New Versus Used Automobile Sales 1990-2010

I've never bought a new car myself.   I feel like I'm in a minority in that regard but maybe not.   I was curious what % of car sales are new versus used so I did some research.  I found data in Table 1-17 on the National Transportation Statistics page.   They haven't updated the numbers on that table for a few years so it only goes up to 2010.   But its good enough for my purposes and you can see the general trend is fairly consistent over a couple decades.

Most car sales are used cars.   The total number of used cars sold is two or three times the number of new cars sold.      In 2010 there were 36.8 million used cars sold and 14.5 new cars sold or leased.

The value of used cars and new cars sold is roughly the same.  In 2010 we spent $324B on used cars and $311B on new cars.  

New cars average sales price is around triple the average price of a used car sold.    In 2010 the average new car was $26,850 and the average used car was $8,786.

Here's the info in graphics over the period from 1990 to 2010 :

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I Wouldn't Worry About A Sub-Prime Auto Loan Crisis or Bubble

Looks like the "bubble to get worried about" for the day is the sub prime auto loan bubble.    I just saw two references about it in my daily twitter feed.     Apparently Esquire print magazine has an article and so does Slate.

So why shouldn't we get all worked up about it?

Buried halfway down a NYT article from 2014 in a mult-part discussion of the sub prime auto loan topic, they say :
"The size of the subprime auto loan market is a tiny fraction of what subprime mortgage market was at its peak, and its implosion would not have the same far-reaching consequences."

According to Credit.com as of 2015 the total car loan debt was $950B and sub prime market was 27% of that.    Thats about $256B in debt total.     I don't see general information on the average interest rates for the loans.   One reference, in that 2014 NYT article says that some bundled loans averaged 18.4%.    Of course thats way higher than the average car loan in general which is currently around 3% (sourced again from NYT).    

In 2006, just a single year, $600B in subprime home loans were originated.   (from Wikipedia)

Outstanding mortgage debt peaked around $14.7T in 2008 (the fed historical data )     Before the bubble burst about 20% of new loans were subprime.  

I also don't see any sign that this is really any kind of bubble.    There have always been high interest rate loans on cars for people with bad credit.   This isn't anything new and the rate of borrowing isn't even hitting the rate from before the recession.   This is really more along the lines of "business as usual" than a bubble as far as I see.

High interest rate car loans are certainly a problem and have really difficult impacts to low income / poor credit rating people who get them.   The loans are also often associated with predatory lending practices.    I don't want to minimize the negative aspect of these loans and the drag they have on peoples finances.    

But there isn't a bubble in the sub prime auto loan market and even if there was, if it were to pop it wouldn't have 1/10 the impact that the great recession housing bust had.


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You Should Probably Buy a Used Nissan Leaf

I'm not trying to tell you what to do but, you should probably buy a used Nissan Leaf for your next car.

If you need a pickup truck for work or commute over 80 miles a day and your job lacks electric chargers then you can skip this article.

At least if you want a cheap vehicle.   Leafs are cheap to operate due to the electric drive train.   Its significantly cheaper to charge the battery in a Leaf than it is to fill a gastank full.   A Leaf is going to cost you around 2¢ per mile in electricity and a decent 30MPG car is going to run ~7¢ for $2 gas.   Leafs also benefit from a fat tax credit.   Lastly the Leaf will have low repair and maintenance costs compared to normal gas engine cars ( no oil changes, fewer moving engine parts things to break).

Edmunds has a True Cost to Own metric that figures the total cost to own a car for 5 years.   Below I compared several select, relatively economical and inexpensive car 2013 models.  

A selection of 2013 model year cars is below with the TCO, cash price and the ratio of TCO/price.

		TCO	cash price	ratio
Buick	Verano	$29,557	$12,039	2.5
Chevy	Cruze Eco	$26,434	$10,536	2.5
Chrysler	200 Touring	$28,388	$10,870	2.6
Dodge	Dart	$27,512	$12,449	2.2
Ford	Fiesta S	$23,066	$7,345	3.1
Honda	Fit	$25,119	$12,442	2.0
Honda	Civic coupe ex	$25,912	$13,789	1.9
Hyundai	Accent GLS	$24,510	$9,432	2.6
Mazda	3	$25,630	$12,084	2.1
MINI	Cooper	$29,959	$12,447	2.4
Nissan	Leaf	$19,652	$9,991	2.0
smart	fourtwo	$22,862	$5,320	4.3
Suburu	Impreza 2.0i	$27,664	$13,885	2.0
Toyota	Prius 2	$24,887	$15,212	1.6
Toyota	Corolla	$25,174	$11,300	2.2
VW	Beetle TDI	$27,785	$11,538	2.4

The Leaf comes as the cheapest car to own and operate.    I picked the 2013 model year pretty arbitrarily but you could also compare 2012 or 2011.

