What car should you buy with $6000?

I don't know whether it's the time of year or some sort of side effect from Cash for Clunkers but it seems that right now you can get a lot more car for $6000 than you could just a couple of months ago.

When it comes to buying a used car, the conventional wisdom for a many years has been to buy a Honda or Toyota because these cars have a reputation for lasting forever. The truth is that these are generally good cars, and yes, they should last a long time but they have two significant factors going against them.

1. Their reputation is exaggerated. Statistically speaking some other brands are catching up. According to Consumer Reports a Ford Fusion, for example, should be more reliable than a Toyota Camry or a Honda Accord. Speaking from experience, two of my friends – one with a Civic and another with a Camry – had their cars die of catastrophic engine failure – both with less than 100,000 miles on the odometer.
   

2. Used Hondas and Toyotas can be overpriced. Since these are the used cars that everyone wants, demand is high which raises the price.

For these reasons, I often try to steer people towards cars that will be reliable but aren't as well known for being reliable. For example, ten years ago the Geo Prizm was a great choice for a high reliability per dollar ratio. A Prizm is just a Toyota Corolla sold under the Geo name so you get all the reliability of the Corolla but don't have to pay the Toyota premium.

More recently the Ford Focus has been a good choice. Ford has been making good cars for a while now but they still don't have the sterling reputation that Honda and Toyota have.

The NADA Guide says the “clean retail” value of a 2003 Focus SE with 70,000 miles is $6000. (I find the NADA Guide to be consistently more accurate than Kelly Blue Book.) A Civic LX from the same year with the same number of miles comes up as a whopping $2500 more.

It's true that the Civic should be more reliable but is enough more reliable to justify a nearly 50% premium? If we're only talking reliability per dollar I would say the answer is no.

Unfortunately things are never as simple as they seem on the surface and there are other factors to consider.

Personal preference could and probably should be a factor in your car choice. Perhaps you really like the sportiness of a Mazda or the styling of the Corolla (not likely). If you want a hatchback, a Civic may not be an option option but a Mazda Protege5, Toyota Matrix, Pontiac Vibe (Toyota Matrix with the Pontiac name), and Ford Focus are all good choices.

If gas mileage is important to you then it should have an impact on your decision. I've had a couple Focus's and I'm on my third Civic now. Comparing the gas mileage of my 1999 Civic EX to my 2005 Focus SE showed a huge discrepancy between the two. On one highway intensive tank in the Civic I averaged 40 MPG. I never managed more than 31 on the Focus. I think Ford is catching up in this department but it seems that as of 2005 they had a long way to go.

Perhaps even more important than the model you choose is the particular car and deal you find. NADA Guide may say that a Civic is $2500 more than a comparable Focus but that doesn't mean that's what you'll find in the real world. Maybe you'll find a particularly desperate Civic owner who needs to get rid of their car fast and will sell it for cheap.

The condition of a car can tell you a lot about how well it's been cared for. Personally I'd rather have a car with 100,000 miles on it in excellent condition than a mediocre car with 70,000 miles on it.

Unfortunately, there are no easy answers to this question so the best advice I can give is to keep an open mind and spend the time it takes to find a car that suites your needs, is statistically reliable, and is in great condition for a good price.

Picking the 5 year car

Except for a brief experience with a 2002 Toyota MR-2 Spyder (fun car), Louise and I were a one car family for about three years. I worked in the suburbs. Louise worked downtown. I drove the car to work. She rode the train. We spent our evenings and weekends together so as much as I love cars, there was no good reason to have more than one. In fact, I find nearly as much pleasure in efficiency as I do in excess so having only one car between the two of us gave me some degree of satisfaction.

Three years later I still drive to work every day but Louise stays at home with our newest family member, Fiona. This arrangement would still work great if Louise was really staying at home. The problem is, when it’s just you and a 1-year-old you can only stay in the house for so long before you really need to get out of the house. When it became clear just how much extra freedom a second car would give Louise, I knew I had the perfect excuse to do my favorite thing in the world: Buy a new car.

