As you can see from the graph, it really pays off to keep a car longer.Here’s a simple example: You buy a new car for $25,000 and you drive it (^)
12,000 miles per year. Maybe its value drops to $20,000 in that first year.Your cost per mile in depreciation would be 42 cents. If you’re the average (^)
person, you’ll keep it 3 ½ years. Its mileage will then be 42,000, and if weuse a conservative residual value of $15,000 (60 percent), your cost per
mile will now be 24 cents.
If you pay it off in six years (the length of the average car loan at the time ofthis writing), it will have 72,000 miles on it, and it will be worth
approximately 40 percent of what it was when new. That is a depreciationof 21 cents per mile based on current used car prices—which is just before (^)
the depreciation curve steepens from 80,000 to 100,000 miles. And if youkeep it another year or two and have no car payment, things start to get
really good...
My dad was one of those rare people who did this. I helped him get a newMitsubishi Montero SUV in 1994. He drove it 175,000 miles with only two
minor repairs and normal upkeep and maintenance, then sold it to myyounger brother, who took it past 200,000 miles before the vehicle rusted (^)
out (they both live in snowy climates). Dad’s depreciation CPM was anabsurdly low 11 cents per mile—even though he bought the Montero as a (^)
new vehicle, for around $22,000.
EXCEPTIONS
There are some exceptions to these general rules on depreciation. Here inthe Rocky Mountains, where I live, Toyota Tacoma pickups, 4Runners and
Land Cruisers hold their value so well after 100,000 miles that you can buyone after that point and virtually run it for the cost of fuel and maintenance
barry
(Barry)
#1