Some people worry about the battery life in a Leaf but they come with a 8 year / 100,000 mile warranty for the 2013 model year.    If you buy a 3 year old car and operate it 5 years you're likely to have warranty coverage for the battery the entire time.   And theres really zero reason to think the battery will fail shortly after the warranty expires any more than we'd expect a gasoline engine to explode a day after its warranty ends.

Financially a Leaf is a good choice.  

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Vehicle MPG by Income Level

This is kind of a random piece of data but I found it interesting.  

I got the numbers below out of a report titled Household Income and Vehicle Fuel Economy in California  That report is specific to California but its probably similar to national figures.    Its quite likely that trends differ some based on region but probably not by a lot.

Here is the table :

	gal/day	mi /day	MPG
$0 to $25k	0.9	20.7	23.9
$25k to $35k	1	24.1	24.6
$35k to $50k	1.2	29	24.8
$50k to 100k	1.5	36.7	25.6
over $100k	1.9	47.2	27
all incomes	1.3	31.7	25.2

People with higher incomes have more fuel efficient cars.   I'm going to hazard a guess that this is in large part because people with higher incomes generally drive newer cars and newer cars have gradually better MPG ratings.

People with higher incomes also drive more in general.   I assume this is a combination of factors.   A lot of lower income households are people who don't work or are retirees and thus have less need to drive.   And of course the cost of gasoline keeps lower income people from driving as much.

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Opinion: 50's to 70's Classic Cars Will NOT Appreciate As Well Moving Forward

Classic and antique cars have been a fairly good investment in the past.    CNBC wrote last year that Classic cars outperform global stocks.   Though that data only looks at cars over $500k so its not your typical car buyer.   But the general trend still holds.    Cars have been a good investment if you buy the right ones.  

I don't think this is going to continue as the Baby Boomer generation ages.   For two key reasons.  First they are going to gradually age and pass away and their cars will enter the market.  
Second the younger generations don't have the same nostalgia as the Boomers do for 50's 60's and 70's cars.

Fortune magazine has already reported what they saw as  The bear market for classic American cars back in 2014.   That seemed to be mostly 50s cars but I assume it will start with the older cars and then progress into the 60's as people age.

If you're considering buying a 60's or 70's car now and consider it an investment then I'd certainly be wary about the future value longer term.     For investment purposes an alternative might be to buy 1980's cars now.  Cars from the 80's are less likely to have collector value today but as the Gen X people like myself age some the value is likely to increase.       Tricky part is finding the right cars now that will develop into classics.    Hagerty has a list of THE GENERATION X TOP 40/40/40: THE 1980S subtitled "40 Collector Cars, Built In the Past 40 Years, That Cost Under $40,000".    Those kinds of lists can give you some ideas, but any such investment is speculative in nature.   Its feasible that us Gen X won't start buying cars of our youth as we have mid life crisis and increased disposable income.

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Is a $49 Monthly Lease for a Fiat 500e a Good Deal?

I heard a radio ad from a local car dealership leasing Fiat 500e electric cars for $49 a month for 24 months.   Sounded like an awesome deal but of course theres a minor catch revealed in the fast talking legally required disclosures at the end of the ad which is that it has $3400 due at signing.    Still that seems like a decent total cost.    You'd be paying $49 x 24 + $3400 for $4,576 total in two years.   Thats $2,288 a year.   Most new cars are going to depreciate that amount in a given year plus the 500e is electric so you'd save on fuel costs.

The 500e gets 87 miles out of a full charge.    The battery is 24 kWh.   At 11¢ per kWh that equates to $2.64 for a full charge and about 3¢ per mile.
A reasonably good MPG gas engine car might get 40 MPG.   With gas costing $3 per gallon that comes out to 7.5¢ per mile.
If I were to put 1000 miles a month on the car then I'd be paying $30 in electricity for the 500e versus $75 in gasoline for a gas car.

In total I might save up to $45 a month in fuel costs driving the electric 500e versus a gas car.  However thats the maximum savings assuming you hit the 1000 mile limit on the lease so your actual savings would be less or you risk paying extra on the lease for going over their 12,000 mile per year limit.