The question was, which car should I get? I’ve had quite a few cars in my time. Would I learn from these experiences? Or would I repeat the same mistakes? Looking back over the years, there are a couple of cars that I really enjoyed that I wouldn’t mind owning again. Should I get one of my old favorites or something completely new? I’ve always wanted to own an early 90s Toyota MR2 Turbo. Since we already have a practical car for Louise, would this be my perfect opportunity to make the dream of owning this classic sports car in to a reality? Or should I get something fun but still practical so I can enjoy driving even with the whole family aboard? Over the six months or so that I spent searching, I can tell you that the answer to every one of these questions was yes…and no…depending on when you asked me.

One thing I knew for sure: I wanted to take advantage of this car purchasing experience by driving as many cars as I could before making a decision. To that end, I was successful. Before making my five year commitment I managed to drive a few Mazdaspeed 3’s, a 2009 Mazda 3s, a couple 2010 Mazda 3s’s, a 2010 Mazda 3i, VW GTI’s with and without the dual clutch sequential gear box, a 2009 Subaru WRX, multiple Civic Si’s, a 2005 Infiniti G35 sedan, a 1994 Mazda Miata, a 1991 Toyota MR2 Turbo, a 2010 Hyundai Genesis Coupe, and a 2005 Mazda RX-8 (OK, I may have actually purchased the RX-8 for a brief period before ending up with the Civic Si but my rewrite of history says this was just an extended test drive.)

So after 18 test drives, why did I choose the Si? Or perhaps even more profound, how did I get Louise to accompany me on the majority of these adventures? Stay tuned for the thrilling conclusion…

The most important feature you hadn't considered...

What's the single most important distinguishing feature of a car? Is it the horsepower? Gas mileage? Styling? No, no, and no. It's the driver's center armrest. Sound crazy? Perhaps so but hear me out...

When you're driving a car, you need to be comfortable. Given that we put on an average of about 12,000 to 15,000 miles on our cars each year, it's clear we spend a lot of time in the driver's seat. Even if you enjoy the thrill and dedicated attention required for a fast drive down a twisty road, most of your time at the helm will probably be spent cruising down a straight highway or stuck in traffic. In either case, comfort quickly becomes important above all else.

I recently owned a car which had no center armrest at all. It was a 2003 Ford Focus SVT. All-in-all it was a pretty fun car but I found the lack of an armrest to be simply awkward. What was I supposed to do with my right elbo when it wasn't actively guiding my hand to shift gears or turn the wheel? Rest it in my lap?

Interestingly, the contemporary non-SVT Focus did come with a center armrest - a big one too. I know because I had a non-SVT Focus not long after the SVT. Ford presumably deleted the armrest for the SVT was because they felt that the armrest might get in the way during spirited driving and shifting. To some degree they may be correct - the center armrest is very high compared to the shifter in Focuses so I can see how it could get in the way.

It's clear that car manufactures spend a large amount of time, money, and effort making the driver comfortable. Seats manage to be supportive for high speed cornering, yet comfortable for long distance driving. They adjust fit your preferences too - forward, backward, up, down, and recline are pretty much standard these days as are adjustable headrests. Steering wheels tilt and telescope. In some cases even the pedals move. Yet, all too often the driver's center armrest is more of an after thought than the spoiler was on your mom's Camry.

Surely this problem only plagues cheap cars though right? Wrong. One of the worst offenders is the ultimate driving machine - the BMW 3 Series.

What's wrong with this picture? You guessed it - the armrest! Try to rest your elbow on that. Oh wait, you can't because there's bite taken out of the armrest right where your arm should go! BMW, in its infinite wisdom, has decided that leaving a space there for your hand brake is more important than your comfort. Sure, convenient hand brake placement is important but this hand brake too far back for ideal reach anyway.

