Low End Sedans (under $16k)

backy · May 2004

No--why do you ask?

grandtotal · May 2004

An honest, sincere question- you are not employed in any finance or accounting related field, correct?

I'm not either, but I agree with Backy.

If you buy a $20K car and it depreciates to $10K over 5 years it will cost you $10K assuming you pay 0% interest. That's $166.67 per month.
If you buy a $15K car and it depreciates to $6K over 5 years it will cost you $9K assuming you pay 0% interest. That's $150.00 per month.
If you pay interest at a modest 5% those numbers become $230.38 and $194.84 per month effective cost. The gap is larger than in the 0% case because you are funding a larger amount in the first case.

alpha01 · May 2004

But what is your point? We're not talking about monthly payments here, we're talking about retained value.

For the vehicle that costs $15K initially and depreciates $9000, you're getting less usage out of the car per % depreciation. For the vehicle that costs $20K and depreciates $10,000, you're going to get more usage out of it, either in time, miles or both.... before it drops to the same % of retained value that the $15K car did. You are not $1000 "ahead" in the $15,000 in anything other than PURE dollar terms.

That may work for you, fine. But you're actually behind compared to the car with greater retained value, because you're paying MORE for the same amount of use, in terms of resale (=retained value/MSRP).

In other words, compared to the $20,000 car with lower depreciation, you are essentially bearing a greater part of the burden of the original price of the car than is the second hand owner. In my opinion that does not save you money, but rather, saves the second hand owner money.

Backy, I think you do understand my point, because I made the illustration of the Cavalier vs. the Elantra, which proves your theory (that cars with greater MSRPs have greater resale) incorrect.

I asked if you were in Finance or Accounting only because the logic you use (and I understand where its coming from, Im not knocking you at all or anything, I think this is a GREAT discussion) would go against most principles.

~alpha

backy · May 2004

I am not in the Finance or Accounting business, but it doesn't mean I'm a dummy in that regard. I am a math major (including lots of work on logic and proof) and have an MBA, and have worked in the business world for 25 years, so I have some knowledge in those subjects.

IMO all you are doing with your talk of "burden" and so on is obscuring the important fact that by buying the $20k car that has a $10,000 value after 5 years, you are $1000 poorer (just considering depreciation) than if you had bought a $15,000 car that has a value of $6000 after five years. And as for getting more use out of the $20k car, that is inaccurate because in this scenario you will buy one or the other, and you would get the same use out of either one.

If you don't agree with my logic, that's fine. But I think saying my logic goes against "most principles" is unsubstantiated.

alpha01 · May 2004

I was very polite and respectful, I dont appreciate your sarcasm. And I never implied that you were a "dummy". EVER. What I did do, and you seem not to recognize, is say that I appreciate this discourse.

For the record:

"And as for getting more use out of the $20k car, that is inaccurate because in this scenario you will buy one or the other, and you would get the same use out of either one."

FYI: I didnt say "more use" I said "For the vehicle that costs $15K initially and depreciates $9000, you're getting less usage out of the car per % depreciation." This is a true statement.

Lets say the each car has 30,000 miles on it. The $15,000 car with resale value of $6,000 in 5 years has depreicated 60%. So, in 30,000 miles, you've lost 60% value.

The $20,000 car is worth $10,000 in 5 years. In 30,000 miles, you've lost 50% of value. To lose 60% holding the time of 5 years constant, YOU MUST DRIVE MORE MILES in this car. Therefore, as I correctly stated, "For the vehicle that costs $15K initially and depreciates $9000, you're getting less usage out of the car per % depreciation."

"But I think saying my logic goes against "most principles" is unsubstantiated."

Perhaps instead of "principles" I should have used the word "practices". In either case, the only factor you are considering in our discussion is the $1000. You state "IMO all you are doing with your talk of "burden" and so on is obscuring the important fact that by buying the $20k car that has a $10,000 value after 5 years, you are $1000 poorer (just considering depreciation) than if you had bought a $15,000 car that has a value of $6000 after five years." Fine, you're $1000 "poorer" in raw money terms. But theres a lot more than just the raw terms, and that is all I am trying to get you to see. Despite being "richer" by $1000 buying the $15,000, you've LOST a much greater percentage of the assets value. Explain to me how that is good?

This is fun,
~alpha

backy · May 2004

I'm sorry you didn't appreciate my attempt at a little humor (ala "Alan Greenspan").

I guess this is one of those times we'll have to agree to disagree and move on. I've explained why money is important to me, and you've explained why percentages are important to you. But let me ask you this: when you buy a car, do you have the discussion with the seller in terms of percentages, or dollars? For example, "I will pay you 82% of MSRP for this Mazda3", instead of "I will pay you $18,000" or "I will pay you $500 over your cost." And when you sell a car, do you say things like "I will sell you my car for 40% of what I paid for it (or its original MSRP)", or instead say something like "I will sell you this car for $5000."

alpha01 · May 2004

On the last car purchase in our household that required negotiation, I offered the dealer 2% over invoice, which was accepted. But so what?