The net cost including fuel savings would end up at $2,288 for the lease minus $540 a year or $1,748.   I think thats a pretty good cost for driving a new car.  If I was in the market for a new car and a small car like the Fiat 500e would work for me I might consider such a lease.    However I might be better off buying a slightly used 2012 or 2011 Nissan Leaf for $10,000 to $12,000 range.

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I've Paid About 48¢ Per Mile to Drive My Car

I've owned my car now for over 8 years.    In that time I've just now hit 70,000 miles total.   I paid a little over $14,000 for it in 2007 and its worth around $4000 today.

I'm estimating my expenses but I'm probably pretty close in my estimates.    I figure this is likely correct within 10%.    I just don't have detailed accurate records of everything I've spent for 8 years, so I'll have to estimate.

The depreciation I figured using the current private party sales estimate value from Edmunds versus what I paid originally 8 years ago.

I figured gasoline costs based on using historical numbers for our city off of Gasbuddy.com     Those numbers are going to be a bit inflated since they're using the city average value and I pay below average prices for my gas.    For example right now the city average is about $2.90 and the station I go to has gas for $2.71.   

The costs for insurance, oil changes, tires, repairs & maintenance and taxes are all estimates based on my memory and there is more margin for error in these categories.  

Lastly I added a figure for the opportunity cost which is based on figuring 4% interest on the original ~$14,000 purchase price over 8 years.  I'm pretty sure I could have made 4% with that money.

Here's the summary of costs over the years and the totals :

depreciation	$     10,000
insurance	$       5,600
gas	$     10,182
oil changes	$          560
tires	$          500
repairs/maint	$       1,500
tax	$          400
opportunity cost	$       4,544
TOTAL	$33,286
per mile	$0.476

So the total cost there is $0.476 per mile or roughly 48¢.

Thats more than I'd have guessed.      

If I'd done a very quick almost off the top of my head calculation I think I'd have come up with about 30¢ per mile cost.   That would have been based on the $10,000 in depreciation, figuring "a couple thousand more for other stuff" and then guessing a price of $2.70 for gasoline.      I would have underestimated the cost of insurance and the opportunity cost.   And I apparently remembered the price of gas wrong over the past eight years, most likely because my memory is biased towards what I paid last week for gas more than 7 years ago.

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Does it Really Cost $8876 a Year To Drive a Car?

AAA says that the average cost to own and operate a sedan is $8876 a year.    Thats the result of their "Your Driving Costs" study.    Does that seem high to you?  

I knew for a fact that this is much more than what the average American actually spends.   We can see in the BLS Consumer Expenditure Survey for 2013 that the average household spent $9004 for 1.9 cars.   Thats $4739 per car.

I wondered how AAA figured it and you have to read  quite a ways into the article to find that they say:  " Ownership costs are calculated based on the purchase of a new vehicle that is driven over five years and 75,000 miles"

Ah, so they're really figuring the cost of a NEW car.   Well thats not really the same as the average cost of driving.  Its the average cost of driving a new car.

And the methodology they use sounds a lot like how Edmunds figures the TCO for cars.  I figured I'd check how AAA and Edmunds compares.    I don't see an average TCO cited by Edmunds anywhere but I can pick a few car models to get an idea.

AAA total for 5 years would be $44,380

Here's a sample of cars and their TCOs from Edmunds.
Toyota Corolla = $31,835
Honda Accord = $36.976
Ford Fusion = $40,085
Buick Regal = $45,493
BMW 3 series = $51,714

This puts AAA's figure more in the average or even closer to entry level luxury car.    I'd say the AAA number may be accurate as a true average figure as more expensive cars will skew the numbers upwards.

I think AAA's figure is accurate but its just an average for new cars and includes all the high end and expensive cars.

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What Will Gasoline Prices Do In The Future?

A few months ago gasoline cost about $3.80 a gallon.   Then it dropped considerably over several months to hit a low price around $2.10.    Now gas has gone up again and peaked around $3 to then turn around and drop a bit.     It doesn't take much research to see that these price changes are a direct reflection in the cost of oil.   Oil has gone down a lot in the past 12 months.    But will oil go up or down in the next 12 months?   What about the next 5 years?  

yes, no, maybe.

We don't know what oil will do in the next year or ten years.   You can really only take guesses at this kind of thing.    But we might get a reasonable expectation for the cost of oil and hence the retail cost of gasoline by looking at the history of gasoline and oil prices.

