Author Topic: Blog post: You bought a new car and 4 other signs that tell everyone you’re bad  (Read 1491 times)

Patrick

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http://investorchallenge.co.za/you-bought-a-new-car-and-4-other-signs-that-tell-everyone-youre-bad-at-maths/

Ejectzero

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Dear Patrick,

I read your article.  Sure, I get it, you save money with a used car and you lose less money due to depreciation. 

I argue that driving is probably the most dangerous thing we do and something that is of no compromise.  You we're lucky - you bought an excellent car without any issues.  A colleague recently bought a used Mazda 3 and everything just went haywire.  I personally believe that the risk associated with used car purchases is not worth the cost saving.  Cars are complicated pieces of equipment, anything can go wrong.

I depend quite heavily on my aging car and therefore do not care to splurge on quality car insurance - in my case Discovery.  I like their preventative maintenance and tracking approach to driving and believe I am in competent hands with their roadside assistance crew.  Technically I can also make a portion of my fuel spend back by using Ucount+Credit Card and BP/Shell (I did the calculation - its not that amazing though).

It's a case of you get what you pay for - what does it help you have spare money to invest if you never reach retirement age?  I would've bought that Kia too, with a smile of reassurance.  I am not bad at math - I merely factored life expectancy into that calculation too.

I'd love to hear about your strategy when you are buying used cars, maybe I am too cautious.
« Last Edit: December 06, 2016, 09:31:38 am by Ejectzero »

Hamster

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Meh, I bought a new car knowing full well what the financial implications were. You got to live too (some prefer holidays, some a new car, some...other stuff).

Mind doing the maths and telling me the lotto odds of winning more than what you spent on a ticket? You don't need to actually win the jackpot to still win (I know full well that the odds are immensely against you).

Patrick

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I'd love to hear about your strategy when you are buying used cars, maybe I am too cautious.
I could probably write a whole blog post on this, but in brief this is my strategy. It's based on three things:
-I believe a good quality car will last 15 years or 300 000km before it gives major issues.
-I know that the depreciation curve is the steepest in the first two years.
-I only buy something that is know to be ultra reliable.

When I was looking, all I considered was a Toyota Corrola or a Nissan Almera. I wanted 5 seats, 4 doors, a seperate boot, low fuel consumption, low running costs and the best reliability available. I'm also biased towards the boring jap brands because I know parts are cheaper. I eventually settled on the Almera mostly because my dad at the time owned a nissan dealership, so I thought I'd get a discount on parts and  servicing. He sold it a year after I bought!

Once I had the car type identified, I looked at the available two year old models. Considering I don't drive very much, maybe 12000km a year, getting a low mileage car wouldn't be good value for money. If I bought a car with just 25000km on the clock, it would only have 180000 at 15 years old, so mileage wise it would be fresh, but it would be old in years.

That would mean I would be carrying extra driving inventory I couldn't use. That's why I went for quite a high mileage 2 year old car. Mine had 67000km on the clock, which is high for a 2 year old, but after 12 years it's now on 205000km. When it's 15 years old it will be on about 240000km, so it will be closer to the right amount of use.

Because the car ahd such high mileage for a 2 year old, it was much cheaper than the rest, and considering it had a full service history, and not even the slightest issue, I had a good feeling that it would be reliable. It has been, very reliable.

Someone who drives a lot, would need a different strategy, and would probably be better off buying a low mileage car initially, though I just can't see anyone ever winning financially with a new car over a 2 year old car. That initial depreciation curve is just far too steep, and for no good reason. The value of that new car smell just isn't that valuable!

Meh, I bought a new car knowing full well what the financial implications were. You got to live too (some prefer holidays, some a new car, some...other stuff).

Mind doing the maths and telling me the lotto odds of winning more than what you spent on a ticket? You don't need to actually win the jackpot to still win (I know full well that the odds are immensely against you).
I agree, buying a new car knowing the implications is perfectly fine. People are allowed to spend their money as they please as long as they don't end up being reliant on the state or on their children when they're old. If you have that covered you can do anything you like! I just happen to like buying my future freedom from being tied to a job :)

As for your lottery question, go grab a cup pot of coffee and take a read here: http://www.circlemud.org/jelson/megamillions/

It's not based on the SA lottery, but the theory will be the same. Basically the expected value of a ticket is always less that the cost of the ticket. Usually less than half. Even when the jackpot is huge, the expected value remains the same due to the sale of more tickets.

Ejectzero

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Thanks indeed.  I like your numbers based strategy.

czc

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I wonder if any of you read this article (Is it cheaper to own a car or to Uber in South Africa) on using Uber instead of owning. I think they must be playing with some figures there.
https://businesstech.co.za/news/finance/145743/is-it-cheaper-to-own-a-car-or-to-uber-in-south-africa-here-is-the-answer/

Orca

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This is why I don't want a car .... but then again, we have better public transport than SA. For a cost of 1€ I can travel by bus to any part of the city. Reliable and one every hour right in front of our apartment.
The international trains depart 3 times a day from the city center and the Portuguese inter city trains depart every 2 hours.
There is a bus dedicated for the international airport in Porto 65 km from here.

Not that I could drive on the wrong side of the road anyway. http://www.moneyweb.co.za/moneyweb-opinion/soapbox/better-to-own-a-car-or-to-simply-uber/?utm_source=Moneyweb&utm_campaign=90940fdc76-EMAIL_CAMPAIGN_2016_12_06&utm_medium=email&utm_term=0_b106a40770-90940fdc76-141299505
I started here with nothing and still have most of it left.

Moonraker

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If you are able to afford the 'right' kind of car, you will certainly outperform all indices and even the 'star' equities on capital appreciation.
Mainly Ferrari, Lambo's etc. but also classic cars and even some not that vintage.

"A few years ago we had a Mercedes-Benz 54K which we sold on auction at R7.6m," he adds. "And within a few years it’s gone over the R20m mark."

Another Mercedes, the 1969 280SL Pagoda, was on the Stephan Welz auction in November. "Three to five years ago, you paid R300,000 to R500,000 for it," he says. "Today, there’s one in Cape Town for R3.5m, with a dealer."

But it’s not just the most expensive marques. "A little MGA five years ago cost R100,000," says Rosewitz. "Today you can’t get one for R500,000."

Moonraker

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Got to have money to make money  ;D