Best car for value investors?

[shhughes1116]

Hey guys,

 

Going to look at a Camry soon. Anyone have experience/thoughts on getting a certified pre-owned?

 

 

Make sure it is a Stealership you trust, and/or make sure there is a reasonable time/mileage warranty if you are going to buy a certified pre-owned car.  You may also consider inquiring to see if they have the maintenance records for the previous owner to see  what work was performed and when. 

[abyli]

Waiting to order Tesla 3... if Elon Musk can keep the promised price and not too far from the expected delivery date... :-)

[jeffmori7]

You guys spend a lot on cars.  Let's see how many years I can drive for the same price you spend on one tesla.

 

2007: I paid $15K will drive it at least until 2017 (maybe longer):  2007-2017  $15K

2017: An Elantra is now about $18K: 2007-2027 $33K

2027: Probably about $20K now: 2007-2037 $53K

2037: $22K for new Hyundai: 2007-2047 $75K

 

So I get 40+ years of driving for the price of one Tesla or 20+ years of driving for the price of one $33K sedan or Chevy volt.  I know there is gas savings to be had, but it won't make up that much of the difference.

 

EDIT: If I add in the Corolla I had before the Hyundai it looks even better:

1996: $13K For the Corolla.    1996-2047  $88K for 51 years of driving.

 

Used Chevrolet Volt with lower fuel cost than a Elantra: https://www.carsforsale.com/chevrolet-volt-for-sale-C999103

[LongHaul]

Even if you bike for 6 months out of the year.  It is still a good partial option.  It lowers your overall car cost and miles put on the car.  I still have a car but drive ~4k miles per year.

[blainehodder]

If you live in the cold, the Ford Escape is affordable, cheap to service, good fuel economy (not that it really matters anymore), and has all the cool options. Seems to drive better than the competition as well even though it is among the cheaper small SUV options.

 

We are big fans of ours.

[Guest notorious546]

A few recommendations. 

 

The Honda Fit is a nice car - worth exploring it anyhow as the hatchback can fit a lot.

 

I would also recommend BIKING.  Here are the benefits.

 

1.  Out in the fresh air.

2.  Exercise - get the blood flowing so you can find the next 10 bagger!

3.  Super cheap. 

4.  Consider the incremental time to work.  10 min  by car 20 min by bike is only 10 incremental minutes.

5.  It is fun.

 

Cons

1.  None at all - just kidding.

2.  Night biking is dangerous.  If you do it, wear a ton of reflective gear and lights because it may be 10x as dangerous as during the day.

3.  It is extra time.

4.  Cold, raining, etc.  This will toughen up any remnants of an inner wuss you have.

 

+1 for biking.  I wish I lived close enough to work to bike.  Excellent option for the health benefits alone.  But it isn't practical all the time (It is 12°F where I am right now) And snows all winter long.  Even if I lived in biking distance to work it would only be practical for 6-7 months out of the year, so I would still need a car.  Even if you lived in a more agreeable climate and biked to work everyday you would probably still need to own a car to pick up groceries and for other things.  There are only a limited number of places you can live car-free in the US.

 

Biking is definitely the cheapest

[rkbabang]

You guys spend a lot on cars.  Let's see how many years I can drive for the same price you spend on one tesla.

 

2007: I paid $15K will drive it at least until 2017 (maybe longer):  2007-2017  $15K

2017: An Elantra is now about $18K: 2007-2027 $33K

2027: Probably about $20K now: 2007-2037 $53K

2037: $22K for new Hyundai: 2007-2047 $75K

 

So I get 40+ years of driving for the price of one Tesla or 20+ years of driving for the price of one $33K sedan or Chevy volt.  I know there is gas savings to be had, but it won't make up that much of the difference.

 

EDIT: If I add in the Corolla I had before the Hyundai it looks even better:

1996: $13K For the Corolla.    1996-2047  $88K for 51 years of driving.