Energy.gov has data on inflation adjusted gasoline prices.   I've charged the numbers from 1972 to 2013 here :

If you look at the first 30 year period in that chart from 1972 to 2002 the cost of oil started around $1.50 and ended around $1.50 (both in 2013 dollars).   I would conclude then that over the longer term in that 30 year period oil basically rose at the price of inflation.    Of course there is a 10 year period there in the 80's when oil shot up and then dropped.   Now in the more recent decade from 2002 to 2013 we see oil has again shot up in prices.   That more recent increase in price would seem a direct result of major conflicts in the middle east.  

Gasoline prices are volatile. 

In the past 40 years gasoline prices have risen over the long term at least as fast as the cost of inflation.    In the most recent decade gas has risen at a rate about 8% faster than inflation.   In individual years gas has risen or dropped as much as 25% above inflation.   In a 5 year period gas has gone up as much as 80% over inflation.

Generally I'd conclude that gasoline will go up at least as fast as inflation in the long term.  In shorter periods we could see gas go up or down 25% a year and even double in cost within a decade.
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Diesel versus Gas Prices

Lately I've been  seeing a very steep premium for diesel fuel prices over the cost of regular gasoline.    One of the pricier stations had regular for $2.25 and diesel for $2.95.   Thats a 31% premium.   Of course thats just one example.

I found historical prices from the EIA .    The most recent numbers as of Feb 2nd (as I write this) says that the national average for gas is $1.98  and $2.86 for diesel.     Thats a hefty 44% premium for diesel.   I the EIA data and pulled out just the prices from the first week of each month.   Below is the trend showing the difference in prices for diesel over gasoline :

The current difference is abnormally high.   You can see the large spike for the most recent data which is way off the chart compared to normal.   Usually the % difference is less than 20% but now its hit over 40%.   

You can also see that it varies seasonally.     I plotted monthly prices for a few years 1995 to 2000 to see how the difference varies month to month. 

 
Generally diesel is around 5-10% higher than gas in the winter and then drops to ~5% cheaper

Overall diesel averages about 6% higher than gasoline over the long run.     The mean and median are both 6%.


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Auto Maker Market Shares for 2014

It seems to me that where I live there are a lot of Japanese cars on the road.   But in actuality the big 3 US brands are still mostly dominant.  It was not that long ago that Toyota passed Chrysler and Ford & GM are still the biggest sellers.

WSJ has data on auto maker market share.    I took the YTD figures for 2014 and made the chart below.  

8 names control the vast majority of the market but its pretty spread around between them. 

If you look at the major area the car makers are from then this is how its split up :

I'm a bit surprised the European brands don't have more of the market.   But I think those brands are more popular among my co-workers so I a higher % of them in our parking lot.  Or maybe I just see more ads about them then actually see cars on the road.

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Average Real Cost of Gas Spent Per Mile 1994 to 2010

Gas has gone up a lot in the past 10 years.   But at the same time  cars have become more efficient and due to general inflation costs have gone up in general.   If adjusting for inflation then what is the trend in spending on gasoline per mile driven given these 3 variables?   Well glad you asked, here's a chart :

The figures are in 2010 real dollars.

And in table format :

	real gas /mile
1994	$   0.056
1995	$   0.058
1996	$   0.061
1997	$   0.059
1998	$   0.050
1999	$   0.054
2000	$   0.068
2001	$   0.062
2002	$   0.058
2003	$   0.064
2004	$   0.074
2005	$   0.085
2006	$   0.094
2007	$   0.096
2008	$   0.106
2009	$   0.073
2010	$   0.084

 I got the data from :
Average auto fuel economy in MPG from the DoT Bureau of Transportation Statistics Table 4-23: Average Fuel Efficiency of U.S. Light Duty Vehicle
Average gasoline prices from the EIA
Inflation data is from the CPI report Table 24
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Is a Natural Gas Fueled Car a Good Idea?

In a recent article T.Boone Pickens said we should use natural gas cars more.   I agree in general.   Natural gas is more abundant and cheaper here in the USA than oil.   It doesn't require refining and is pumped straight to most homes.  Natural gas burns cleaner than gasoline too.

