Buy Gold? Buy A Used Car Instead!

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Why do people buy gold?

Cash for Clunkers

The smart ones do so not primarily because they’re looking to make money.

They are looking to not lose money.

That’s the sweet spot these days. Just trying to keep your proverbial shirt on.

Gold may not have the high rate of return that the casino called Wall Street offers … to insiders. But it is a really good way to store value – and that accounts for its popularity among people who may not get rich quick but tend to avoid becoming poor.

Used cars are another great way to transmute depreciating paper money into a durable asset that – like gold – is portable and fungible (i.e., easily converted into other things of value).

The government has inadvertently created a bull market for them, too.

First, it decreased supply via the infamous “Cash For Clunkers” program (“clunker” being defined not by mechanical condition, incidentally, but by the car’s gas mileage numbers) that paid people inflated sums of other people’s money ($3 billion of it) to turn in perfectly roadworthy used cars in for destruction … so as to “stimulate” demand for new cars.

This was like burning down every third house in a neighborhood. It had the effect of driving up the value of the now-smaller pool of used vehicles that remained available.clunker 2

True story: Just before the CFC program, which launched in the summer of 2009, I bought a 2002 Nissan Frontier pick-up with about 49,000 miles on the odometer for $7,200. Today, six years after CFC (and 50,000 miles added to the odometer), the truck is worth $7,900 according to the NADA (see here).

Only the government could – in effect – pull a King Canute and cause the tides to ebb and flow in reverse.

You may have noticed that, to this day, used car prices (especially used truck prices) remain high – while new cars (and even new trucks) are often heavily discounted via “cash back” offers and effectively free loans at interest rates below the rate of inflation. This shouldn’t be surprising, given that the average new car now sells for more than $30,000 – while the average family’s annual income is less than $60,000.empty pockets

If the lending criteria used to approve mortgages applied to car loans, almost no one would be approved – because only a fool (or the Mafia) would write a loan to someone for an amount equal to half their annual pre-tax income.

Take home point? The new car market is as rickety as a Jenga castle and could topple at any moment. It is economically artificial, driven not by normal (healthy) demand but by heroin-like injections of too-good-to-be-true financing deals and cash-back offers that distort cost signals which – long term – cannot be sustained because you cannot indefinitely pay people to buy things, cars or otherwise.

And unlike home loans, car loans can’t be extended over decades to make the payments manageable. Six, maybe seven years at the most. Which is where we are right now. Beyond that lies the point at which the typical car is worth less than what you still owe – and not many people are going to sign up for a deal like that.data chart

Meanwhile, the cost of new cars is rising like Hugh Hefner’s member, due largely to government-imposed technological solutions to non-problems such as people backing their cars over small children (back-up cameras for everyone!), high-pressure direct injection, turbochargers and aluminum rather than steel bodies (to squeeze out small MPG gains from cars that are now more expensive to buy and much more expensive to service) and elaborate countermeasure (e.g., automatic braking, automatic steering correction, lane departure warning) to idiot-proof the cars instead of expecting drivers to idiot-proof themselves… with more on the way. It has been proposed that new cars – all of them – be fitted with “passive” alcohol sensors and god-only-knows-what–else-they’ll-think-up.

Point being, the cost of new cars is going to continue to rocket upward – while the purchasing power of the average American  (as distinct from his ability to qualify for debt) has not. A point will be reached – probably sooner rather than later – when the proverbial bubble finally bursts.

When it does, the value of used cars is going to go into full afterburner. Because people will still need to get around.

They just won’t be able to afford new anymore. cuckoo's nest

The smart ones have already exited the lunatic asylum … before the stampede. Which is what makes them smart.

There is still time – though probably not much. If you burrow into the data – the real data, which means not the stuff the government cherry picks but the real data as compiled by honest economists (like Paul Craig Roberts, see here, for instance) you will find more structural rot than the floorpans of a rusted-out Pinto. Something like 23 percent of the potential workforce is unemployed – with about 12 percent of them (not included in the “official” stats) no longer even looking for work.

They cannot afford a $800 monthly payment on a new turbo-Ecoboosted (and aluminum-bodied) Ford pick-up. Which explains, probably, why sales of the new turbo-Ecoboosted and aluminum bodied F-150 are down by 8-10 percent and why Ford has had to resort to dangling thousands of dollars in “incentives” to entice dubious (and increasingly cash-strapped) buyers.

But they can afford a $10,000 used truck – or a $5,000 used car.

Which is why – very soon – the price of such rides is going to increase in a big way, just as they did post cash for clunkers.

Only this time, the supply is even smaller (thanks, Uncle).

Better hurry!

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67 COMMENTS

  1. I’m going the other way – leasing.

    Currently I’m responsible for 6 vehicles in our extended family & I feel like I’m at the shop every other week (vehicles are 10-20 years old).

    Once the kids are gone & the older relatives are no longer driving (3-5 years) I’ll keep maybe one older vehicle & lease anything else.

    This will allow me to experiment with some fun-to-drive vehicles not known for their long-term reliability (e.g., anything made by VW.)

  2. What’s needed is a car like the one Chevrolet sells in Mexico, the Matiz:

    http://www.chevrolet.com.mx/matiz.html

    $109,900 Pesos (about $7000 USD) gets you four doors, air conditioning, and iPod connectivity. Or $6400 for one without air conditioning (which isn’t going to work for anyone living in Texas or Arizona)

    What that price doesn’t get you is much else. It has 3-point seatbelts and crumple zones, but no airbags. A 1-liter engine will get you down the road, but you won’t win any stoplight races. But — it’s affordable and comes with a warranty, unlike a used car of questionable origin.

