they’re $350, so I only save $1368.01. But I’m still driving a new car!!

 

My dealer said he would give a 2001 a trade in of 12,000 – 13,500 with 60,000 miles If I used ($13,000)those numbers I’d pay only $.1697 per mile, and save $3297.01 over the three years, vs the used car.

 

If you’re thinking yeah, but I’d drive that car way over 120,000 miles, and then the cost would be cheaper per mile, I’d say you’re still wrong, because you will suffer similar drops in resale, and you will experience vastly increased costs in maintenance. Tires every 50-60,000 miles, brakes every 80,000, timing belts every 80K, and on and on. On top of all of that, have you been keeping up with the posts in this forum? The 2.5 engines have a serious flaw in them that causes thousands of dollars of repairs, anywhere from 76,000 miles to maybe 150,000 miles. Add a $2500 engine rebuild to your used car and you’ll never catch up to the value of the new one.

 

This only works in the case of a car in a high mileage use situation, say 20,000 per year, and with a car that holds it’s resale value better than most. It works for the Toyota Camry, but not for a dodge grand caravan. It also fails to be a good value if you only drive 10,000 miles per year, because then when you try to sell it at 60,000 miles, your resale value has gone to heck. If you sell it at 3 years, you’ve only gotten 30,000 miles out of it. With my example it works because I am leveraging the fact that a three year old car with 60,000 miles on it has a higher resale than a 6 year old car with 60,000 miles on it.

 

This is not a fluke. I welcome any effort to punch holes in my scenario, but with the premise that the car has a 20,000 mile per year usages. I am not claiming that a used car is always more expensive, but that it is more expensive with an outback, with this usage pattern.

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I've been leasing cars (mostly Acuras and Toyotas) using that logic, for years. I usually don't get that thorough on my explanation, but very close. Works for me. The real key is to get cars that hold their value, as stated above. Doesn't work on GM cars.

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the real issue is one of a time-horizon. If you're planning on trading in your car every 3 or 4 years (when it still has some value), and you're putting a ton of miles on it during that time, then perhaps this will work.

 

But if you look at people who -really- run cars into the ground, buying and holding for 10 years or more (assuming the car isn't a money pit) is cheaper in the long-run.

 

For example, we've seeing a few people post about 1991 legacies with 200k+ miles on them.

 

when new, they were around $15-16k

 

$16,000/156 ~ $100/month to buy new

 

To get this car up to the $300/month figure, you'd need to put in $32,000 more in repairs over the 10 years it was out of warranty. I'm not sure I see that happening.

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I have to admit I would agree with your argument with an old legacy, with a 2.2 engine, because by almost all accounts the 1.8 and the 2.2 were bullet proof. I had a loyale and it was unbelievably reliable past 120,000 miles.

 

I tried this comparison with a regular 2.5 legacy wagon, and while it stayed close to the same price per mile, it cost slightly more PER MILE, surpisingly, because it lost its resale value much more quickly than the outback.

 

Still, the 2.5 is not as reliable, and if I wasn't feeling the $4000 pinch of its flaws right now, I'd almost laugh that a Japanese automaker went to production with an engine that couldn't hold a candle to the longevity of its competition or even its predecessors. It’s as though they’ve devolved over at the Subaru engine division. Most automakers build more reliable engines using the knowledge gained from past products. Not Subaru.

 

In fact the only reason I'm buying another subaru is because they know my situation with my 97 Outback, and feel bad enough about it to give me $5000 for trade in value on the car. Nobody else will touch it, so I either have to pay the $4000 to fix it, and then maybe be able to sell it, or trade it where it is, which is at a Subaru Dealer, who sells more subarus. They have me by the short and curlys.

 

I'm not convinced that it's anything but a $3000-4000 gamble to drive an outback past 100,000 miles. Many or most will be fine I guess, but mine isn't, and I won't risk being in this position again if the difference in cost long term is so mimimal, or even favoring the new car every three years. Besides, who wants to drive a 10 year old car more than 50 from home?

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One more thing- The reason this car gets such a work out is that it is the only car we have that fits our dog(In the back), our stuff in a rocket box on top, and the baby and my wife comfortably for long trips. Any trip to visit family is 200-1400 mile round trip, and a trip to Jackson WY for some backcountry skiing is usually 2500 miles, once every two years if we can afford it.

 

Our other car mostly stays within 50 miles of the house, though it's reliable as heck -a 93 toyota Corolla(Bought used with 80K) with 150K and counting.

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For heavy drivers like me, used is definitely the way to go. We bought our 95 Leagacy wagon with 175,000 miles back in June for $2300 cash. I'll hit 200,000 in the next week or so and I've spent about $1000 on repairs, all of which I'd consider to be maintenance (timing belt - due at 180,000, plugs/wires, brakes, a tire, coolant, tranny/diff fluids). I'll probably need a clutch sometime in the next year or so, but other than that it's perfect. I obviously drive lots, (fortunately on the Interstate) so I expect to hit 300,000 in about three years. Even with replacing the clutch I should be able to get through the next 100K for $2,000 or so. That'll put me up to $5300 total expenditures, and there won't be much residual value left. Still, that will only be about $110 a month.

 

Adam

 

Originally posted by SevenSisters

"The trick with any car, new or used, is how long it can be kept running after the loan has been paid off and when the owner doesn't have a car payment. That's where the savings come in."

 

Tell me about it. Haven't made a car payment in 10 years on the old 'ru. "Run it into the ground theory" works well and it justs keeps ticking.

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personally, i love these $500 subaru's i find.. drive'em for a year or 2.. if they die, ok, go get another.. i spend maybe another $500 ontop of the purchase price fixing it, and they are reliable as heck..

 

so if you figure i pay $1000 a year to have a car to drive, in my book thats cheaper than going out and buying a new car anyday..

 

given this is with the 80's subaru's not the outbacks, but still.. its cheaper..

 

and her ein VA taxes on cars at dmv is 3.5% of the purchase price.. so figure the difference between a $500 car and a $20,000 car.. quite a bit in my book..

 

example.. my old 86' wagon i bought for $500 never had to do anything to it, just change the oil, and put gas in.. i drove it 17k in a year.. then the frame rusted out and i junked it..

at the same time we had a new conversion van, paid $12k for it used. payments were $280 a month, figure in the insrance difference of about $100 a month for full coverage versus liability on the wagon.. then figure in the $200-400 each month on repair bills on it.. by the time it was all said and done we spent $9k in 9 months fixing the van..

i coulda bought a fleet of old subaru's for that much and drove the snot outa them and still come out ahead..

 

we were spending more a month to drive the van for 2 weeks a month than we did to buy the wagon, which we drove for 17k trouble free..

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If your not going to do the 30,000 mile service, just hope you don't have any major engine or transmission issues between 30 & 60k. Not haveing schedualed maintanence done is grounds for denying warranty work. Just sumthin to keep in the back of your mind.

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The maintenance at 30 K is a fair point , but it turns out my dealer will perform those inspections and fluid replacements at no charge. As for the risk of repairs between 36-60K miles, there's still the powertrain warannty to protect me. There is the possibility that some fluky repair would be necessary before 60K, but if I were going to include that for the new car model, then I'd be inclined to throw a complete engine replacement into the 60K-120K senario. I'm betting the likelihood of each is equivalent.

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