~alpha

backy · May 2004

Well, to be honest, on my last car purchase, I offered to pay the dealer their "real" invoice cost of $16,028 less the $3000 in incentives offered at that time, for a total of $13,028. I don't know if they would have understood me if I had offered 18.7172448215622660344397304716746% under invoice.

Then I tried to negotiate a lower buy-out price on my Grand Caravan. I asked the leasing company what they could do. They said $9500 was the best they could do. I asked them to express the offer in terms of a percentage of MSRP, and the guy said, "Huh?" ;-) Then I offered $8000, and he said, "We can't go that low." So I am turning the van back to them.

alpha01 · May 2004

You make me laugh. Thanks.

~alpha

smith20 · May 2004

I have been following this discussion on the sidelines. Here is a point I'd like to make:

"you've LOST a much greater percentage of the assets value."

This is referring to losing 60% value on a $15,000 car versus 50% value on a $20,000 car.

So if these are two "low end sedans" and each car satisfies the potential owner the same, I think it's important to think about the $5,000 price difference. The $15,000 car is doing the *same job* for its owner as the $20,000 more expensive car. For this example let's say all fuel costs, maintenance, repairs, etc are identical.

So, let's assume two identical owners who can afford either car. One purchases the $15,000 car and sells it for $6,000 at some point later in time. The $5,000 they save up front is just stashed in a box in their house and makes zero percent. So the total loss to the owner is $15,000 - $9,000 + $5,000 saved which would means they would have $11,000 left over from the original $20,000 available to spend. The other purchasing scenario is simpler since all the $20,000 goes into the car and it loses $10,000 over the period of time. When the car is sold and it's time to purchase a new car, this owner has $10,000 at their disposal for the purchase of a new car.

Alpha, I don't think you're taking in to account the immediate $5,000 savings of the cheaper car which *does not depreciate*. Furthermore, the point Grandtotal was making, is that if this is a financing situation you will further be paying interest on the $5,000 extra for the more expensive car. So in that case the extra $5,000 spent on the $20,000 car will DEPRECIATE AND ACCRUE INTEREST.

If it's a non-financing situation, the owner that buys the $15,000 can be wise and save or invest the saved $5,000: make 3% (or more if interest rates go up, which they will) a year in a bank, 7% (or more if this was 2000-2004) a year in real estate, 10% in a mutual fund, ++% if they are a skilled active trader.

The way I see it, if both of these hypothetical cars satisfy the owner's identically, there is NO WAY the $20,000 car makes better financial sense.

When you read the threads like "Elantra vs. 3", "Elantra vs. Civic", "Elantra vs. Corolla", the owners of the 3, Civic and Corolla spend their time arguing why their cars are WORTH the extra money. They have to prove to others and themselves that the extra money got them something more. I have yet to see someone say they decided to arbitrarily pay $$$ more for brand A over brand B. Even in that situtation that person is basically paying $$$ for the brand if all else were identical to the person.

For me, the Elantra was pretty similar to the other cars, in fact it even had some features that were not available on the models of some other manufacturers. Therefore, since the cars were "fairly" similar to me, I decided to enjoy the immense cost savings of the Hyundai Elantra . . . I now have an enjoyable new car to drive to work and use for road trip vacations this summer and beyond and I saved $3k, $4k, $5k+. Over the same years I'm enjoying driving my Hyundai Elantra, I'll be growing the "asset" I avoided putting into a car into funds for a new car in the future . . .

alpha01 · May 2004

Youre reading into my statements too much. I was not arguing the validity of purchasing the 20K car or the 15K car, as to which is a more wise investment.

I never said anything about the 20K car making more financial sense. I couldnt agree more with your statement "In fact The way I see it, if both of these hypothetical cars satisfy the owner's identically, there is NO WAY the $20,000 car makes better financial sense." Its all marginal utility, dependent upon budget constraints and indifference curves. (That said, your argument is based on two very arbitrary figures, and the ceteris paribus assumption of fuel economy, repair etc.... is a bit unrealistic).

My only case, the ONLY case I have EVER argued here, is that in terms of resale and depreciation considerations, the absolute dollar value corresponding to cost-resale value should not be the only valuation. My argument is that it makes more sense to look at percentage.

Your post is thoughtful and informative, and I understand all the points you make. But it addresses an issue which I thought was obvious. In my arguments, I wasnt trying to make a point as to which is the "better" investment, which is the substance of your contentions. I was simply trying to show why theres more to retained value than just a dollar amount, which backy stated is the main consideration.

~alpha

grandtotal · May 2004

So that makes three of us in agreement. I think Alpha01's argument *is* interesting, but ultimately he is trying to defend the indefensible.

