Gyroscopic Investing

I live in an area where it's very impractical to get around without a car so not owning one is not an option.

I currently drive a 1999 Honda Civic which was given to me new when I was still in High School.  It has almost 170K miles (270K km) on it.

I'm considering buying a new car but I still have second thoughts about it since my old beater still drives like new (except for a few dents) and hasn't gotten very expensive to maintain.  If I *had* to buy a new car within the next 12 months, I'm looking at a Prius C (costs about $20K USD.)  Since this car has no payment, is fairly fuel efficient, very cheap to insure, and fairly cheap to maintain, I'm considering keeping it indefinitely (at least until it can no longer be driven or at least when repairs get pretty expensive.)

I only require a car that takes me from point A to point B..  I have no business clients I need to impress..  I have no girl I need to impress (she drives an older car as well.)

I also have no desire to "gamble" by buying a used car which I have no idea how well it's been maintained.

Given my criteria and needs, is keeping the used car as long as possible the most economical choice?  Even if I were to buy a new fuel efficient car now (Prius C), the higher insurance will likely cancel out the savings from the increased gas mileage and the lower maintenance costs.  Also take into account the $20K that I'd be taking out of my PP (@9% annually, that's an opportunity cost of $1800+.)

Let me know if there are any flaws in my thinking or other hidden costs/risks I've not taken into account.

Btw, I started thinking this after watching Dave Ramsey's video: http://www.daveramsey.com/media/flash/e ... layer.html

(I kinda agree with the overall idea but there are some minor flaws in the implementation..  i.e. I'd sock away the equivalent of a monthly car payment into the PP.)

I've always bought older cars, but now that cars are FINALLY significantly increasing in mileage, I definitely put myself into your camp of logic.  

I would say that one thing to watch out for is the INSANE amount of new transmissions that have been developed over the last few years to give these cars better mileage.  A transmission is one of the most finnicky parts of a car, and they usually have years of issues before the manufacturers get all the kinks worked out.  I wouldn't buy a car with a transmission that's not at least 5 years old in usage.

To some degree, I'd say the same about all-new engine lines... especially with direct-injection being used so much these days, not to mention turbo/superchargers.

So basically I like the gas mileage newer cars are getting, but not how they're getting there.  I won't be surprised if in 5-6 years these 6-speed auto transmissions that started coming out of the woodwork a few years back are starting to give owners issues... often these issues pop up not-too-long after 100k mile warranties expire.

Personally, I'd wait a few more years and keep the Civic.  They're dirt-cheap to maintain, and if you make sure you've got a great AAA plan, even getting stranded isn't as bad as it may seem.  Insurance is cheaper, no down payment, no $500 per month in payments, no depreciation, no fretting over every new scratch, etc.  Plus, be honest... there's nothing more fun than tossing around an economy car worth less than $5k... especially if it's a stick.

I usually weight safety over gas mileage. Meaning I'd be more likely to want to upgrade from a 1999 vehicle to get the better air bags, anti lock brakes and stability control of a modern one. This is because statistically you're going to get into a bad wreck eventually and you want to be sure you have the best chance of either avoiding it with superior vehicle control systems, or surviving it unscathed with better airbags and crash survival design.

So for me, ultimate fuel mileage isn't the #1 priority. I'm willing to pay extra in gas costs to know that if I get into a wreck I have less chance of being permanently injured (or worse). For instance, when I rent a car I never get the compacts. I want the standard sized vehicle. I prefer having the extra mass around me just in case the worst happens.

craigr wrote: I prefer having the extra mass around me just in case the worst happens.

Sort of like with the PP.

You've got the big engine in the form of stocks, the big brakes in the form of bonds, the airbags and seatbelts in the form of gold, and the size of the vehicle itself will dampen any collision, and this is represented in the form of cash.

MediumTex wrote:

craigr wrote: I prefer having the extra mass around me just in case the worst happens.

Sort of like with the PP.

You've got the big engine in the form of stocks, the big brakes in the form of bonds, the airbags and seatbelts in the form of gold, and the size of the vehicle itself will dampen any collision, and this is represented in the form of cash.

I think I'll take it for a test drive.  I hear it is built for durability rather than speed.

MediumTex wrote:

craigr wrote: I prefer having the extra mass around me just in case the worst happens.

Sort of like with the PP.

You've got the big engine in the form of stocks, the big brakes in the form of bonds, the airbags and seatbelts in the form of gold, and the size of the vehicle itself will dampen any collision, and this is represented in the form of cash.

Random car insurance trivia:

• Getting a hybrid car will cost you about as much as if you got divorced.
• Marijuana possession is worse than a hit-and-run resulting in death and a separate count of ‘illegal transportation’ of explosives.
• Driving while your license is suspended/revoked has the same weight as vehicular manslaughter.

Insurance companies are required to provide data about their rates to various state insurance regulatory authorities.  A new startup called leaky.com uses this publicly available data to provide estimates about what your insurance premiums will be.

http://techcrunch.com/2012/03/26/leaky-relaunch/

Storm wrote: Random car insurance trivia:

• Getting a hybrid car will cost you about as much as if you got divorced.
• Marijuana possession is worse than a hit-and-run resulting in death and a separate count of ‘illegal transportation’ of explosives.
• Driving while your license is suspended/revoked has the same weight as vehicular manslaughter.

Insurance companies are required to provide data about their rates to various state insurance regulatory authorities.  A new startup called leaky.com uses this publicly available data to provide estimates about what your insurance premiums will be.

http://techcrunch.com/2012/03/26/leaky-relaunch/

Thanks, Storm! That site is awesome. I love seeing how changing my occupation changes my insurance rate by so much!