Okay, here is my situation. I have a '04 SSM 5AT TSX w/ 48,xxx miles on it. At the end of Nov. I will have had it for 3 years. NADA says 19,600 average trade in and 22,400 average retail. In the past I've kept my cars about 3 years. My choice here is do I trade now for an '06 TSX, or wait 3 more years? I know that usually the best financial decision is to keep the car, but it seems I may be no farther ahead then. I know I will not keep it past 6 years (or at least I think I know). To throw another twist in, I was planning on buying new tires next spring when the snow tires come off (although I was looking forward to some summer only tires).

What do you think?

 

Do you want a new car? Then go for it, otherwise it makes no sense to trade in a car 'just because' you're at the 3 year mark. Decide if the cost of the future depreciation (of the new car) is worth it to you to drive an 06 instead of an 04, cause as you suggested, the fiscally wise thing to do is to continue to drive your existing car until you absolutely desire to switch out into something else. And of course, you'll always take the biggest hit trading in.

 

^^ I agree with Reach. There is no reason to trade just because you always have in the past. If you like your TSX keep it for another year or two. You can sell anytime.

 

i don't think you will get that much for your TSX as a trade in. i think all the dealers use KBB as their guide. if so, the average trade in for you car is probably around 17.5k. but i you really wanna see if it's worth upgrading, just take it in and see how much you'll get for it.

 

My thinking is this... may not be 100% accurate, but to keep it simple...

In 2009 my '04 with 100K would be worth about $14,000 and an '06 with 50K would be worth about $20,000 in which case either option is about $2,000/year to drive.

I don't need a new car, but for about the same cost I'd get a warranty and several new fetures.

And in my state, I only have to pay tax on the difference.

 

I think I'll e-mail and ask since the closest dealership is over 100 miles away. Never really have used kbb... it seems low at 17 - 18, my last trade in transactions have all got me around nada average.

 

I am also PatrickB... not sure how I got logged in with each account. One of these days I'll have to have these two combined. Sorry for the confusion.

 

You have to also factor in the years you will not be paying a monthly payment for a car.

 

As it is now, it will be paid off at the end of next year. I figure a trade up to an '06 will just be one additional year.

 

I don't understand spending the extra cash for minor improvements over your current car, but, hey, its your money. Did you take care of the car? Is it having problems? One additional year of payments for essentially the same car?

 

when i was considering my purchase about 2200-2500 (dependant on car) a year depreciation was what i calculated

 

Honda/Acura are one of the best cars on the road. You can go another 3-5 years without any major problems in this car. Paying off your car and driving payment free for +3 years is like a tax free $500 a month pay raise at work. I was payment free for +3 years on my car and +6 years on my wife’s car and the money we saved helped pay for a 4 bedroom 2600sf home w/ 3 car garage. You can pay off the car and save the monthly payment for:
- 2nd car like S2000
- pay off credit card bills (increase your credit score)
- max out your retirement
- down payment on a new home
- increase your savings account
- save and pay cash for a new 50” plasma
- take the spousal unit on a nice 2 week vacation

Why would you want to have a +$500 car payment for the rest of your life?

 

Doesn't sound bad. If that's what you'd prefer, I say, "go for it".

However, you may want to wait for the 08 TSX, apparently due to be out end of 07. There's a rumor that Acura will have its world premier of it at the Los Angeles Auto Show this December.

Acura announced a world premier there, and a Honda salesperson told me it will not be an SUV, but a car that Acura will premier. Next on the line to change is the TSX, so it sounds like a good chance it will be the next TSX.

 

It's true if you keep changing cars every 2-3 years, you will be losing the opportunity to save for other things, like what mrgold35 mentioned above. It would make more sense to lease too. It depends on what you (and if you have a significant other) really want most. If it is the cars however, then it's the cars. That's a-okay too.

Currently, these are the same thoughts going through my head. I can trade-in one of my new-ish cars for a TSX. I would not be in any financial strain. Yet, I'll "lose" money I can use to perhaps get something I want more (like saving for our retirement), in addition to creating the ability to buy another car later with more financial ease (greater down payment, etc.)

I've decided I'm impatient, and to wait. Especially since there is a new TSX coming, and there will always be wonderful cars for us to choose from at a later date as well if I don't like the new TSX (plus they'll be used ones of the current generation as well). However, if I decided the current TSX is what I wanted to buy, and buy now... I don't see anything wrong with that either.

 

How long do you think I'd have to keep the car to be below $2,000/year of depreciation? I put on about 18K a year.

 

Just to clarify, I consider myself pretty financially smart... I am 27 years old, I have 30% equity in a 4 bedroom, 4 bath, 3250 sq ft. house on a wooded 1 acre lot in a very nice subdivision. I have never carried a penny of credit card debt. I have over 750 credit score. I pay cash (well credit card paid in full each month) for everything I buy except cars for now and of course my house. I only have a 42" plasma, etc....

I try to make all my decisions based on improving my financial status overall.

So, for example, I have an asset (my car) that will depreciate no matter what I do, so I try to minimize that loss... I figure every year I keep it, it will lose $2,000 in value until it is fully depreciated. This is my transportation cost (without gas/insurance/maintenance/etc...). So I can say keep it for 12 years and 216,000 miles, then sell it for $1000. Over time after the initial warranty, in theroy the maintenance costs go up. Or for that same 12 years, I can get a new one every three years and sell it for a $6,000 loss. In either option, I would have spent the same money right? I realize, I then am keeping about $20,000 - $25,000 in equity in a car instead of an investment and after subtracting extra maintenance cost of keeping a car for over 200,000 miles, that value is what I actually pay for always driving a new car.

And payments won't be an issue, because after this one is paid off (I have to start somewhere), the only cost to upgrade would be the $6,000 which I would have saved 3 times that much in the 3 years (not including interest earned).

Not trying to ignore everyones advice, just trying to determine that perfect point at which to trade up.

 

Why are you so worried about warranty? It's an Acura

 

Warranty = No unplaned maintenance costs.

Maybe this board scares me, but I see a lot of other peoples issues and I know for each 1 person that posts a problem, there are hundreds or thousands that don't have that problem, but problems exist no matter what you are driving... We just see a lot less then most

 

None of us know your situation. We can all agree buying any kind of car is not a good return on our investments because it is a depreciating asset. One of the rules of business is not to invest in depreciating assets because the best you can do is break even. Another rule further down the list is you will never break even on depreciating assets.

I’ve been lucky with my old Accords my wife and I had with +3 and +6 years with no car payments and only about $3000 in maint cost during that time. $500 avg a month from car payment(s) X 60 months X 5% interest = $34,600 saved in my pocket instead of Honda’s pocket.

If you are already maxing out contributions on the house, retirement, savings, college, and family; then have some fun and get the kind of car you want. I’m going to pay off the 06 TSX in 18-24 months and keep it for my son when he drives in 8 more years.

 

You sound like a young person who has a very solid financial base.

The rate of depreciation is greatest in the first 2-3 years of a car. And then it depreciates slower and slower. That's why some pretty old Hondas and Toyotas, etc. still sell for several thousands of dollars.

I don't know what's the best moment to trade-up. I would have guessed however that, with the slower depreciation curve, it would be later than the initial 2-3 years.