The only other point I'd bring to the discussion is this; last year my daughter was involved in a serious accident (she was blameless) and walked away with minor injuries from our 2003 Corolla. I cannot prove it but I think she would have been more seriously injured if I had saved a little upfront money and bought a 2003 Kia or Elantra. Having seen how it performed I went out and bought another Corolla.

smith20 · May 2004

Right, that makes total sense to me. You paid extra money for a specific benefit of that model (Corolla) which is important to you, thus the cars are not the same to you. My parent's own a Toyota Echo and a Honda Civic, both purchased in the past few years and I think they are great well-built and reliable cars. For my wife and I, a specific feature we wanted was a hatchback, so we can have some functional space without purchasing a minivan (we don't have kids yet, hatchback is plenty of space for two). Also, I haven't (nor family members or close friends) been in an accident in the 8 years I've been driving, so, while safety is certainly important to me, I have not had such an important example as myself or a family member or a friend being involved in an accident where the safety features of a car helped protect the occupants.

People were suggesting I check out the Mazda 3 hatchback when they discovered we were looking to buy a new car. I also researched online the Ford Focus ZX5 a little bit. What it came down to was that my wife and I didn't feel the Focus was better at all than the Elantra, that for us there was not a $5,000+ benefit in the 3, and Honda and Toyota don't make automatic hatchbacks of the Civic or Corolla . . .

backy · May 2004

I'm glad the Corolla protected your daughter. But you're correct--you can't prove the Corolla would do any better in that particular accident than another car would. The NHTSA test scores for the Corolla are comparable to the Elantra's--two five-star ratings and two four-star ratings. The IIHS tests for the '04 Elantra haven't been published yet. The Spectra is an all-new design, based on the Elantra but with standard side air bags and side curtains, so its crashworthiness should be good but there are no test results yet. Other small cars, notably the Civic and Matrix, score higher than the Corolla on the NHTSA tests. But it's hard to argue with staying with what has worked for you.

alpha01 · May 2004

The Civic 4 door w/o side airbags has the same dual 5 star frontal and dual 4 star side impact as the Corolla, though we have both discussed the MAJOR limitations associated with the NHTSA's antiquated side impact test. (For that matter, the frontal impact test hasnt changed since its inception in 1978, and tells very little about structural performance.)

~alpha

smith20 · May 2004

I somehow missed reading this earlier in the day. I think my points are obvious in #2579 because I explained them very well.

Also, the fact that my argument is based on arbitrary figures is in the spirit of this entire discussion. I see plenty of made up dollar figures in your posts to illustrate your points . . . and furthermore, I do believe your arguments for the percentage comparison were aimed at trying to determine which purchase makes better financial sense, otherwise why would you even bother worrying about depreciation of "assets". (see quotes below)

"the absolute dollar value corresponding to cost-resale value should not be the only valuation. My argument is that it makes more sense to look at percentage"

I still think the argument to compare the percentage depreciations between two differently priced cars is defective, I will explain below.

You have posted these things over the past few days:
1.
"The dollar amount of resale value matters not at all, but rather, the percentage of worth that is retained is crucial. A $45,000 Buick Park Avenue has terrible resale value, much worse than Civic or Corolla, but when you turn it in after 3 years, you'll still get more dollars than turning in a 3 year $16,000 Civic. Who cares though, because you're losing a far greater percentage? Cars that are priced higher to begin with do NOT necessarily command higher resale as a percentage of original cost."

2.
"That may work for you, fine. But you're actually behind compared to the car with greater retained value, because you're paying MORE for the same amount of use, in terms of resale (=retained value/MSRP).

In other words, compared to the $20,000 car with lower depreciation, you are essentially bearing a greater part of the burden of the original price of the car than is the second hand owner. In my opinion that does not save you money, but rather, saves the second hand owner money."

3.
"Despite being "richer" by $1000 buying the $15,000, you've LOST a much greater percentage of the assets value. Explain to me how that is good?"

The percentages of two differently priced cars are apples and oranges which is why looking at the percentages side-by-side is wrong. In order to compare them you have to normalize to the same reference dollar amount, which is why I pointed out the $5,000 difference on the two cars in #2579. The $15,000 car which lost "60%" of it's value, really only lost 45% in terms of the percentage corresponding to the $20,000 car because the $5,000 the person DIDN'T SPEND depreciated by nothing. So the person which purchased the $20,000 car lost $10,000 to the second-hand owner and the person who purchased the $15,000 lost $9,000 to the second-hand owner (I'm trying to put it in terms of your examples).

The reason myself and others in this thread are trying to talk in dollar terms in that that IS a normalized figure which can be compared across differently priced cars. A percentage point might be $200, $150, or $450 . . .

backy · May 2004

Correct, the Civic 4-door has similar ratings to the Corolla. The Civic 2-door has quad 5-star ratings, however. I didn't realize we were limiting the discussion to 4-door cars. Personally, I much prefer the 2-door Civic to the 4-door on looks alone, but there's also a safety benefit.

