How do you factor scheduled maintenance costs into vehicle value?
How are you supposed to factor in cost of scheduled maintenance when valuing a car? I'll use a 2006 Toyota Camry LE V6 as an example. The maintenance schedule calls for replacing the timing belt at 90,000 miles or 108 months. Let's assume that a timing belt package for that car will cost $750. When I look up the value of the car, what does the price reflect about those kinds of maintenance costs? For a car like this the cost of maintenance like that could be +/- 10% of the value of the car.
Say there's a car with 90k miles that just had a timing belt package done, is its value book value, or book value plus the cost of the job, or something in between? Looked at another way, a car that has 90k miles that hasn't had the job done is worth book value, or book value minus the cost of the job, or something in between? Obviously (all else being equal) both cars aren't equally worth book value.
As an experiment I looked up the Edmunds TMV for a 2006 Camry LE V6 (same color, same zip code, same [default selection of] options, clean condition). At 89,999 miles it says the private party value is $6,910. Bumping it up to 90,000 miles returns a value of $6,203, shaving about 10%. Is that supposed to reflect something about scheduled maintenance costs or just a general perception that the car has hit a milestone that significantly decreases it's value? I'm skeptical that it's that abrupt in the real world. All else being equal I'd much rather buy the car with 1 more mile for 10% less.
The tool lists the same "mileage adjustment" to the price in both cases.
Best Answer
-
Options
stever
Guest Posts: 52,454
Another tool that may help is the True Cost to Own tool although it only goes back to the 2008 model year for the Camry and out to 60k miles (we assume 15,000 miles a year as the average). Might help you narrow down the numbers, but generally I don't think a "repair" helps increase the value of a car much at all, although it can help it sell faster.
5
Answers
So that tool assumes you're buying a car of that year now, with average mileage for the year (age), and driving it for up to 5 years at 15,000 miles per year?
I'm not sure I understand what you're saying. I'm not talking about a random repair that can come up unexpectedly and needs to be done to bring the car back to par. I'm talking about scheduled maintenance that has to be done at a predictable time (or mileage) or else the car will fall below par. If you have 2 cars that are identical except one has had the timing belt done and the other hasn't, obviously the one that's had it done is worth more. So when using the book value as reference to negotiate the price of a car, how would you factor in known scheduled maintenance costs like that? Is the book value supposed to reflect the value of the car with all scheduled maintenance being done? And how do you account for the cost of scheduled maintenance that'll be due soon, e.g. in 1,000 miles?
I think you're right wever, but that it only really matters when valuing rather exotic and expensive cars, where scheduled maintenance costs, if deferred, can be substantial. Otherwise, the cost of maintenance has already been factored in by the mileage recorded on the ordinary used car.
Yeah, the TCO tool projects your future 5 year costs based on buying the car now, with typical mileage. So that $8,777 '08 Camry CE will cost you $32,118 over the next five years.
You can appraise used cars here and play with your repair scenario by choosing "clean" or "average". Going from clean to average on an older car can easily knock the price down by $1,000. But in the real world everyone always wants to say their car is in clean or outstanding condition.
Your example is an especially good one and I composed three paragraphs about my own timing belt experiences, but I get long-winded so I'll leave that for now.
Back to your original question, yes, doing the maintenance will increase the book value. But books don't buy cars and that's where I get hung up.
I think book prices presume up to date maintenance--that would be a "clean" or "excellent" car, in the guide standards.