Howdy, Stranger!

It looks like you're new here. If you want to get involved, click one of these buttons!





Justifying Repair Expenditures Exceeding Market Value

hpmctorquehpmctorque Posts: 4,193
There are times when people spend more on repairs than the market value of their old car. I can understand if someone has a car they absolutely love, but can this ever be a reasonable decision, from an economic standpoint?

This discussion is about someone who knowingly decides to repair rather than to sell, trade, donate or scrap their car. It's not about investing in a new transmission, and then, two months later, learning that the radiator and water pump are shot too, and replacing these as well. In other words, this isn't about being nickel and dimed, but, rather, on consciously deciding to spend something more than the retail value of the car, for repairs.

Shifty, maybe this discussion should also be included in the Maintenance and Repair board, if you think that's appropriate.
Tagged:

Comments

  • Mr_ShiftrightMr_Shiftright CaliforniaPosts: 44,634
    Yeah, good suggestion!

    MODERATOR

  • isellhondasisellhondas Issaquah WashingtonPosts: 17,665
    Are we talking about modern cars or collector cars?

    On collector cars people often far exceed the value of the car when a restoration get's out of hand. They know this going in but they still do it.

    I know a guy who is having a 1953 Mercury professionally restored. He send the shop between 1000.00 and 6000.00 every month and this will be a three year ordeal. It'll be a Trailer Queen. He was telling me how much just the chrome work will cost and it's staggering. It sounds like he will have north of 150,000 in it when it's done.

    Now, on a modern car, the cost of a transmission job or even a big repair job can easilly exceed the car's value. People do this too.
  • andre1969andre1969 Posts: 21,914
    Now, on a modern car, the cost of a transmission job or even a big repair job can easilly exceed the car's value. People do this too.

    I can see the justification in that, under certain circumstances. For example, when I had my 2000 Intrepid, I would have been willing to replace the transmission if it went out. I think a tranny in that car is about $2500-3000. When the car got totaled, I got $2,000 for it. My reasoning is that the car was running well otherwise, and if I had the work done, I'd know I at least had a $2,000 car with a good transmission, that would probably be reliable for awhile. On the flip side, I could ditch the car, find another $2,000 car, and have its transmission go out in a couple months, and be right back where I started.

    Of course, there's always the chance that I could put $2500-3000 into the car, and then have it get totaled a month later. But that's the chance you take when you're driving an older car.
  • hpmctorquehpmctorque Posts: 4,193
    We can talk about modern and collector cars because the reasons for spending more than a car's retail value on repairs provide interesting contrasts regarding the economic and emotional rationales for making these decisions.

    As your example of the owner of the '53 Mercury illustrates, there's a distinction between rational and rationale. This gentleman's decision is probably not rational, from an economic or investment standpoint. However, his rationale for this restoration is probably something along the lines of, hey, I want to restore this car, and I can afford to do it. Nothing wrong with that. It's his car, his money, and it's a free country. I wouldn't choose to put that kind of money into a '53 Mercury, or any Mercury, for that matter, but I respect this man's decision.

    By contrast, andre's line of reasoning represents the economic thinking of those who choose to invest in more modern cars.

    In case you're interested, I posted my situation with my '87 BMW 325 on the Maintenance and Repair board, and got some really good, albeit contrasting, suggestions.
  • isellhondasisellhondas Issaquah WashingtonPosts: 17,665
    When it comes to old cars, I think a person is FAR better off buying one that is already "done".

    The over restored Trailer Queens that go through Barrett-Jackson don't do a thing for me. As overpriced as (I think) they are, it's pretty doubtful that a person could buy a rough car and have it brought into that condition for what they sell for.

    I respect my friend's decision to restore that '53 Mercury. He has no wife or children;and (I guess) money to spend freely.

    I wouldn't do this but it's his choice. Good for him!

    In the case of Andre's Intrepid. OK, a 2000.00 car needing a 2500.00 transmission? With a bad transmission on a high mileage 10 year old car, that Intrepid is basically totalled. BUT, if Andre feels confident about the car otherwise. I agree with him. Fix the car and drive it if it seems OK otherwise.