I think it's interesting that Edmunds.com uses dollars to express depreciation in their TCO calculations, vs. percentages.

alpha01 · May 2004

In comparing Civic to Corolla to Elantra, why would you make a comparison on the crash tests of the Civic 2 door to the Corolla 4 door to the Elantra 4 door, when the Civic 4 door's scores are more directly comparable to models actually offered by Corolla and Elantra?
------------------------------------------------
smith20- "The percentages of two differently priced cars are apples and oranges which is why looking at the percentages side-by-side is wrong."

I disagree wholeheartedly, and contend that you are wrong. Again, despite how you are re-reading my postings, my contention is not on the entire financial evaluation of which of the hypothetical cars is makes better sense.

HERE IS MY POINT, which you are missing, smith20.

Based on percentages, as presented in Kiplingers, and used by ALG in setting resale values, one can easily see that:

Percentages facilitate easy comparison between the depreciation of two vehicles (assets). The factors that comprise the resale value percentage are not dependent on the level of the vehicles original MSRP. However, resale value is simply caluclated as a function of that number. From percentages, and not from raw dollars, a statement such as the following can be made, with 100% accuracy. (Note smith20, that this proves WRONG your assertion that comparing two differently priced cars is inaccurate).

"With a resale value of 43% of MSRP after 4 years, the $16,000 2004 Honda Civic LX 4 door experiences a much lower rate of depreciation than either the $12,000 Hyundai Accent (27%) or the $44,000 Lincoln LS (34%)."

I dare you to disprove that statement.
---------------------------------------------

smith20-
"In order to compare them you have to normalize to the same reference dollar amount, which is why I pointed out the $5,000 difference on the two cars in #2579. The $15,000 car which lost "60%" of it's value, really only lost 45% in terms of the percentage corresponding to the $20,000 car because the $5,000 the person DIDN'T SPEND depreciated by nothing."

Um, no. You cannot "net" a price difference between two assets in effort to calculate depreciation of one or the other of those assets. (SFAC 6)

Also,
"So the person which purchased the $20,000 car lost $10,000 to the second-hand owner and the person who purchased the $15,000 lost $9,000 to the second-hand owner (I'm trying to put it in terms of your examples)."

Reread what I said. I did not say the first hand owner lost a dollar amount to the second hand owner. This is what I said "In other words, compared to the $20,000 car with lower depreciation, you are essentially bearing a greater part of the burden of the original price of the car than is the second hand owner. In my opinion that does not save you money, but rather, saves the second hand owner money."

This is getting a bit out of hand. If you want to look at resale and utility in terms of raw dollars, do it. I'll look at assets, depreciation, resale, and utility in terms of percentages and be completely happy.

~alpha

dkuhajda · May 2004

They are all based off MSRP.
Hondas and Toyotas rarely get any factory rebates or discounts. Sometimes at the end of a model year they offer special lease rates or low interest, I have only seen a couple of $500 rebates on those two popular makes.

Almost all other manufactures MSRP is overly inflated to allow for big rebates. Hence there will always be a problem with depreciation percentages when they are based off MSRP versus the real world selling price.

Take the Cavalier or Sunfire for example. It was rare that they did not offer at least a $1000 rebate on those models, up to $2000 rebate. How can an accurate post purchase depreciation comparison be made if the ALG depreciation rate is based off MSRP and not the actual selling price? One cannot accurately take the ALG depreciation numbers off the real world selling prices and expect an accurate figure.

So far as the Elantra goes, for most of the model year they offer a $750 to $1000 rebate and dealer incentives with a $1500-2000 discount at the end of the model year.

Is there anything that shows real world depreciation against actual retail selling prices?

grandtotal · May 2004

How can an accurate post purchase depreciation comparison be made if the ALG depreciation rate is based off MSRP and not the actual selling price? One cannot accurately take the ALG depreciation numbers off the real world selling prices and expect an accurate figure.

Well, what I do is use their figures to calculate a residual amount and compare it with what I can reasonably buy the car for, for the three or four cars I'm looking at. Then when I've calculated my numbers I buy the one I like best.

smith20 · May 2004

Okay here is what I think the source of contention revolves around whether or not to include the $5,000 difference asset in the calculation.

$20,000 car depreciates 50%
$15,000 car depreciates 60%

So the cheaper car is an asset which loses percentage value faster, I agree with that, but the total assets of the person who purchased the $15,000 car which would have been required to purchase the $20,000 car is:

(15000 * .6) + (5000 * 1) = 11000

Therefore the cash savings offsets higher depreciation rate of the cheaper car and thus making the car with a higher depreciation rate a better choice. I reaffirm that I believe this comparison is necessary because the $20,000 CAN'T be purchased with only $15,000 . . .

As for the second-hand owner scenario, the purchaser of the cheaper car which depreciates faster wins doubly. But that is a moot point for the new car purchaser since they can only look at their options of new cars and how the potential purchase of each of those cars will affect their bottom line. I would gladly let the second-hand owner of my vehicle get a good deal for that vehicle if owning that particular vehicle saved me money as well compared to my other options.

I am not missing your point at all. I simply think your point is too narrow in scope to be truly useful to some looking to purchase a new car . . .