 

Used Chevrolet Volt with lower fuel cost than a Elantra: https://www.carsforsale.com/chevrolet-volt-for-sale-C999103

 

To be fair though you'd have to compare it to a similarly used Elantra, which are cheaper.  Also I'm not convinced you can get 200-250K miles on a Volt without the major expense of replacing the batteries.  If you buy one that already has 25-60k miles on it you'd probably be much better off with a gas car if you plan on driving it for 10 years.  My Corolla was 11 years old and had 253K miles on it when I traded it in for my Hyundai.  It still looked and ran great and I never had anything major go on it. I was just getting concerned about the amount of rust I could see underneath it and after 11 years I was ready for something new.  I'm not sure you are going to hear people say things like that about a Volt.  Anyway, I wouldn't risk it.

 

[augustabound]

You guys spend a lot on cars.  Let's see how many years I can drive for the same price you spend on one tesla.

 

2007: I paid $15K will drive it at least until 2017 (maybe longer):  2007-2017  $15K

2017: An Elantra is now about $18K: 2007-2027 $33K

2027: Probably about $20K now: 2007-2037 $53K

2037: $22K for new Hyundai: 2007-2047 $75K

 

So I get 40+ years of driving for the price of one Tesla or 20+ years of driving for the price of one $33K sedan or Chevy volt.  I know there is gas savings to be had, but it won't make up that much of the difference.

 

How much will you spend maintenance over the same time? And fuel does make a difference.

The average driver will spend $2400 a year in fuel and the AAA estimates the average maintenance cost is 6 cents per mile.

Over 10 years assuming average driving habit that's an additional $36k, $24k on fuel alone.

 

The model 3 is estimated to be $35k. Lets assume he's off on this like he was on the model S for argument sake and say $40k. Typically the government rebate is about $8k from what I've read. So we're at $32k for a model 3.

 

I've read multiple articles from Tesla owners (maybe Eric can confirm) who have said the only maintenance is tires. Which is a wash since every car needs them. Even the battery is under warranty for 8 years as per the Tesla website.

 

But I'll also say we don't really know much about maintenance past 5 years since the car is so new.

[oddballstocks]

Hey guys,

 

Going to look at a Camry soon. Anyone have experience/thoughts on getting a certified pre-owned?

 

 

Make sure it is a Stealership you trust, and/or make sure there is a reasonable time/mileage warranty if you are going to buy a certified pre-owned car.  You may also consider inquiring to see if they have the maintenance records for the previous owner to see  what work was performed and when.

 

Ha, love the attitude, reminds me of my dad buying a car. I remember being at a dealer with him and him saying to the used car guy "I can't believe you don't have velvet elbow patches and a plaid sport coat."

 

Look, you'll have both honest dealers and dishonest private sellers.  I've run into both.  I'd go to a higher volume dealer, they're focused on volume not playing games to crank you down for the last cent.  That said the car business has changed dramatically.  People still think it's 1988 out there, the Internet and open pricing has reduced what a dealer can make on the front end to a few hundred dollars.  The incentive for a sales guy isn't to make much from you, it's to get vehicles out the door so they get their monthly bonus from the manufacturer.

 

Certified pre-owned is a scam in my view.  Get the checklist online.  Their 400 point inspection involves things like "ensure functioning headlights" that's something you'd do anyways.  The certified inspections don't do much if anything mechanical.  Ask if certified pre-owned means they get the car on a lift and start poking around, I can answer, they don't.  Yet there's a branding premium to that.  Save the cash and buy non-certified.  Take the car to a trusted mechanic and pay $100 for them to get it on a lift and inspect.  Ironically dealers do this sort of thing themselves, a pre-sale inspection, yet they don't do it on their own cars they're selling.

 

I'd stay stay away from the Accord, they have a CVT in there.  Maybe you get 95k on that tranny, maybe 125k, but then you're buying a new tranny.  Get an older Nissan before the CVT switch, or go Toyota.

 

If the CVT thing doesn't make sense google how transmissions work for 10-15m, you will thank yourself.  In short a traditional transmission has metal gears, CVT has belts, like rubber bands that expand and contract.  Which lasts longer, a piece of machined metal or a rubber band? Snap the band and the tranny is shot.  Honda is known for transmission issues.