Apparently the only natural gas car out there is the Honda Civic GX.   They cost $25-30k which is about the same as a Civic Hybrid.     However the natural gas car should save you around $200-500 a year in fuel if you drive 15,000 miles a year.    There is also apparently a Ford F-150 truck option for CNG/LNG but thats a new option and I don't see as much on it.  They do say that tanks would cost $6000 to $9000 which I think would mostly make that kill that as far as cost effectiveness.

There are some state level tax incentives as well.  Apparently 20 states have some sort of incentive.   You can find it your state has incentives here.  Oklahoma gives 10% of vehicle cost up to $1500.   Texas rebates $2500.   Pennsylvania has a $1000 rebate.   I'm not sure about the details on the tax credits or rebates so you'd want to research that on your own.

How much you save with natural gas will vary though based on the cost of natural gas in your area.  The average price of natural gas nationally  is about $1 per therm for residential rates..   The natural gas equivalent to a gallon is about 1.14 therms.   So on average the cost is $1.14 for natural gas equivalent to a gallon of gasoline.      Natural gas prices vary across the nation.    The EIA tracks natural gas price data by state.  Its over $4 per therm in Hawaii and under $0.80 per therm in Colorado.

Prices at public fueling stations seem to be more than home prices.  Public stations tend to range around $1.50 to $2.50 a gallon.   A map of prices is here.

Honda does not recommend home refueling according to the  Civic GX owners manual.    "Due to the wide variation of natural gas quality for home use, Honda does not recommend the use of home refueling at this time"    I don't know if home refueling hardware does a good job of ensuring the gas is filtered properly or not.   If you did fuel at home you'd have to buy the refueling hardware and have it installed.  That can be as much as $6000 total bill.

Public CNG stations are limited.   This is a major draw back to natural gas cars and a key reason we don't see more of them.  But that makes ita  chicken-vs-egg situation.   There aren't enough refueling stations to drive demand for cars but lack of cars doesn't give incentive to open more refueling stations.   The Honda GX has only about 8 gasoline gallon fuel capacity and  mileage of 27 city/ 38 highway, so you can only drive around 200-300 miles.   
  
There is a map on the EIA site.   I captured their map below.

Source : EIA

Note the light red sites are private so only the dark red locations are of use to the general public.
Theres large sections of the nation with no refueling locations at all.  Looks like South Dakota doesn't have a single refueling station.   You'd have a hard time driving from Seattle to anywhere else I'd imagine given the lack of public stations outside the Puget Sound.   But refueling at your home exclusively would probably work just fine for most people.    A 200 mile local driving range is more than enough for anything but longer distance day trips.

Overall I like the idea of natural gas fueled cars and they can make sense.  Its cheaper to operate than a gas based car and some states have tax rebates to boot.    If you're looking at a Honda Civic or similar size car then the natural gas based Civic GX might be worth a look.  But I'd definitely make sure the finances make sense.  If you have to buy a home fueling station then that extra cost can make CNG car more expensive overall even with cheaper home natural gas.


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Gasoline prices are down 3.4% in the past 12 months

Its always news when the price of gas goes up.   Yet when gas drops in price it doesn't seem to generate front page headlines.   The Energy Information Administration tracks gasoline prices weekly.    As of 9/8 the national average is $3.534.    Last year on 9/9 it was $3.658.   Thats a drop of 3.4% in the past 12 months.    OK thats not much of a drop but its a drop all the same.


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JD Power Initial Quality Survey - 2004 versus 2014

I was wondering how much movement there is in the JD Power automotive Initial Quality Survey over longer periods.  I arbitrarily decided to compare todays results with those from 10 years ago just to get a look.

The 2014 IQS is on the JD power site but I found the 2004 IQS  at and old USA today article.

Here's the comparison from the 10 years :

	2014	2004	change
Porsche	74	159	-85
Jaguar	87	98	-11
Lexus	92	87	5
Hyundai	94	102	-8
Toyota	105	104	1
Chevrolet	106	119	-13
Kia	106	153	-47
BMW	108	109	-1
Honda	108	99	9
Lincoln	109	121	-12
Audi	111	109	2
Chrysler	111	120	-9
Cadillac	115	93	22
Mercedes-Benz	115	106	9
Volvo	115	113	2
Ford	116	130	-14
GMC	116	127	-11
Ram	116	121*	-5
AVERAGE	116	119	-3
Buick	120	100	20
Nissan	120	154	-34
Dodge	124	121	3
Land Rover	127	148	-21
Infiniti	128	104	24
VW	128	164	-36
Acura	131	117	14
MINI	133	142	-9
Subaru	138	123	15
Mazda	139	157	-18
Scion	140	158	-18
Mitsubishi	145	130	15
Jeep	146	136	10
Fiat	206	na

Now you can see that there are a lot of changes there.    Many brands when up or down quite a bit.  Overall the median change was -4 and the averages dropped 3.  So the general trend is down over the 10 years but individual brands are all over the place.