My bottom line is that it can be better to choose the faster depreciating car asset under certain conditions.

dkuhajda · May 2004

So what you are saying is that for example:
(numbers used are for example only)
Car A has an MSRP of $15,000 and a depreciation over 3 years of 55%
Car B has an MSRP of $17,000 and a depreciation of 40% over 3.

At 3 years car A would be worth, 45% of 15K= $6750; while car B would be worth 60% of 17K=$10,200.

Car A however is discounted $1500 due to rebates and incentives, while car B has no incentives. The cars will cost in depreciation:
Car A: $13,500-6750=$6780; CarB:$17,000-10,200=$6800. Since the real world loss in value is close you would buy the one you liked in styling, driveability, and other factors (like interest rates, etc).

muffin_man · May 2004

>"With a resale value of 43% of MSRP after 4 >years, the $16,000 2004 Honda Civic LX 4 door >experiences a much lower rate of depreciation >than either the $12,000 Hyundai Accent (27%) or >the $44,000 Lincoln LS (34%)."

>I dare you to disprove that statement.

As others have mentioned, this is based on MSRP, only.

43% of $16,000 is $6800. The value of the Civic after 4 years. (is it really that low?)
The $12,000 Accent would be worth only $3240 if it depreciates to 27% of it's MSRP.

That said, You can buy an Accent in Los Angeles for as low as $6500. But for this argument, let's call it $8000. (very common, less extreme). That Accent depreciates to 40.5% of its value, very close to the Civic. The hypothetical $6500 Accent depreciates only 50%.

Now, most people are not buying Acecnts for those prices, but the availability of such cheap Accents drive down resale values for everyone.

So, while the $16,000 Civic depreciates less than the $12,000 Accent (bought at absolute peak price), the depreciation between a market priced civic and accent is much closer.

alpha01 · May 2004

All this debating on resale being determined off actual purchase price is great- but MOOT. Resale and residuals are calculated as a function of MSRP. Period. Dont ask me, ask a source, such as Automotive Leasing Guide. MSRPs are set by manfacturers, just as are the rebates and incentives offered to move cars whose MSRPs are deemed by market constraints as not fully reflective of acceptable price given demand vs. supply. I would bet my savings (HA! thats not much I just gramutated collige) that an average purchase cost will not replace MSRP as the benchmark dollar value of which resale is a function but on which is not a dependant. Its quite obvious that as a result of incentives and rebates, resale is driven down. Its up to the consumer to weigh whether or not this offset to purchase price is of greater significance than the corresponding decrease in resale.

smith20, is this really the point you were making initially? Cause thats not how your argument sounded: "My bottom line is that it can be better to choose the faster depreciating car asset under certain conditions." Well, duh. I could have bought a torque-lite Civic LX for what I paid for my Sentra 2.5, but I wanted some balls under the hood. As I said previously, its all really just preferences based on budget constrants and indiffernce towards various factors.

~alpha

backy · May 2004

Percentages facilitate easy comparison between the depreciation of two vehicles (assets).

As we have seen over the past couple of days, the comparisons aren't that easy, or clear, using percentages. Maybe that's why Edmunds.com uses actual dollars when comparing depreciation of cars in their TCO reports. They let you see clearly how much you are likely to lose each year in depreciation by buying a particular car. That is a whole lot more useful to me than someone telling me that the depreciation rate for one car is higher than that of another car. And I think their figures are based not on MSRP, but on TMVs, which include localized discounts and rebates. So they are about as realistic as an estimate can get, assuming they did a good job gathering their data.

Why is this so important that we are beating it to death? Because I believe many buyers are fooled into believing that buying a certain car is a bad idea because it has a higher rate of depreciation than another car. If they go by depreciation rates, rather than actual costs, they may be in for a surprise when they go to sell their cars, as some of the examples above have shown.

P.S. Why would I look at the crash test ratings of a 2-door Civic? Because as I explained, I prefer the 2-door Civic to the 4-door. If the Elantra came in a nice-looking 2-door model at the same price as the 4-door, I probably would have bought it instead of the 4-door. Anyway, the topic is Low End Sedans, not Low End 4-door Sedans.

alpha01 · May 2004

"If they go by depreciation rates, rather than actual costs, they may be in for a surprise when they go to sell their cars, as some of the examples above have shown."

Um what? What surprise? I have no pity on anyone who doesnt take the time to reasearch any investment they make. Sorry, but "surprises" dont really validate the usage of only $$$ amounts.

I only mentioned about the Civic because you said its crash scores were better than the Corollas and Elantras, but since theres no equivalent Elantra or Corolla to the Civic which scored higher than those models, it seemed an irrelevant comparison. If you like the 2 door go for it!

~alpha

PS- at this rate of posts, we may even make the most active list on the home page! wa-hoo!

backy · May 2004

The surprise that they had a greater cash outlay over the ownership period for the car with the lower depreciation rate compared to the car with the higher depreciation rate. In following these boards here for four years, I've seen many a case where a person touted the "low depreciation rate" as a key reason they bought a particular car. Those are some of the people who stand to be surprised.