So why did they do it? Style? Perhaps it's tradition. I had a 3 Series from the generation before this one and it was plagued with the exact same problem. If tradition is the reason then the decision makers at BMW need to get their thumbs out of their ears because they inexplicably dropped their long running BMW trademark driver oriented cockpit with this generation. Next thing you know they'll switch to front wheel drive and drop their longitudinally mounted inline 6 but, hey, at least they'll always have a bite taken out of the armrest!

Fortunately some manufacturers are starting to get it. The best armrest situation I've sampled to date is in the current generation VW Rabbit/Jetta twins. The center armrest in these cars is adjustable for reach and height. Very cool! In these VWs when you ratchet the armrest up and slide it forward you can plant both elbows in completely symmetrical positions while keeping your hands within reach of the steering wheel for the ultimate in relaxed cruising. The armrest can also be pushed back and out of the way for a day of autocross as well.

The 2010 Mazda 3 is another prime example of a manufacturer giving the center armrest its due respect. The armrest on this new model is adjustable forward and backward and is very padded which feels great on the elbows. It lacks the height adjustment that the VWs give you but it feels a bit sturdier in return. This is a significant step forward from the last generation Mazda 3 which had a center armrest that was too far back and too hard to be useful. You can tell by the goofy grin that this new armrest has made the Mazda 3 the happiest car on the planet!

Honda took a slight step back in this department with the mid-cycle update on the Civic. The center armrest was adjustable in 2008 but is completely fixed in place for 2009. The Civic still gets 8 out of 10 in this department though because the armrests are padded and the fixed position of the center armrest is high enough and far enough forward to be comfortable without getting in the way of shifting.

Why does this armrest rant matter to you? So next time you're out car shopping you can tell the Ferrari dealership, "No thanks, I'll take the Lamborghini so I can rest my arms."

Why your next car should be a new car (if you act fast)

Conventional wisdom tells us that the cheapest way to buy a car is to buy a used car. Get a car that's two or three years old and you've avoided the steepest part of the depreciation curve. After all, a new car loses 10% of its value the second you drive it off the lot, right?

Well times have changed and today this is not nearly as true as it once was and in many cases it may even be completely false. Here are three reasons why:

1. Car companies and dealerships have too much capacity and they are desperate to sell you a new car. This means you can get thousands off of MSRP.
2. Interest rates are down. The cost of money is very low right now. This means that even if your dealership isn't offering some crazy low loan rate, your local credit union probably is. My credit union, for example, is offering 4.24% interest on a car loan for 72 months right now. That's crazy low!
3. The prices of used cars are up. For used cars that get decent gas mileage, prices are up substantially. Perhaps it is the weak economy that is driving up prices of used cars since they are perceived as being more affordable. Also, people still seem to remember $4.00/gallon gasoline so fuel economy still seems to be a factor people actually consider.

I just went to Craigslist for an example of what I'm talking about. I typed "jetta diesel" in to the search box and here is one of the first results that came up.


$6950?! For a Jetta with over 183,000 miles on it?! Volkswagens aren't exactly known for their reliability so we're talking about a serious sum of money for a car that has three wheels in the junkyard already! The really scary part is, this car isn't even over-priced according to KellyBlueBook.com.

Let's take a closer look at a specific example of new versus used. For sake of argument, let's say you've decided you want Honda Civic LX with a manual transmission. We'll compare one that's three years old to one that's brand new. Let's also say that you're going to keep either car for five years.

Right now you can walk in to Walser Honda in Burnsville, Minnesota, and buy this car brand new for $15,665. That's $2500 off. Walser is one of these haggle-free places so you won't have to negotiate for that price either. Put in a little effort at one the the haggle dealerships and you should get $3000 or more off right now. This shouldn't be too hard either. After a quick exchange about a month ago I got a dealership to offer me $3000 off when Walser was only offering $2000 off. Add it tax and registration and you should be out the door for less than $16,500.


