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Value investing in other parts of life


sdev
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Recently, my car was totaled due to somebody making a mistake and rear ending me. When I bought the car a year ago, I shopped hard to find an under-appreciated, unloved car that was functional for my needs and not shameful. That ended up being a Saab 9-2x. After the insurance assessor gave me the valuation report and claim amount, I was surprised to find that I stood to make 21% on the car over the 11 month period that I owned it. Sometimes it just pays to be cheap! More importantly, it reinforced that the price paid is paramount, something that as a novice investor I tend to lose sight of from time to time.  8)

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Used car shopping is lots of fun for a value investor. The market is pretty inneficcient (altough the internet brings it closer to efficient), the perceptions on cars is as bad as novice investors. And, nobody seems to do any cash flow projections when buying cars.

 

For example, over here in Montreal you can buy a 125k km Intrepid for 1500$, fully equipped. Compared with a 5000$ Civic with about the same life expectancy.

 

People will tell you, it's a lot cheaper to buy the Civic because it's so cheap on gaz totally ignoring that 3500$ difference.

They will also tell you, Civic break a lot less. Totally ignoring that breaks, suspension etc is normal maintenance and would have to be replaced as often.

 

In the last 5 years I think my cost of ownership for cars has been below 100$ per months excluding gaz. That is value in my book!

 

BeerBaron

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How's the tax treatment with that going to work? I would assume a capital gain?

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It normally reduces the tax cost of the car (if new car cost 1000, gain was 200 on old car, then tax cost (basis) is 800). It is an election so you could pay taxes on the 200, which would be a short term gain (less than a year)

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