I think it is funny that you think I am "grasping at straws." Maybe that's what 30 years of car buying experience, 25 years of business experience, and many years of post-graduate education does to a person--makes them incapable of making a decent argument. Or maybe it's all those years raising kids that turned my brain to mush.

Well, at least we are agreed that the depreciation costs are important when researching a buying decision. I am still trying to figure out what additional useful information a percentage gives a buyer if they already know the dollar amount of depreciation, but since it's irrelevant to me I'll go get dinner instead.

muffin_man · May 2004

Actually, if you buy a car for more or less than MSRP, resale and residuals calculated off it are
moot.

When I calculate the residual value of my 2002 Civic Si, I will do it based off my $15980 purchase price, ~$3500 less than MSRP.

Private Party Value $13,570
residual value vs. MSRP = 69.5%
residual value vs. paid = 84.9%

Looks like I'm doing A-OK. I'm willing to bet that there aren't too many cars out there holding value like that.

smith20 · May 2004

See it's your condescending and know-it-all posts like this that caused me to jump into the fray in the first place. At first I was content to just lurk on the sidelines and observe different people's opinions on this topic, but your aggressive posts were irritating me.

Bringing up a "torque-lite" Civic LX and a Sentra 2.5 and pointing out the "balls under the hood" completely misses the ENTIRE point I've been making. It obviously must not be as simple as "duh" to you. One of the constraints on my example model were that the cars were relatively the same in desirability (and for simplicity I said "let's assume they're identical") to the potential buyer. The differences were PRICE and DEPRECIATION RATE. Having a difference of "balls under the hood" clearly has nothing to do with what I was saying. You had been pushing the depreciation percentage very hard as the determination of what is a better asset in this thread and what have been trying to demonstrate is that it's not that simple. It's not just the cars themselves . . . I know I pointed out the importance of the difference in price in my first post. I apologize if you couldn't understand it in my earlier posts, I tried to make it as straightforward as possible.

I can tell you're an "I-always-have-to-win-because-I-am-never-wrong" person. I await your next post . . . enlighten me some more please.

alpha01 · May 2004

"You had been pushing the depreciation percentage very hard as the determination of what is a better asset in this thread and what have been trying to demonstrate is that it's not that simple."

Maybe Im not being very clear, but Ive said time and again that the argument I am making is not an effort to place a value on which car is better than another as an overall package- its simply an argument as to how I view, and I feel the correct method of viewing resale... is. I am thoroughly grateful that we all have the opportunity to debate this as holtly as we have. I think its a wonderful exchange of perceptions.

My point in bringing up the Civic LX I considered in my purchase of the Sentra 2.5LE was only to show that despite my major contentions with how people here view depreciation dollars vs. depreciation rate, ultimately, again as I've said.... resale/depreciation is but one factor not only in the purchase proposition, but also the overall cost of ownership. For me, this factor (superior resale- the Civic LX) was outweighed by my desire for a bit more torque (I needed an automatic trans.) and my budget.

Im not sure how you read into that as condescending, but feel free to take from it as you please. I was not intending to insult any Civic owners, I had one that served me well at one point. But frankly, the Civic does have one of the lowest torque ratings in the field, so Im not sure why calling it "torque-lite" would offend anyone.

If you think my POSTS were agressive, please come spend a day with my ultra-competitive co-workers, and you will see that I am far from agressive, and actually quite civil. Perhaps we just have different thresholds, eh?

"I can tell you're an "I-always-have-to-win-because-I-am-never-wrong" person. I await your next post . . . "

Noooooo. Ive been wrong from time to time, and if youve been reading on the "sidelines" as you state, youd know that some time back I improperly asked the host to close this thread. I recently apologized to backy, who correctly called me on the error of my ways.

Enlightened?
~alpha

alpha01 · May 2004

I stopped by the most local Kia dealer today, a huge Kia-Dodge-Ford (Daewoo) conglomerate monstrosity. I've been treated poorly there before, and today was no exception.

I asked to test drive an automatic Spectra EX, but was told they didnt have any "auto EX demos" available. Right. Im sure it had nothing to do with the fact that I look my age.

I digress. There was a jazzy black Spectra EX in the showroom, no ABS, but it had those very sharp alloys. Interior fit and finish was top notch, I didnt really have a problem with the driving position- although I will agree with you backy, that the seat height adjuster that tilts you forward as it moves you upward is rather ineffective at helping find a "sweet spot". Seats were nicely sized, well shaped, and the rear and trunk were roomy. Unless the driving experience is seriously deficient, which from all accounts presented here and in the press- its not- I think this car will sell well. Dont like the [non-permissible content removed], though. Side curtains and front seat mounted airbags are a BIG selling point, IMO, as is the seemingly excellent materials choice and build quality. If MPG figures were just a bit better...

