When to sell your old car

Hans-Georg's picture
Wed, 2008-01-23 15:13 by Hans-Georg

These are a few thoughts from the point of view of a hobby economist and friend of old cars. (I have a 1970 Jaguar E V12. :-)

I hear people say that one should sell an older car "before the expensive repairs begin". I've always found this logic questionable. I'd rather say that one should sell an old car when its technological disadvantage becomes too big, compared to a modern car (unless you, like me, like old cars).

Unless you're buying a particularly fuel-efficient car, forget about fuel efficiency—old cars often need less fuel than newer ones, perhaps because they are lighter. The more interesting aspects of new car technology are security, electronics, convenience.

There is no clearcut point in time, when "the expensive repairs begin". A car engine can run for up to 200,000 miles before it needs to be overhauled or replaced. Clutch, transmission, etc. may live even longer if they aren't abused. Other parts like wheel bearings are not that expensive to replace. A car can live for 10, 11, 12, or more years before its body shows significant decay. I still use a Mercedes 190 that is now (in 2013) 23 years old and still has not needed any major repair, though minor things fail from time to time. It has always taken me to my destination and never failed me, apart from two incidents that were at least partly my own fault.

From an economic point of view the problem is that, when the need for an expensive repair is already obvious, it is too late to think about advantageous selling. Unless you cheat the buyer by making him believe that the car is perfectly allright, it does not matter much whether you repair the car first or sell it in need of repair. Under the line it should come to about the same. Effectively you have lost the cost of the repair as soon as its need becomes obvious.

Equally flawed is the notion that after the first big repair you should expect more big repairs soon. That is simply not so, provided the body of the car is still allright. Fortunately body corrosion can be checked and ascertained, and you should do this before it is too late. But even local body corrosion can often be repaired without costing you an arm and a leg.

Even if you have experienced an unlucky chain of repairs, it is still questionable to treat that as a reason to sell the car. If anything, it should be a reason to keep the car, because every repair that has been done increases the utility value of the car (though not necessarily its market price, or not by much). But every repair that has been done also decreases the likelihood of another repair, because after each repair you have one component less that is likely to cause trouble.

I think without detailed knowledge the probability distribution of the possible major repairs of a car are roughly Poisson-distributed, and one isn't much correlated with the other. In other words, an early engine repair doesn't mean that the transmission will also have to be overhauled or replaced soon.

What I could understand is that somebody should sell a car that has done its 200,000 miles without needing any big repair, because the advantage of selling it without having to lose any big repair costs could be considerable. However,

  1. you can still not be sure whether or not the car would run for another 100,000 miles without needing any big repair, and
  2. another 100,000 miles and another couple of years of use may well be worth one big repair.

In short, the inclination to swap an older car for a newer one is often exaggerated.

Add to this that the making of a new car is not particularly environment-friendly, a fact that is conveniently ignored by politicians pretending to want to "help" the car industry.

When to sell your old car? Lifestyle choice.

Sun, 2008-01-27 16:50 by Nickcherryhill

You make some valid points.

Lifestyle choices govern the ultimate decision. If you don't care about being seen in the latest and greatest, it often makes sense to keep a vehicle for 15 years.

While there's a serious flaw in the logic of a big repair bill means there are more coming, the other side of the coin is that just because you just had some major repairs there won't be any more. The modern, very complex, vehicle is capable of generating essentially an infinite number of $ 300 or $ 400 repairs every couple of months, based on personal experience.

I think the German TUV system makes choices there different than in the US.

The AVERAGE US car on the road is about 9 years old. Our average mileage is around 15.000/year but not very evenly distributed.

I had a 1997 Audi A4 that I sold when the cost of repair was about the same as the value of the car. It had about 130.000 miles on it. The transmission and engine were in great shape. It was the front end suspension that cost a lot of money. I needed my third steering rack, for example. They ran $ 1,200 to $ 1,500 each.

I had that car for over 8 years. It cost me over $ 100 per week each and every week I had it in original cost and maintenance.

For that $ 400/month I could lease a brand new $ 30,000 car and get a new car every 36 months.

At the other end of the spectrum, we have my father's 1993 Honda Accord. It has 60,000 miles on it with the original engine and transmission. I won't mind spending $ 1.000/year to keep it running.

One major reason that Honda and Toyota have such a large following and market share in the US is that they are unbelievably reliable. It's common to go 150.000 to 200.000 miles with NO major repairs of any kind. The only expense is routine maintenance.

Once you get around 200.000 you can rest assured a new transmission( $ 3.000+ or new engine $ 7.000+) is coming at some point.

However, each month you get by with the car and don't buy a new avoids depreciation which is really the big killer in auto expense.

If you want to make the choice even more complicated, factor in the costs savings of not needing full coverage insurance. It's probably $ 1.000/year, or more, to fully insure a new car over the older car which doesn't warrant collision coverage.

Nick Cvetkovic

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.