Depreciation Applied

In the past I did a WAVE-B Drive Free project. The starting car was a Ford Windstar Mini-van which was sold for whatever I could get for it. That money plus my small nest egg of $3,500 was used to buy a 1994 Honda Accord. One year and a half from then I sold it for about what I purchased it for and added that to the money that was saved to purchase a 2012 Honda Accord cash. The purchase price for the 2012 was $15,000 + registration, fees and tax ($17,000 total). The miles on the car was 26,000. The question I have is: what was the depreciation of this car to this point?

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Talk is Cheap – Action is Priceless

Talk is cheap – Action is priceless. The worst word in the world is “but”. It is the seed of excuses. The excuse seed flowers into realized failure. Recently I had someone tell me they could not buy a good car with cash. As I questioned why not, they had every excuse they could think of with all comments prefaced with the word “but”.  My personal opinion is they need a “but lift”…

Brazil Butt Lift“Brazillian Butt Lift” fitness program – Lifting Excuses One “But” at a Time

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Red X Drive to Freedom

1994 Honda Accord

Almost Sportscar 1994

The WAVE-B Free Ride Project hit a major milestone. The Almost Sports Car‘s service to my family has ended. It has 194000 miles on it and it has served it’s purpose. Now it is going to serve a college student who has no car but, needs one due to a loss of a transmission in an older car. The recap of the car is as follows:

$ 3400 cash to purchase in June 2013. This is 18 months which is 8 months past the initial plan of 10 months. The car is 21 years old so it is a little bit past it’s prime. We saved $120 per month in gas price for a total of $2160 over the previous car (Ramsey Rover) The time with the 1994 Accord wasn’t wasn’t all economically rosy. I had to replace the computer after we decided to keep it past the 10 months. This with a ball joint and some other minor parts added about $1600 to the price of the car. Most of the parts were over a period of time so the costs were not that hard to absorb economically (just emotionally). There were some upgrades like new tires that included a full size spare and rim included with the after purchase costs.

The bottom line costs of the car was a out of pocket $5000. If I subtract the gas savings of $2160 and the what I sold it for ($2500) the net cost is $340. I had a couple of offers for the car at the same price I bought it for but, decided to sell it to a college student at a discount on the term of she has to set a budget that included a $1000 emergency fund. If I had sold it for what I purchased it for I would have effectively been paid to drive the car $560 for 18 months compared to my previous vehicle.

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Free Ride Project – Edmunds Style

Good ideas have legs. The Dave Ramsey “Drive Free for Life” has been duplicated by and of Edmunds.com. The idea has been sited in Australia as I posted previously. The name of the Edmunds duo’s article is “The Debt-Free Car Project“.

1996 Lexus ES 300 – Model of the Edmunds Duo

 

I think the Edmunds Duo did a great service by writing the article. They have a knowledge of cars which would help anyone trying to work the Dave Ramsey plan. There is a little bit of reflecting I would like to take from their project which relates to mine.
It seems Edmunds followed the same steps I did to find a car:
  1. Choose a reliable car
  2. Set a budget for the car and stick to it
  3. Have a repair budgeted in with the purchase
  4. Plan on preventive maintenance
  5. Prioritize repairs / maintenance
  6. Look for savings by DIY where you can

There were other considerations for me that weigh more on my project than theirs like MPG and cost of replacement parts. That is one of the reasons I focused in on a 1993-1997 Honda Accord 4 cylinder. If I really wanted to push better mileage the Honda Civic of the same age would have been the optimal choice.

Below is my breakdown of the comparison of the two projects. Note my project is only 9 months long so far and I estimated the mileage for the rest of the 12 months to the 9 month average. This way there was some working numbers.

WAVE-B – Edmunds Comparison
Dave Ramsey’s starter car was added in as an illustration of where some details needed to be addressed (and where by the Edmunds Duo). The risk of over bearing repairs could make a project like this a money pit. (although usually not as much as financing)
One of the most interesting part of the article by Edmunds is the importance of purchasing well. (reliability, negotiating , and avoiding scamers) How you buy is a big factor if you have a successful project for yourself. Negotiating well is often overlooked when purchasing but, directly effects the bottom line. It reminded me of a podcast on NPRs Planet Money : An FBI Hostage Negotiator Buys A Car.

Ronald Montoya was very detailed with why and how they thought about any decision they made with their project car. He even does a little tip of the hat to Dave Ramsey at the end of his article. It was one of the best real world articles on car purchasing I’ve read and I encourage you to read it as well.

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Value Drops in Cars is Your Gain

Value drops in cars is one of your best tools to have during a car purchase.  It is a double edged knife as well. If you purchase a vehicle at the wrong time it will cost you money.

A car has a natural depreciation cycle. If you can map the cycle and make your purchase accordingly you can make a value purchase. Of course there are many other factors to purchasing a car but, depreciation is the biggest factor to determining how much you pay for a car.

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WAVE-B Free Ride Project 2013 Report

This is the first progress report of the “WAVE-B Free Ride Project“.  When we begun this experiment we had the following cars:

  • Car A: Ramsey Rover – 2000 Ford Windstar Mini-Van with around 208,000 miles
  • Car B: Green Machine – 1998 Jeep Cherokee with 230,000 miles
  • Savings assigned to car: $4000

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