Wow, Porsche sure did turn around their quality!   They went from near bottom to the top.   Now you might be wondering how could that be?    Surely Porsche quality wasn't bottom of the industry just 10 years ago.   Well that brings us to an important thing about how the IQS works.      For that I will refer you to the Car & Driver article The Trouble With J.D. Power's Initial Quality Study. 
They explain that for the JD power Initial Quality Survey, the "quality" includes design features that people may or may not like.   So for example if you find the navigation interface confusing then you can get a poor quality result.   Thats a design deficiency but not exactly loose screws or squeaky breaks off the factory line.   When I think of car quality I think of defects in manufacturing where the car fails or breaks.  However the IQS survey also adds things like complaints about features.   For more detail on that read the Car & Driver article, also they show how the IQS numbers varied for a few brands over several years.    They also pointed out for 2011 that : "new and redesigned machines averaged 122 problems, and carry-over or lightly modified cars and trucks scored only 103 problems"   So newly designed cars with new and unproven features do worse. 

It would be better to look at multiple years of data and see how different car makers move up and down year to year over a longer period.    That would give a better picture.   Overall though I'd say the IQS should be taken with a grain of salt.   Its hard to know if makers are doing poorly due to new complex features or general quality failures.   I would say that if a car maker is typically at the lower quarter or typically in the upper quarter then thats a solid sign of their general quality.


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Beater Shopping - Borrowing Money to Buy a Car With Better MPG Can Make Sense

If you don't have a lot of money and you're shopping for a beater car you likely find that the cheapest cars usually have pretty poor fuel economy.   I believe people in the car market realize the value of better MPG and are willing to pay a bit of a premium for it and see the problem with a low MPG car and discount its value.   So the end result is that the  cheaper cars often have poor economy.     If you don't have a lot of money this puts you in a poor spot since it seems all you can afford is a car that will cost you more to operate.    I think in this situation it can make sense to borrow some money simply to buy a car with better fuel economy.

Lets look at some examples.   I looked on Craigslist and found a couple cars around $1000.   One was a 1994 Pontiac Grandprix that gets 20 MPG (17/26) and the other is a '94 Ford Explorer 4x4 which gets 17 MPG (15/20).    These are cheap cars and if you don't have much money maybe its all you can get.   But your gasoline bills are going to be pretty high.   If you drive 10,000 miles in a year at $3.50 per gallon then that Grand Prix will run you about $1,750 to fill the tank for just one year.   If you found a car that got 25MPG then it would be $1,400 and a 30MPG car would only cost $1,167. 

Paying a bit more can net you a car with decent mileage.  I found a 1996 Honda for $2000.   That car would get 25 MPG (22/29) and so the gas would run you about $1,400 a year.   So spending $1000 more on the car would save you about $350 a year in gas.  I also found a '99 Chevy Prizm for about $2000 which would get 29 MPG (27/34).   That car would run about $1,207 a year to fuel or about $543 less.

Note that I'm ignoring things like reliability here which of course you'd want to take into account as well.

Can you borrow $1000 somewhere?    Lets say the best you could do is a personal loan at your credit union at 12%.   Thats really high interest so hopefully you've got better options.    If you borrowed an extra $1000 to afford that Prizm with better MPG then your payments over 36 months would be $33 per month.   You'd save more in gas than your payments on the loan would be.     Or if you went with that Honda then your payments and gas savings would be about a wash.


Here lets compare the total cost of my 4 example cars if you look at what you'd pay over 5 years :

	cost	MPG	annual gas	5 year total
Grand Prix	$1,000	20	$1,750	$9,750
Explorer	$1,000	17	$2,059	$11,294
Honda	$2,000	25	$1,400	$9,188
Prizm	$2,000	29	$1,207	$8,222

The last column with the 5 year total includes 5 years worth of gasoline and the cost to buy the car.  For the Honda and Prizm I'm counting $1000 out of pocket and then 36 months forth of $33 payments on that 12% loan.   In the end the more expensive cars with better MPG are going to cost you less even if you finance their purchase at 12%.