 

Re: Biking - Used to bike to work when I was in an office.  Absolutely loved it.  I'd bike in with work clothes in a pannier along with a laptop, then I'd change when I got there.  Now that I'm at home I will run or bike at lunch, just for exercise.  Even if you can bike a few days a week it can reduce expenses a lot.  In Pittsburgh it's $6-14 to park a day, each parking garage has free bike racks saving fuel and parking expense.  There's a dedicated bike trail from the north and south into town avoiding all roads.  I would park at the trailhead and ride in.  My commute was a few minutes shorter biking compared to sitting in traffic.  Shorter, healthier, cheaper, not sure why it wasn't more popular.  You can adapt for cold weather and snow.  I know guys who have bikes with snow tires for riding in winter.

[rkbabang]

You guys spend a lot on cars.  Let's see how many years I can drive for the same price you spend on one tesla.

 

2007: I paid $15K will drive it at least until 2017 (maybe longer):  2007-2017  $15K

2017: An Elantra is now about $18K: 2007-2027 $33K

2027: Probably about $20K now: 2007-2037 $53K

2037: $22K for new Hyundai: 2007-2047 $75K

 

So I get 40+ years of driving for the price of one Tesla or 20+ years of driving for the price of one $33K sedan or Chevy volt.  I know there is gas savings to be had, but it won't make up that much of the difference.

 

How much will you spend maintenance over the same time? And fuel does make a difference.

The average driver will spend $2400 a year in fuel and the AAA estimates the average maintenance cost is 6 cents per mile.

Over 10 years assuming average driving habit that's an additional $36k, $24k on fuel alone.

 

The model 3 is estimated to be $35k. Lets assume he's off on this like he was on the model S for argument sake and say $40k. Typically the government rebate is about $8k from what I've read. So we're at $32k for a model 3.

 

I've read multiple articles from Tesla owners (maybe Eric can confirm) who have said the only maintenance is tires. Which is a wash since every car needs them. Even the battery is under warranty for 8 years as per the Tesla website.

 

But I'll also say we don't really know much about maintenance past 5 years since the car is so new.

 

I have two concerns with the model 3.  One is that the longevity of it will be unknown.  Will it last 10 years and a quarter of a million miles?  And 2: When will the batteries need to be replaced and how much will it cost?  At first glance the $35K looks like it could workout in the Model 3's favor, but the answer to those 2 questions above could change things considerably.  Also the Model 3 isn't available yet.

 

Take my Corolla, I paid $13K, drove it for 253K miles.  I changed the tires/breaks a few times.  I only do oil changes about twice per year, which is over 10K miles in between changes.  I did the timing belt on that once at 175K miles and I gave it one tune up also at 175K miles.  That is it.  My cost of maintenance was way, way, way below 6cents/mile.

 

Timing belt and tune up for that little car was under $1000

Tires/breaks twice lets call it $1500

$60 year for oil changes (I did them myself most of the time, but for this purpose I'll suppose paying $30/oil change) = $660

 

Total maintenance $3160 or 1.25cents/mile.    My Hyundai has only been 9 years, but has cost me similar to my Corolla so far. People who are used to driving American or German made cars really do not understand how much cheaper an Asian car is to maintain. 

 

[intothebreach]

This will not answer the OP's question to what is the best car for value investors, but in a typical value investing fashion, here's how a friend of mine has been taking a completely different approach to the question for years: instead of selecting a specific car, he scans lease buster sites for a good combination of a recent car, a high incentive from the owner wanting to get rid of the car, a low mileage and a fairly short lease remaining. As part of the negotiation, he requires that the previous owner pays for all transfer costs. And here's the nice kicker: before expiry, he tries and usually succeeds in selling the car for a higher amount than the lease buyout. At the end of the day, he ends up driving a very recent vehicle for slightly more than $100 a month.

 

It does however require investing significant more time than buying a car and keeping it for a long time.

[kfh227]

For luxury, used Lincolns with low mileage.

