And we must remember that extenuating circumstances that may not have a dollar value (need for more room/space, or less room/space, etc.)

Peace of mind…obviously.

As for the reader who asked about trading in the SUV, the husband is right about one thing: the longer they drive an SUV, the worse off we all are. Not only do SUVs waste a lot more gas than the average car, but they are less safe as well. Here’s a great article by Malcolm Gladwell that appeared in the New Yorker about the safety of SUVs: http://gladwell.com/2004/2004_01_12_a_suv.html

And remember depreciation works like this: you lose money. Shocking, I know. The average car payment in America is $484/mo over 84 months according to the Auto Dealer’s Association. So not only are people paying almost $500 a month, per Trent’s math, they’re losing $500 a month in depreciation.

Think about that. In one year, that adds up to $12,000. You can get a really nice used car from 2000-2002 for $12,000. Half that will buy a very decent used car. I just paid $3000 for a car[1] that my mechanic expects will last another 2 years without major mechanical work, and many many more years with a few typical high mileage repairs (pumps, gaskets, etc etc).

[1] 1994 Toyota Camry XLE V6. Its in fantastic shape. There’s dozens of cars like this available in most major cities, with a little digging and hunting.

If they’re highway miles, I wouldn’t worry too much about 55K in 3 years.

Generally, the used vehicle “free” market works.

So, it cost almost as much to buy a 2 year old Civic as it does to buy a new one. That’s a good indication of what the market thinks the quality and utility of Civics is. The market sees that the 2 year old Durango just isn’t desirable so it drops fast.

(As a former grease monkey, I think this is 2/3 quality, but maybe 1/3 psychology – for those in the market for SUVs, it just isn’t fashionable to be seen in an old one.)

Aside from the transaction costs, you could buy a new Honda every few years and almost come out even!

Our current 1992 Escort has 127K miles on it (we bought it six years ago with 50K on it) and is just hitting the point when a number of maintenance issues have come up recently. However, the body’s still in excellent shape (cars made after about 1990 have considerably longer lifespans than cars used to have, due to advances in rust-proofing) and I expect the car will last at least another few years with only minor maintenance issues. (Until recently, the maintenance expenses had always been fairly trivial, though certainly somewhat greater than for a newer car, and the car is fundamentally still sound.)

Anyway, if all you care about in a car is having transportation to get you from Point A to Point B at the cheapest possible price, don’t overlook paying cash for an older vehicle (we paid $3500 for the Escort six years ago and it’s some of the best money I’ve ever spent). Just remember to have enough cash left over so that the loss of the vehicle won’t be financially embarrassing to you. The savings in capital costs are usually much greater than what you lose in operating costs.

Civics are also cheaper cars, and depreciation is somewhat proportional to car cost (ie expensive cars have higher absolute depreciation losses).

I would also agree that the gas mileage argument is pretty compelling, although I would like to know the purchase month, a 2005 car could be almost 3 years old.

However, the only reason I see trading in the car is switching to a compact or hybrid to save on gas. My sis has an SUV and is considering trading it in so she can buy a prius because she is a major commuter.

55k on a 2 year old or less vehicle is a lot of miles. figure mostly highway miles which is a good thing; however, despite being a relatively new car, being an SUV and paying gas for those kinds of miles is ludicrous. i would get a different vehicle simply for the better gas mileage as Chris posted.

Possibly depending on the state you live in, another thing to consider is how much it costs to register the beast. In Arizona, that drops year by year as the car ages. When my 2000 Toyota Dog Chariot was new, I had to raid a mutual fund to pay the registration (OK, it’s the Vanguard fund where I keep my car savings & so that’s part of what the money is FOR, but still…the cost of a year’s registraton was more than I could pay out of my salary). Seven years later, the cost has dropped enough that I easily can pay it out of my cash flow.

Stupidly, I’ve always bought new cars. But never again. If you live near a retirement community, you can get a great low-mileage, gently used car–much nicer than anything you would find in the larger community–for a fraction of what it would cost new. It’s worth driving across the state to buy your car from the old folks.

But I’m hanging on to the Toyota till it dies. Yeah, I had to pay a chunk for the 60K maintenance. . .but that was a far cry from the 15 grand (on top of this car’s trade-in or sale value) I’d have to pony up to buy a new car. And the car still runs trouble-free.

Of course, the more people trade in vehicles that are around 3 years old, the more late-model used vehicles there are for me to pick from. :-)

But, just because the car is a few years old? My Saturn is eight years old and has a trade-in value of about $4000. If I’d bought a new one 4 years ago I’d be out $10-12K for the new car and have a 4 year old car with a trade-in value of about $6000.

Can I afford a new car? You bet. Do I have better things to do with $10K? You bet. If you want a new car, fine. But don’t try to say it’s a financial decision.