    It's a tough decision because the question is, what's next? An old car can quickly become a money pit but not always.
  • hpmctorquehpmctorque Posts: 4,193
    I agree with each of your points.
  • euphoniumeuphonium Great Northwest, West of the Cascades.Posts: 3,325
    The car needs to be repaired to be a viable trade in so after it is fixed, you might just as well continue to drive it. After all, the next owner will run it.

    Because people I know will buy my used cars, I always keep them maintained. :)
  • 0patience0patience Posts: 1,542
    It isn't uncommon for people to pay off their vehicle, then still keep taking the payments out of their budgets to cover repair costs.
    One couple I know have a seperate bank account where they still put the car payments they no longer make in that account. When the vehicle brakes, the use that money.
    Some people will make bank to their repair shop who track their monies.
    You'd have to really trust your repair shop to do that. (small towns et all)
    Some will pay for extened warranties. Sometimes they pay off, sometimes they don't.

    In some shops, the other option is to make payments to a repair shop.
    A lot of folks do that to me.
  • Mr_ShiftrightMr_Shiftright CaliforniaPosts: 44,634
    If you owned a Porsche and recently got married, you could open up a bridal registry at the local repair shop.

    MODERATOR

  • michaellnomichaellno Posts: 4,300
    My dad bought a 1970 Chevy C-10 pickup, new.

    He's put about 140K on the body in 40 years, and had the top end of the engine rebuilt just before it turned 100K.

    About 4-5 years ago, he spent about $6K to redo the body. New paint, new rubber gaskets around the windows, new spray in bedliner.

    Now, the truck looks almost brand new. Was it worth it? To dad, sure. I know he's turned down offers of $8500 for it in the past. Not sure what it would bring now.

    In his mind, the $6K was a better deal than $15-20K for a new truck that gets driven maybe 3000 miles a year.
  • Mr_ShiftrightMr_Shiftright CaliforniaPosts: 44,634
    I think $6K is justified on an otherwise sound '70 C-10. These trucks have some value at least and the wise man knows that investing in cosmetics always brings more value than investing in mechanicals.

    You can resale a good looking vehicle that's all worn out underneath much easier than one with a rebuilt drivetrain and a rusted, banged up body.

    MODERATOR

  • hpmctorquehpmctorque Posts: 4,193
    edited February 2010
    The "3000 miles a year" is an important factor in justifying whether to spend more on repairs than the market value of a vehicle. With depreciation on a new or late model used vehicle being such a significant component of the cost of ownership, amortizing the higher cost to repair an older may compare favorably with the depreciation on a newer vehicle. The probability of this being the case is higher if the yearly miles driven on both vehicles (old and new) is low. If you drive a lot of miles, then the higher repair costs on an older vehicle could exceed the depreciation on a newer one over time.

    What I'm saying is that annual mileage matters.
  • Mr_ShiftrightMr_Shiftright CaliforniaPosts: 44,634
    true enough on paper but I'm wondering if we have to grant the older vehicles something more than utilitarian status. Some people get their money's worth just looking at a nice old rig sitting in the driveway, and bragging about it. It's hard to brag about your Taurus.

    MODERATOR

  • michaellnomichaellno Posts: 4,300
    I had a chance to drive the C-10 about a month ago on a visit to see the folks.

    Dad had the brakes redone - I don't know exactly what he did, but they have become quite 'grabby'. I mean, like 1" of pedal travel will throw you against the steering wheel. Very hard to modulate. I drove it around the block, then parked it.

    Spent the rest of the week driving their '03 Hyundai Sonata.

    Here's a picture that I took not long after the restoration was done:

    image
  • hpmctorquehpmctorque Posts: 4,193
    I would agree that you have to like the old vehicle, and assign some value to the strict cost per mile comparison between old and new vehicles. Similarly, the peace of mind of a new car warranty has value. There's no question that there's a subjective component to the fix it versus trade it evaluation.
  • hpmctorquehpmctorque Posts: 4,193
    Nice truck! I can see why your dad wanted to keep it.
  • michaellnomichaellno Posts: 4,300
    Nice truck! I can see why your dad wanted to keep it.