Now don't get me wrong, I'm not saying you should borrow $25,000 to get a car with 40MPG.   The point here is that if you're looking for a beater car in the low end and have very limited funds than rather settle for the cheapest car you can find and pay out the nose at gas station, it can make sense to borrow some money to finance a car at the 2nd to bottom rung of the beater pile.

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Car Depreciation Based on Edmunds TCO

Edmunds.com has a measure of depreciation in their True Cost to Own data.   I figured their depreciation values must be based on some real data and should be pretty good figures.   So why not use their numbers to take a look at typical car depreciation?

I looked up the TCO information for several representative midsize sedans from nine different car brands to find the depreciation rates.  For the record I looked at a Toyota Camry, Buick Regal, Chevy Impala, Dodge Charger, Ford Fusion, Mazda Mazda6, Honda Accord, Hyundai Sonata and Nissan Altima.    Here is what I found :

Retained value over 5 year periods:

	year 1	year 2	year 3	year 4	year 5
Toyota	82%	71%	62%	55%	47%
Buick	79%	69%	59%	51%	44%
Chevy	80%	70%	60%	52%	44%
Dodge	75%	67%	60%	54%	48%
Ford	89%	77%	67%	58%	50%
Mazda	68%	59%	52%	45%	40%
Honda	82%	71%	62%	54%	47%
Hyundai	77%	67%	58%	51%	44%
Nissan	84%	74%	65%	57%	50%
average	79%	69%	61%	53%	46%
median	80%	70%	60%	54%	47%

The depreciation in the first year in these new models is lower than what people seem to perceive.  The commonly held belief is that a new car "loses half its value' when you drive it off the lot.   But the reality seems to be closer to losing 20% in that first year.   And it takes about 5 years for new cars to lose half their value.


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Avoid Buying Extra Services With An Oil Change

 I got my oil changed on my car today.   I pay to have the oil changed simply because I prefer not to do it myself and paying for it is generally almost as cheap as buying the oil.    However... the reason they're so cheap on the basic oil change is that those oil change places generally hard pitch extra services with a steep profit markup.    You can go in for an oil change and then they'll try to sell you an automatic transmission flush, new windshield wipers, cabin air filter change, a new kitchen sink, etc.

Don't Pay $40 for this

Lets look at one example.   The place I went to today wanted to change my cabin air filter.    They like to show you the dirty filter to help pitch the sale.   I asked him to check it, mostly out of curiosity.  He opened my glove compartment and pulled it out and showed it to me.   And yes it was pretty dirty.   I should probably change it.  But I knew from experience that filters are fairly cheap and easy to replace.   He confirmed how easy it is by pulling out the old one right in front of me.   I could do the same thing and pop in a replacement in probably 5 minutes total.    The price they quote for a new cabin air filter is "starting at $39.99".    I would hope my basic Toyota Camry wouldn't be more than the basic price but theres a possibility of spending over $40 on a filter replacement.

I found a FRAM CF10132 Fresh Breeze Cabin Air Filter for $11.75 plus $5 shipping on Amazon.   I found the same filter for about $8 with free shipping in a new opened box product on eBay.   I bought the $8 one from eBay with the intention of changing it sometime later when I've got a few minutes.

Wiper blades are another example.   I can install a pair of wiper blades in a couple minutes.   They wanted to charge $12.99 each and up  but I can find blades on Amazon for as little as $6.49 each like the ANCO 31-Series Wiper Blade.

They want $24.99 and up to do headlight restoration which is $50 or more for both lights.    You can use a DIY 3M 39008 Headlight Lens Restoration System kit for $15.18 and do it yourself.     Thats a savings of about $35 or more.  However the DIY work in doing it yourself can take a while.    Reports from users of the 3M kit on Amazon claim it takes 30-60 minutes each lens.  So thats 1-2 hours of work plus you need to own a drill to use the kit.

What about spark plug replacement?   Thats a big job isn't it?   Well the oil change guys want $59.99 and up to replace spark plugs.   This 6 minute Youtube video shows how to do it on my Toyota Camry and it looks fairly easy really.    You could do the 4 plugs in a 4 cylinder Camry engine in under a half hour.   The spark plugs run $2-6 each.   If you don't have the tools to do the job already you can buy those too for under $30.   The tools mentioned in the video are : 3/8-Inch Drive by 5/8-Inch Spark Plug Socket for $4.58,10mm Shallow Socket for $3.99, 3/8-Inch Ratchet for $14.95 and 6-Inch Extension Bar  for $6.04    All together you can buy the tools and the spark plugs for under $40 total and do the job in a half hour.