Now let's compare that to the same Honda Civic that is three years old. The Kelly Blue Book value of a 2006 Honda Civic LX with a manual transmission and 45,000 miles on it is $11,995. These days you'd be lucky to find such a car for private party value but let's say through careful searching and good negotiation that you do. Well, unfortunately you still have to pay sales tax and registration on your used car as well so you'll be free and clear for about $13,000. Wow, you're starting out ahead $3500! Not bad, eh?

Well let's continue by looking at how much each will be worth when you sell it. You're not a sucker so let's assume you're going to sell it yourself for private party value rather than getting screwed by trading it in to a dealership. Let's also assume that you drive the typical 15,000 miles per year and that you're careful with your things so whether your Civic is five years old or eight years old when you sell it, your car is still in "excellent" condition. Of course excellent is a relative term. The 8-year-old car with 120,000 miles on it will undoubtedly be in much less excellent condition than the 5-year-old car with 75,000 miles on it.

Let's ignore inflation and assume that an 8-year-old Civic is worth the same five years from now as an 8-year-old Civic is today. At selling time, you're 8-year-old Civic will be worth $4705. The 5-year-old Civic will be worth $7775. The difference? $3070. So you'll save $430 by buying your Civic used.

Even if you add in fanancing things are looking pretty good for the new Civic. Let's say you had exactly $14,000 to spend so you had to finance the $3500 difference between the cars. If you spread that difference out over the 60 months at 4.24% you'll be paying $64.83 per month for a total of $3890.40. Keeping in mind the $3070 more you're going to get when you sell the 5-year-old Civic the total difference between the cost of the two cars is now $820.40.

But that's far from the whole story. If you bought the new Civic your car would have been covered by a Honda bumper-to-bumper warranty for half the time you owned it! It would have been covered by a powertrain warranty for all but the last year! Combine that with the fact that it's significantly newer the entire time you own it so it's much less likely to break. (Yes, believe it or not, even Honda Civics can and will break.) It could be a tires, a clutch, could be CV joints, could be brakes, or it could be all of the above. It could even be worse - a friend of mine had a Civic with 95,000 miles on it when its engine completely died! Needless to say, the difference in service costs between these two cars will very quickly make up for and surpass that $820.40 savings that you get with the used Civic.

I've found this applies pretty broadly - at least it does for cars that get good gas mileage. In general I have found that if you try these calculations with an even older used car, you will see less depreciation but more risk and more maintenance. Go too old and you'll be losing safety features and end up driving a junker that needs more work than it's worth.

So if you're considering buying a car - new or used - go buy a new one and buy it now while dealer incentives and low interest rates make this possible. The free market has a way of working itself out so this won't last long!

Commitment Time

I have a commitment problem. No, I don't have a problem committing to a relationship - I think my marriage is good for at least another couple of years. And I don't have a problem committing to a job - I'm only on my second job since college and it's been quite a while now. The commitment that I just can't seem to make is to my car. After 17 years of driving I'm on my 21st car. Well all that is about to change...


2009 Civic Si Sedan Purchase Agreement

Ben will not buy another car until July of 2014. The only exception can be purely need based. Ben has written this agreement for himself and his family.

My wife and I both signed this contract today. I just bought a brand new car and I want to keep it for a long time. That doesn't sound so hard right? After all, keeping a new car for five years should not be a problem for a normal person...or perhaps I should say, a healthy person. You see, I'm sick - car sick - and I want to get better.

I love reading about cars, talking about cars, and driving cars. I love sizing up all the pros and cons of a car. Is it reliable? Efficient? Is it fast? What's the engine note like? How well does it turn? How is the interior and exterior styling? When I tap on the interior surfaces with my fingernail what sound does it make? When I push on interior panels do they creak? Will it fit my family, my dog, a rear-facing baby seat? How's the stereo? What is the driving position like? Are the steering wheel and pedals the right distance away? Can I comfortably rest both my elbows on the arm rests and still reach the steering wheel for relaxed driving? And the most important question of all... Should I buy it?