Kia is now offering a $1000 rebate, plus a $1000 conquest rebate, and I believe there is a college grad rebate available as well. Very Very appealing. Well done.

But then theres depreciation.... (ha!)

~alpha

PS- this particular former purveyor of Daewoos also has on the lot several brand-new leftover 2002 Nubiras and Lanos models. I asked why, and was told that they stopped selling them due to legal concerns, but kept them in inventory, when all the biz was going down with Daewoo's exit, GM's takeover, etc, but the cars were once again for sale. I was assured that servicing could be done at that dealership, but nobody really had substantial answers when I asked about warranty.

The Nubiras available had the automatic and basic power equipment, but no alloys or ABS, and stickered at $14,700. I asked the sales offer and was told $8995. I dont think thats a very convincing price, perhaps $6995 is more like it, so I dont think those (SUPER UGLY IMO) Nubiras are going anywhere soon. Cars I saw had between 14 and 49 miles on the odo. Oasis dealership on Rt. 9 S in NJ, for anyone who cares.

smith20 · May 2004

I am pretty new to this board, I was on the sidelines with specifically regarding the depreciation posts . . . I have not really seen any other posts by you.

I find it condescending and arrogant to question people's backgrounds and to dismiss points by others as obvious (implied not useful). I agreed with Backy's "Alan Greenspan" jab because your posts were sounding like you were the god of finance and economics, which consequently motivated me to create a post about asset depreciation. In the last post, it was nothing about the torque-lite Civic . . . it was that my point I've been trying to make was "duh" . . . I don't like your implication that I wrote a lot of text about a stupid point. You use language to try and discredit the other person's intelligence. If one has a solid argument, the argument should do all the work.

Grandtotal and I briefly discussed the utility of his Corolla versus the price paid for it relative to other new car options, which is the same thing about the Civic and the Sentra for you; the Sentra was "better".

smith20 · May 2004

"Why is this so important that we are beating it to death? Because I believe many buyers are fooled into believing that buying a certain car is a bad idea because it has a higher rate of depreciation than another car. If they go by depreciation rates, rather than actual costs, they may be in for a surprise when they go to sell their cars, as some of the examples above have shown."

Yes, I'm tired of some people crapping on Hyundai in particular. When I told some of my peers we were thinking of purchasing an Elantra hatchback, they'd suggest, "Oh, you should check out the Mazda 3 too". Since the 3 and Elantra GT have similar utility to my wife and I, and the Elantra was the obvious choice to me. I don't care if the Elantra depreciates at twice the percentage of the 3 (which I doubt it will), it still won't make up the original $5,000 difference in price . . .

That is probably my motivation for stressing the importance of initial cost.

It was funny how the $20k and $15k hypothetical cars were close to the prices of the GT and 3 and that of course made me think about it each time and fired me up! haha

alpha01 · May 2004

"I find it condescending and arrogant to question people's backgrounds and to dismiss points by others as obvious (implied not useful)."

Well, I apologize, but you should also recognize that all I did was ask backy if he/she was in finance. After that brief post, I did not comment on it again, nor did I make any kind of judgement in my interrogative post.

"I agreed with Backy's "Alan Greenspan" jab because your posts were sounding like you were the god of finance and economics, which consequently motivated me to create a post about asset depreciation."

No, Im not a "god", nor do I think I am one. Im still learning a LOT, so maybe as time passes I'll approach that status

"You use language to try and discredit the other person's intelligence."

Im not sure I even know what this means. I have NOT tried to discredit anyone's intelligence. If I had, you can rest assured that the tight reigns of leadership that Edmunds.com exercises on its boards would have constrained the conversation- insults and disparaging remarks are against the TownHall agreements, and these particular boards are patrolled by quite possibly the best host in any board - Pat. That said, other than "language", Im not sure I know how to communicate my ideas and thoughts.

smith20- Im glad you've decided to participate. I hope you are enjoying the boards. Theres tons of info if you're looking for it.

~alpha

backy · May 2004

You don't think I picked the $15k and $20k figures by accident, do you? ;-)

Actually I agree with your friends who said you should check out the Mazda3. It's always a good idea I think to at least look at and drive comparable vehicles, so there will be less chance of buyer's remorse later ("oh darn, I wish I had driven the 3 before I bought the Elantra!"). I shake my head sometimes at people who diss a car, whether it's the Elantra or Spectra or whatever, and they've never taken a good look at it let alone drive one. If I hadn't driven an Elantra when buying a car in the fall of '00, I never would have purchased one--would have probably gone with the same-old like the Civic.

alpha, one thing you should try to remember is that the written word can be misinterpreted very easily because no one can see your face, hear your inflections, etc. So when you ask someone, for example, if they have a finance background, and then explain why you asked, it could very easily come across as an insult, or at best pompous ("This guy doesn't know what he's talking about because he doesn't have a finance background like I do."). It pays to be extra careful with the written word, including emails--they are very easily misconstrued.

danf1 · May 2004

do yourself a favor and do not consider a daewoo at any price. they are now owned by G.M. but parts availability is an absolute nightmare. I have seen three month back orders for brake rotors.

pat · May 2004

Let's leave the personal affronts out of this ... they do not belong here.