To sum up looking at the four examples above the costs that the oil change place wanted versus the parts cost on Amazon are :

	oil change	Amazon	savings
Air filter	$39.99	$16.75	$23.24
wiper blade	$12.99	$6.49	$6.50
lens restore	$49.98	$15.18	$34.80
spark plugs	$59.99	$40	$19.99

Now to be fair if you went to the auto dealer and asked for these services you'd probably pay even more than the oil change places charge.  Its not as if they're the worst deal in the world.  Some of the services aren't too badly charged.   A few bucks to install wiper blades isn't that bad really.   But the worse oil change places will use dirty tricks to con you into services.    I've heard of examples of places that will show you a dirty filter that didn't come out of your car.  One place I used to go to would try and sell me services that my own cars manual said were not necessary.   I'm not saying that this is normal but you should be on the alert for scams.

Bottom line :   If you should generally decline any added services pitched at an oil change and can usually handle such tasks with minimal DIY effort.


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Affordable Electric Cars

Electric cars are starting to get affordable.

Photo credit mariordo59

A search on Edmunds shows 4 electric car models under $30,000.   However all 4 are in the sub compact class so they're small cars.   If you're looking at cars in that class then an electric might make sense.   The electric versions have limited driving range but its enough to meet the needs of most people for local city driving.

Here are the four cheapest electric cars and their base MSRP:

Mitsubishi i-MiEV = $22,995
Smart fortwo Electric = $25,000
Chevy Spark EV = $26,685
Nissan Leaf = $28,980

(note that some cars may not be available nationwide, I didn't check)

If you then also get the full $7,500 federal tax credit for EV's then that makes the cars fairly affordable.  You do have to have $7,500 in taxes paid for the year to get the full credit since the credit is non refundable.   But a lot of people don't pay that much in taxes to the IRS so they would not get the full $7,500 in credit.

	MSRP	w/credit
iMiEV	$22,995	$15,495
fortwo	$25,000	$17,500
Spark	$26,685	$19,185
Leaf	$28,980	$21,480

These prices are getting more affordable but they still aren't nearly as cheap as similarly equipped gas cars.    


The fortwo and Spark have gas equivalents so I can do a rough comparison of costs to buy and pay for fuel between the gas and electric models.

	Spark EV	Spark gas	fortwo EV	fortwo gas
Cost	$19,185	$12,858	$17,500	$13,270
12 payments	$4,140	$2,772	$3,780	$2,866
Fuel	$307	$1,200	$278	$1,167
annual	$4,447	$3,972	$4,058	$4,033

In both cases the annual cost is higher for the electric cars if we just look at making payments and fuel costs.     My estimates are based on driving 12,000 miles a year, paying 10¢ per kWh and $3.50 for gas.     I also figured just making payments and financing over 5 years on 3% loan.  Of course you could pay cash up front and then figure the opportunity cost.

Given that the electric cars should have higher resale value and lower maintenance costs I'd give the edge to the electric models in both cases.  If you happen to live in one of the states like Georgia or Colorado with Colorado with generous tax incentives then it can be a no brainer to get the electric.


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Total US Auto Loan Debt From 1943 to 2013, real, nominal and % of GDP

Haven't you always wanted to know how much the citizens of the USA owed in auto loan debts in 1978?   Well today's your lucky day!   The answer is approximately $83.5 billion. Can't get enough of historical debt figures?   Well then read on!

I got the data off the Federal Reserve site : Consumer Credit - G.19 - memo - historical data
The inflation data is from the BLS CPI.   To make it a little simpler I just pulled out data for January of each year.    I assume that there aren't any major changes month to month really and if so they're likely seasonal in nature.

Here's the graphic :

(click image for full size)

Our auto loan debt has gone up pretty steadily over the past 70 years.    Even when adjusted for inflation the values have climbed pretty quickly.

In hindsight it seems pretty clear that the "Great Auto Loan Bubble"burst in 2005.   I mean just look at that red line up there!   pop!    I'm glad we all made it through that one.

I think its also always good to look at large financial figures like this as they relate to GDP.   So I got the US historical GDP figures from the BEA and plotted auto loan as % of GDP below.

There the change is less drastic as we bought more cars as our economy grew.  But still auto loan balances grew over the decades.   In the 1950's we were around 3% and then it peaked in now we're just at 4.9%.

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