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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Drive The House

Live in your car and drive your house could give you a financial edge. Previously I had commented on the idea of time shifting. Let’s look at another type of shifting; resource shifting. There is a finite amount of resources no matter who you are. You only live a certain amount of time, you only can earn a finite amount of money, etc. So it would be best to take a step back and re-evaluate the what are your resources spent on.

HausDriver

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Can Having Patience Make You Money?

I was watching a movie the other day on my VCR. The movie was” Nightmare on Elm Street” 1984 version. The tape was priced with a sale sticker of $15.99. I had bought the movie in the early 90s. I see the same VHS movie for about $5.00 on Ebay. In 20 years it decreased 2/3 in value. The DVD version was going for $6.00. BluRay was valued at $3.99 .

The cost of movies has gone down with better quality. The same for many consumer goods. Which begs me to think what can I wait to purchase and purchase for less? I still use a standard def – Tube TV 33″ while I know friends who payed top dollar for HDTVs when they first came out.

The first one I remember seeing was a 16:9 tube 1080i resolution 33″ HDTV for about $5700. Now I can buy the model for about $200 on Ebay. When it is said “patience is a virtue” it might have to do with the fact if you are patient you might be able to be build diligence as well.

Red – Eared Slider : 
Patience is required when they cross the road
 

The economy of patience is as follows:

  • patience allows for depreciation
  • patience allows for time for better choices
  • patience allows time to save more money; paying cash then using debt which cost more in future time
  • patience allows for better versions of products to be made (computers getting exponentially better)
  • patience allows for products to be made for more economically  (think TV manufacturing cheaper)
  • patience allows for time to not be taken by quick scams or high pressured sales
  • patience allows for competition to crop up and drive prices down
  • patience allows for the growth of small rewards into big rewards (think DRIPs)

Just remember: Be Patient because Time is on Your Side

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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Use Time To Make Money

I was watching a movie the other day on my VCR. The movie was” Nightmare on Elm Street” 1984 version. The tape was priced with a sale sticker of $15.99. I had bought the movie in the early 90s. I see the same VHS movie for about $5.00 on Ebay. In 20 years it decreased 2/3 in value. The DVD version was going for $6.00. BluRay was valued at $3.99 .

The cost of movies has gone down with better quality. The same for many consumer goods. Which begs me to think what can I wait to purchase and purchase for less? I still use a standard def – Tube TV 33″ while I know friends who payed top dollar for HDTVs when they first came out.

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Car Depreciation Ripples is Cash

In my previous post of Value Drops in Cars is Your Gain I focused upon the depreciation of the general purchase price of the car. Do you think depreciation can save you more bucks? There is a ripple effect of the depreciation.

The Ripples of Depreciation are:
  1. Sales Tax
  2. Insurance Costs
  3. Finance Costs

The first ripple starts with the tax value of the car. If the purchase price is decreased then the sales tax is decreased by the same ratio.

Purchase Price and Atlanta, Georgia Sales Tax

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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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