    When he bought it, mom told him it would be the last truck he'd ever get, so I'm not surprised that he's kept it all these years.

    I don't think it's ever been more than 250 miles from home (this is in Southern California)

    If he were to sell it and get something else, I don't think anyone in town would recognize him.
  • andre1969andre1969 Posts: 21,914
    If he were to sell it and get something else, I don't think anyone in town would recognize him.

    I've gone through something similar. My Granddad died way back in 1990, but I've still run across one or two people who recognize my '85 Silverado as his truck!

    As for the grabby brakes, I had to have the rear brakes on the '85 done about a month ago, and they were incredibly grabby until they "broke in", I guess. I've seen that happen before on some vehicles.
  • watkinstwatkinst Posts: 122
    If you like to save money and like to have nice cars - do your research - I'm talking major research dig up every little bit of info on the car you can. Everything from paint quality - engine history - transmission history etc. Make sure there are no well known major failures with the model you want to own.

    Buy a good one probably from a private owner not a rental return sold by a dealer after buying it cheap at the auction lot.

    Then read up on it so you know when the shocks start going bad - how long brake pads generally last - how long the rotors generally run. And keep the car for a very long time 10+ years. If you don't want to do the maintenance your self at least know enough to BS with the service guy- ask them what price they are selling the new parts to you for. Almost instantly they will knock off 15-20% on the parts costs just so that when you compare parts prices they fall in the average price range vs your discovery they are ripping you off with high priced parts.

    If the car is in great shape - is a quality car with a good reputation of being durable and long lasting - yes dropping a few thousand in it to repair original parts that have had a long life is probably worth it. Much cheaper than buying a similar car new.

    Once the car has reached the point where its just flat worn out and not dependable enough for your needs - replace it with another well researched - used - owner sold car. You'll save thousands and thousands of dollars over your life time. Put that money into a nice house - great trips a retirement fund. Your friends who crack jokes about your old cars won't be cracking jokes when your retired and they are still working. Or when you buy that really nice house and they are still struggling with owning a condo etc.

    Cars are the largest expense and worst place to put your money.

    My wife and I have
    2001 Jetta 1.8T 5spd 55,000 (hers)
    2001 Legacy GT 5spd 160,000 (mine)
    1993 Landcruiser bought from original owner dirt cheap at 104,000. We put about $3000 into it over 6yrs replacing original worn out bits - its been flawless and is now at 140,000.

    The only reason I'm researching newer vehicles - the Subaru is tired and the old LC gets horrid milege. I'd like to replace both with a fuel efficient large SUV. My only choice appears to be the MB GL CDI. So I found a mechanic locally I've been talking to him about common repairs and service costs. Checking out the model years for any common major product issues and looking at the dealer buyback values for lease returns.

    So far it looks like an 09 coming off lease in late 2010 with 25-30,000 miles on it could be had for around $38-40,000. 08's still have some mechanical issues left over from the 07 disaster of a year. The 09's are proving to be much better regarding properly working systems and no major engine or running gear issues.

    Porsche - I have a few co-workers with them. They all had issues till one found a new mechanic. He told them to do track days at least once a month. This was a few years ago. Since then outside of replacing tires once a year they have had very few issues. Turns out doing track days gets the old juices really flowing in the Porsche and helps reduce the number of issues that crop up with the daily stop and go grind to work.
  • euphoniumeuphonium Great Northwest, West of the Cascades.Posts: 3,325
    Your friends who crack jokes about your old cars won't be cracking jokes when your retired and they are still working. Or when you buy that really nice house and they are still struggling with owning a condo etc.

    The above is very very true. We're retired & still driving our old cars, 94 & 95 garaged in a really nice house, on the hill. ;)
This discussion has been closed.