We can debate opinions all day long, but personal criticisms are not appropriate. Differences of opinions are just that and nothing useful comes of either taking or making these conversations into personal issues.

Thanks.

smith20 · May 2004

Okay I'm done.

alpha01 · May 2004

Do you still have a Prius on order?

~alpha

backy · May 2004

alpha01 · May 2004

Which color and options package did you choose, if you dont mind me asking?

~alpha

backy · May 2004

The Prius not being a low-end car, it's probably not the best place to get into a discussion about it. But it's multiple color choices, pkg 3.

lexusguy · May 2004

Agreed on that. While Kia (and Hyundai in particular) have improved astronomically in the past few years, Daewoo never did, which is mostly the reason for the bankruptcy. I cant believe the amount of progress Hyundai has made though, they already have variable valve timing four cylinders. GM and Ford dont even have those yet! I think by the end of the decade, the big three may find they have increasingly small pieces of the US market pie, as the Koreans begin to steal it in large quantities. The Aveo may be a Korean, but it doesnt have their 10 year warranties. Has anyone else noticed that LG has gone from a nobody to a world class electronics company on par with the likes of Motorola and Samsung? Might be time to look up some stock symbols

baber1 · May 2004

I think Daewoo is on a good track now. The Suzuki Forenza is the Daewoo replacement for the Nubria and is pretty well rated by Edmonds. Chevy is selling a Daewoo car that I would not consider because of its weak warranty. When I was in the Philippines in January I saw a Chevy badged Daewoo that was selling pretty good there.Even if it is badged as a Suzuki or Chevy there is room for Daewoo here.

baber1 · May 2004

With my decision to buy a new Elantra. I plan on keeping my cars for qiute a long time. I also drive about 500 miles a week. I needed a cheap reliable car that had a good waranty. My last car was a 99 Accent. I would still be driving that car if some fool hadnt ran a stop sign and totaled it. I had 131,000 miles on the car when it was destroyed.
If someone puts low miles on a car and trades it in every 3 years or so then a Honda is a very good choice. If you plan on keeping your car for a long time or drive a lot a Kia, Hyundai, or Suzuki is a good choice.

backy · May 2004

This is the only Edmunds.com board where we can compare ALL the low end sedans without going off-topic. So why not have our own comparo for the entire category--all sedans under $15k?

The way Edmunds.com determines which cars are in its "Most Wanted" price categories is based on the MSRP without destination charge. But if even one trim line of a car is under the cutoff, all lines are included in the Most Wanted voting. I think that is unfair because then you have cars that cost $20,000 competing against cars costing $10,000. So I propose we include ONLY the trim lines that fit under $15k. That would give the the following sedans:

Chevy Aveo (SV, base, LS)
Chevy Cavalier (SV, base)
Dodge Neon (SE)
Ford Focus (LX)
Honda Civic (HX, DX, VP)
Hyundai Accent (all)
Hyundai Elantra (all)
Kia Rio (all)
Kia Spectra (all)
Mazda3 (3i)
Mitsubishi Lancer (ES)
Nissan Sentra (1.8, 1.8S)
Pontiac Sunfire (SV, base)
Saturn ION (1, 2)
Suzuki Aerio (S)
Suzuki Forenza (S)
Toyota Corolla (CE, LE, S)
Toyota ECHO (all)

The other restriction in Edmunds.com's Most Wanted voting is that editors can only vote on cars they have driven. While that is optimal, they are professionals paid to drive cars, and we are not (most of us, anyway). So instead I suggest we just note which cars we have driven or not driven. The other thing I think we should do is not just rank the cars, but give at least a brief rationale as to our rankings.

So what do you think? Should we do our own Ultimate Low End Sedan Comparo?

pat · May 2004

Good list backy, thanks. That's pretty much what we are already doing here, but you've made a great effort to quantify the subject vehicles.

iluvmysephia1 · May 2004

to also add the Scion xA and xB to this list? Aren't they both under $15,000 for their lowest-priced trim line? Other than that your list should make for some interesting comparo's.

backy · May 2004

Pat, what I am suggesting is that everyone state their ranking order, in a single post. This has been done before but not for a couple of years, and there's been a lot of changes in the low-end sedan ranks since then.

iluv, the Scions are hatchbacks, not sedans. But I have no problem adding them if it doesn't cause the Off-Topic Police to come down on us. ;-)

iluvmysephia1 · May 2004

part of this topic and concentrated on initial price completely. I see what you're saying, although the Scion xB almost seems like a funky crossover/mini-Astro-van and not a hatchback. Let's get Pat's response to either or both of the Scion's being added to the list. If up to me, I would be down with adding them to the list(and that would mean that it's cool with me to add Scion's to backy's list)!

Low End Sedans (under $16k)

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