 

Why used?  These things tank in value with 40K miles.

 

Or buy a new Prius.  And sell it in 2-3 years as a private party sale.  The value will drop about $3K.  Let's say it drops $3600 over 3 years (36 months).  So you are in reality paying $100/month for it (ignoring insurance, gas, maintenance, etc).

 

If course, this is all true when you look at data for cars that are 3 years old now.  Not necessarily what things will be like in 3 years.  The Prius can't dominate the hybrid market forever.  And when that changes, so will the resale values.

[kfh227]

You guys spend a lot on cars.  Let's see how many years I can drive for the same price you spend on one tesla.

 

2007: I paid $15K will drive it at least until 2017 (maybe longer):  2007-2017  $15K

2017: An Elantra is now about $18K: 2007-2027 $33K

2027: Probably about $20K now: 2007-2037 $53K

2037: $22K for new Hyundai: 2007-2047 $75K

 

So I get 40+ years of driving for the price of one Tesla or 20+ years of driving for the price of one $33K sedan or Chevy volt.  I know there is gas savings to be had, but it won't make up that much of the difference.

 

How much will you spend maintenance over the same time? And fuel does make a difference.

The average driver will spend $2400 a year in fuel and the AAA estimates the average maintenance cost is 6 cents per mile.

Over 10 years assuming average driving habit that's an additional $36k, $24k on fuel alone.

 

The model 3 is estimated to be $35k. Lets assume he's off on this like he was on the model S for argument sake and say $40k. Typically the government rebate is about $8k from what I've read. So we're at $32k for a model 3.

 

I've read multiple articles from Tesla owners (maybe Eric can confirm) who have said the only maintenance is tires. Which is a wash since every car needs them. Even the battery is under warranty for 8 years as per the Tesla website.

 

But I'll also say we don't really know much about maintenance past 5 years since the car is so new.

 

You forgot to factor in the fact that electricity is not free.  I don't even know if it is cheaper than gas today.  I know it was a few years ago when gas prices were ridiculous.

 

EDIT: That was easy.  The cost of electricity in Connecticut is $1.80 in terms of gasoline prices.  So you save about 20% on gas.  You save mayebe 40% if you live in Texas.

 

Seems to vary wildly:

http://energy.gov/articles/egallon-how-much-cheaper-it-drive-electricity

 

[Guest]

Hey Nate,

 

I'm consistently impressed by your knowledge of everyday things. I know we're about the same age...but know way more about life than I do. haha

 

With the CVT, is it common to go out around the 75,000-125,000 miles? My 2003 Malibu had over 150,000 miles.  People act like Hondas last for 200,000+. Does that mean with a new transmission?

[rkbabang]

Honda's CVT's haven't been around long enough to really know.  People with very high milage Honda's had normal standard or automatic transmissions.

 

"CVT transmissions will first debut in the 2013 Honda Accord"

http://www.autoguide.com/auto-news/2012/02/honda-to-make-switch-to-cvts-in-a-big-way.html

[Guest]

Hmmm...I'm kind of worried now. I found a 2015 Honda Accord EX for about $20,600 for a total out the door of $23,232.83. I think this is a pretty good deal. I've test drove an Altima, Malibu and Accord.

[SmallCap]

Every time I see this topic title come up in the last few days I always think that it's the wrong question.

 

It's like asking what company a value investor should invest in when the better question is how to get the best margin of safety between price and value on whatever company is out there.

 

there is no value investor type of company but there is a value investor type of margin of safety and discount to value.

 

Is the better question how to go about getting the best value for your money when you buy a car.

 

personally I have always bought used and always from a private party. I have found that is the best way to get the most car value for my money. but due to my lack of experience in other areas I am open to there being other good ways of getting the best value for my money.

 

Interestingly my current car is a 2001 BMW 740I which I would not call a "value investors car"

 

this car was owned by a friend of mine who loved it and cared for it better then I have ever cared for a car and the car was in amazing condition but he was buying a new car and he complained that they would only offer him $3400 for the car. I thought about it for 15 seconds and told him I would take it at that price. he grinned and said he would rather I have his baby then the dealership so he sold it to me at that price.