All too often my answer to the last question is, yes.

It all started with my first car. When I was about to turn 16 my parents bought me a used 1986 Volkswagen Jetta GLI with a manual transmission. It was a fun little car but it had around 150,000 miles on it and was very unreliable. It seemed like it had a new problem every week. The maintenance costs were really adding up so I suggested to my dad that we replace it with something more reliable.

Now I had a goal. Find a replacement car that would be reliable but still fun. There were so many options to consider. In the end my analysis suggested that I could only get the combination of fun and reliability that I needed with a Honda Civic. My dad agreed that my reasoning was sound so we bought an '89 Honda Civic LX.

The Civic was was the perfect car for me...for a year. Then I noticed something...something bad. It was starting to rust from the inside out. This car only had 65,000 miles but I knew if we didn't get rid of it soon, the rust would spread and it would depreciate quickly. Clearly we had no choice but to sell it. It was time to find the perfect car for me...again.

While they were perfectly reasonable choices, these early experiences made it clear to me just how much I enjoyed the search for the perfect car. Many of the car purchases I have made since then have been equally reasonable - others not so much.

So if buying cars makes me happy and in many cases improves my situation, why fight it? Why not just accept that it's something I like to do and go with it? As long as I get good prices when I buy and sell the cars it shouldn't be too expensive, right?

These are questions I've asked myself many times. Through careful shopping I've minimized the cost of this hobby as much as I can but ultimately the cost I can't get away from is the sales tax that I have to pay every time I register a car. If you think the sales tax is expensive on one car, imagine the sales tax on 21 cars. It adds up. I've decided that now is the time for me to stop the madness. It's time for me to commit a pair of cars for my wife and I and keep them.

People who know me have good reason to be skeptical of my ability to follow through with this commitment. After all, I attempted this once before. In 2004 I bought a brand new Mazda RX-8. It was meant to be the car to end all other cars. I'd been following its development for years. It was a light-weight sports car with amazing handling. It was winning comparison tests against sports cars with only two seats yet this one had four doors and four real seats. It was perfect!

Well, it was nearly perfect except for one minor problem and one major problem.

The minor problem was that the gas mileage sucked. Almost all my driving was done in the city and my commute to work at the time took me right through downtown Ann Arbor. I was getting about 12 MPG on premium fuel!

My major problem was that I decided I wanted to buy real estate. For years I'd been watching real estate go up and up and up. Meanwhile it seemed the main thing I was doing with my money was buying and selling cars. I decided it was time for me to invest in something that would increase in value rather than depreciate so I sold the car and bought a condo in Michigan (which to date has depreciated enough pay for the sales tax on 20 more cars).

This time is different though. This time there are going to have to be consequences for failure. If I find myself seriously considering the purchase of another car in the next five years I have to go

cold turkey and give up cars as a hobby altogether. The only way to avoid this fate is to prove that this is something I can do.

And why shouldn't I be able to? My wife and I have the most perfect pair of cars that I can imagine (right now). The Mazda 5 has room for our family, the dog, a pair of visitors (my wife is from Scotland so we get a lot of visitors), yet manages to be small, sporty, fuel efficient, and fun to drive. It is nicely equipped yet affordable. We paid less than $17,000 for it brand new about a year ago and I still think that was a great decision. In fact, it's still the top rated compact wagon/hatchback by Consumer Reports.

The Civic Si is fast, loads of fun to drive, and fuel efficient. It should be reliable and it's big enough and comfortable enough for us to use on most trips around town. It's pretty loaded and was under $20,000 new.

If I'm going to make a commitment, these are the cars to do it with. In writing this blog, I'm attempting to redirect some of my ideas about cars towards something positive rather than expensive. I don't know yet whether I will keep up the blog or whether it will be worth reading but at least for now it should be a fun outlet for this obsession hobby of mine.