 

that was 2 years ago and I am pretty sure I could sell it for at least that price now.

 

 

 

 

[oddballstocks]

Hey Nate,

 

I'm consistently impressed by your knowledge of everyday things. I know we're about the same age...but know way more about life than I do. haha

 

With the CVT, is it common to go out around the 75,000-125,000 miles? My 2003 Malibu had over 150,000 miles.  People act like Hondas last for 200,000+. Does that mean with a new transmission?

 

Thanks, I have a good memory, once something's up there it seems to stick.  Here's the real trick, I just talk to a ton of people about almost anything.  I learned the intricacies of transmissions last winter.  I go skiing once a year to Utah, stay in the same hotel (comes with meals included!) etc.  Anyways each day I like to relax in the hot tub, and naturally there are others in there and I'm outgoing and strike up a conversation.  Last year I was in there with a transmission designer and Nissan/Toyota mechanic.  We spoke for probably 1.5 hours about how they work, why companies are making the switch, car repairs and anything else car related.  I had a small base of knowledge that I built off for this.  It was interesting and I've read some since.

 

At a basic level a CVT has been around for decades, think your lawn mower engine.  A CVT has an almost infinite amount of gears or speeds, whereas a traditional engine has five or six.  Companies went this way because they're lighter, and a CVT has more precise gearing that can help with gas mileage.  The switch was 'forced' by the government with the increased fuel efficiency standards.  Car companies saved weight with the actual device, plus gained a few MPG.  What's lost is reliability.

 

From surfing Nissan forums I've seen that 95k is where they start to run into issues.  They're relatively new.  What's interesting is Nissan lengthened the warranty on them to 120k, they had a lot of complaints.  It seems instead of fixing the root cause they just lengthened the warranty.

 

This mechanic was interesting.  He was on Nissans for 25 years, then switched to Toyota.  He said the Renaultization of Nissan killed their quality legacy.  He went to Toyota and had some interesting observations.  He said in terms of overbuilt vehicles you want either a truck of Prius.  He said the Prius is the truck quality build of sedan.  They're bullet proof.  If you buy a used one with lower miles you don't need to worry about the battery.  I considered one to replace the Malibu, but they aren't great in snow, and I like to drive during snow storms in West Virginia (on neglected back roads) to get good snow.  A Prius that struggled in deeper snow on grades isn't it for me, but for almost anyone else it's ideal.  The Camry is good too.

 

In terms of car length it's all over the map.  You want something well maintained.  Dealers are required to clean the glovebox when they get a car.  To get maintenance records you need to buy from a private seller.

 

My dad had a 1995 Lumina that cracked 300k miles, a 1998 Malibu that crapped out at 280k miles and a Camry he gave to my brother that has 275k miles on it and is still going.

 

People claim Hondas last forever, but here's my test.  Go on Craigslist and look at the $1500-2k cars.  You rarely find a Honda with over 200k miles for sale.  You regularly find Toyotas with high mileage.  You also find trucks that high as well.  I saw someone here trying to sell a 4Runner with 250k miles for $5k, that's insane, but it's not uncommon.

 

Cheap cars on craigslist to me are the ceiling of lifetime.  When someone is dumping a car for $1500 it's usually toast.  So for example if most Ford's at $1500 have 130k miles you can figure they last about that long. 

 

Another way to go is buy used luxury.  I've looked at used Lexus cars.  The theory is people who buy luxury cars take better care of them.  The downside is repairs are expensive.  Lexus comes out tops in dependability rankings, Porshe #2 and Toyota #3.  Bottom of the list is Land Rover.  And anecdotally this is true, we had two friends with Land Rovers.  They began falling apart at 70k miles.  I mean huge repairs in the multiple thousands.  They are a dealer's dream in terms of service revenue.

 

I'm casually looking to replace my own Malibu, it's a piece of junk.  If I were going sedan I'd be looking at a Camry or Prius.  You can get a 2009 Camry around here with 70k miles for $7k.  If you drive 15k miles a year you're looking at maybe 10 years before you'd want to dump it for $1500.  That's about $550/yr to drive.  It's not bad. 

 

You can get deals on higher end used cars that are slightly older.  Reason being there isn't much of a market for them.  Someone who buys a Lexus wants a new one, not one from 2008.  That said one of the most reliable cars in the world is the late 1990s Lexus ES.  You can pick those up use now for a few grand.  It has older styling, but they're sedan tanks.

 

I think you're in Cincinnati right?  There's a place on Montgomery road right past Fields-Ertel that has really good deals on used cars:http://www.mgmimports.com/used-cars-dayton-ohio-for-sale/

 

My mother-in-law lives near there, we drive by often, I like to browse their inventory.  They buy higher end cars and have decent prices.

[Guest]

Nate,

 

Yep, I'm from Cincinnati. Recently moved to Columbus. The conversation with the Nissan fellow is interesting. It looks like the Prius also uses CVT? I wonder if it's smart to get a used Prius.

 

 

thanks for the tip on the dealership too. I'll check it out.

[oddballstocks]

Nate,

 

Yep, I'm from Cincinnati. Recently moved to Columbus. The conversation with the Nissan fellow is interesting. It looks like the Prius also uses CVT? I wonder if it's smart to get a used Prius.

 

 

thanks for the tip on the dealership too. I'll check it out.

 

Paul,

 

Don't know much about Columbus except that merging onto and off of 270 going to my in-laws in Cincy is always a harrowing experience. Bad highway layout with the worst of the Midwest drivers.

 

The Prius has something crazier than a CVT. Essentially one fixed gear and all the gearing ratios done via the electric motor. Here's a nice write up http://prius.ecrostech.com/original/Understanding/ContinuouslyVariableTransmission.htm

 

I'd love for electric cars to become economical and catch on. Even gas/electric. I think my dream is a full sized pickup body with a motor that can generate hundreds of pounds of torque and has a long range for cross country trips. The torque and electric motor can generate is mind blowing. I don't know why we do t have those instead of enormous V8 engines that drink gas. Think motor in a diesel-electric locomotive. There are some conversion kits out there that have a small gas tank plus an electric motor. I think this is how the Volt works va the Tesla which is just batteries.

 

Nate

[Cageyone]

As a buy-and-hold value investor I should have held onto our purchased-new 1967 VW Westfalia Camper Van.  As the last year of the original VW bus design, they’re currently worth a small fortune!  My current “value investment vehicle” is a 1997 Jaguar XK8 convertible which I’ve had for about three years.  Not only is it fun to drive (weather permitting) but I can also convince myself that it is a “work of art”.  Plus it seems to be holding its value (which is about what the rest of my investment portfolio did in 2015!).  But as it is totally impractical for someone living in a northern snow belt, my “daily driver” is a 2010 four-wheel drive Yukon SUV.

[Guest]

Hey Nate,

 

Thanks for the additional information about the Prius.

 

And you're right...the traffic in Columbus is crazy. In Cincinnati, driving was a non-issue. Now, my blood pressure goes up way more than it should while driving! haha. Overall, it's a good city but the drivers are something else.

[frommi]

Hey Nate,

 

Thanks for the additional information about the Prius.

 

And you're right...the traffic in Columbus is crazy. In Cincinnati, driving was a non-issue. Now, my blood pressure goes up way more than it should while driving! haha. Overall, it's a good city but the drivers are something else.

 

The prius is the ideal car to calm down while driving. :)

I drive mine now since 4 years, i have never been a more relaxed driver.

[Jurgis]

The prius is the ideal car to calm down while driving. :)

I drive mine now since 4 years, i have never been a more relaxed driver.

 

I've become much more relaxed since I started driving a tank.

 

::)

[meiroy]

A value investor is probably someone who is at least aware of the concept of risk and reward based on probabilities and downside protection. As such, considering the probability of a car accident which is non-negligible and possible outcomes, I'd say the main criteria would be safety and so one should go for a car which has the best safety rankings.