    But the US government won’t allow it to be sold here. It doesn’t meet safety standards, and probably not emissions standards either.

      • Hi Luis,

        It’s illegal to bring a vehicle into the U.S. (other than as a temporary visitor) if it does not meet DOT/EPA standards – so, yeah, you would have trouble registering it.

        But parts… there’s always ebay and UPS!

      • If it’s older than 25 years then you’ll be fine registration wise. There are people who illegally import cars. Some get away with it, some don’t. Lately the fedgov has been harassing people who turned out to have legally imported land rovers because they had more recent parts on them. I forget the model, but it was made for decades with parts that interchange so when even major parts rusted out they were just swapped with ones from more recent models.

  3. 1990 chevy crewcab one ton 4×4(old body style) ,best truck ever.not great on gas ,but tough as nails and easy to fix.get one while you can ,getting really hard to find one not beat to crap.

  4. My 2004 vintage Ranger truck was bought and paid for years ago. I don’t have to worry about deprecation since it already happened. And the truck is in like new condition because I baby it, which I guess in this screwed up economy adds value to it. LOL

    • C_lover,

      I find the elio very interesting based on the information available. It seems to be a very good car for someone looking for a small economical commuter vehicle that can be used as one’s sole car or paired with a larger vehicle.

      Granted, this car is not appropriate for someone needing to carry 3+ people or tote bulky items around. It is ideal for those willing to sacrifice people and cargo carrying capacity.

      At this point, I am waiting to see if this becomes available to the public. They have had some delays, but hopefully Elio is able to bring this car to market without any negative setbacks. If they are successful, then other companies might offer more affordable high mpg vehicles. In the shadow of increasing CAFE standards, this type of vehicle may be in the future lineup of more manufactures.

      It will be interesting to see if it (Elio type vehicles) will be permitted (by TPTB) to continue if they become too popular.

      • Uncle still calls it a motorcycle, so Elio is working to get it reclassified. I see no reason why they wouldn’t be permitted. I’m just skeptical they can pull off a $6800 vehicle. I would assume this does not include freight. I think it’d make sense to purchase this as a daily driver and keep beater utility vehicle garaged until needed.

        They tout the 80+ MPG figure, but that is highway only. it drops down to 40+MPG city. Nevertheless, I think a vehicle like this would definitely disrupt the used car market. Perhaps in a good way (for the buyer) and push prices down further.

        • Just out of curiosity, I got on their mailing list about a year and a half ago. Every day it’s the same thing. “When” we start selling them. Well, they have redesigned it a few times and while it looks better and should be better, when will they hit the market? I could have had my $100 down for a long while now with nothing but promises and more hype. Every month or so they introduce more bells and whistles so that original price is going up steadily.

          I’m beginning to wonder if it isn’t one of those “pie in the sky” things that will never be produced. Colors have even changed but we still see no final production. Shit, or get off the pot.

          • Eightsouthman,

            Hopefully it is not hype and it actually becomes available for the public to buy (at a price close to if not actually at $6800).

            Your last line was funny. Something I could imagine Buford T. Justice saying to his son. 🙂

            • Mithrandir, a common phrase in my part of the world. Unless they have something in the contract I’m not aware of, everyone who put down their $100 will get the base(the only model at the time)model vehicle, call it what you will. I tried to talk the wife into one since she hauls nothing but her fat ass. Naw, she wants a pickup…..probably a one ton dually 4WD, diesel with a Big Tex 32′ dual wheel, tandem axle gooseneck in case she needs to haul a coworker’s doily home to use as a pattern. She doesn’t seem to be able to avoid hogs, deer, coons, coyotes and no telling what else including guard rails in the rain. Her next vehicle will probably resemble something out of Mad Max. She came home one day and said she thought she hit a coon. Yep, a coon that smashed the fender at the hood line and left blood down the beltline along with deer fur and a few horn scratches. I drive a big rig every day in the dark hours and only last week hit an animal, one of two big hawks that hang out in the middle of the road at night. I hit a quail the week before and a small bird with the Peterbilt. She hits hogs, deer and evidently Texas moose at 20 mph slower speed.

              • sounds like you need to find an old (banned from demo-derbies due to their near indestruciblity) Chrysler Imperial for her to drive.

        • C_lover,

          Correct regarding current US govt classification.
          A motorcycle is a motor vehicle with motive power having a seat or saddle for the use of the rider and designed to travel on not more than three wheels in contact with the ground.

          I suspect one reason for designing the Elio with 3 wheels (instead of 4) is that it may be easier (less red-tape and other legal hassles) to get the vehicle built and sold on the market. I think they are currently working in all states to permit operating the elio without a motorcycle helmet since it is an enclosed vehicle. (As of July 2, 2015. Elio Momentum v8 – Legislative Update)

          I do not know if the final vehicle will be sold at the currently claimed price of $6800. As the actual price rises, it will be a harder sell to an increasing number of people. Each person will need to decide the how much is too much for an Elio.

          The Elio’s use of old-fashioned aerodynamic chassis design and engine technology to reach its estimated 84 MPG highway, 49 MPG city fuel economy flies in the face of ever more complex hybrid and electric drivetrains that keep finding their way into fuel economy-focused cars from mainstream manufacturers.

          http://www.technologytell.com/in-car-tech/4857/not-a-typo-elio-motors-plans-84-mpg-car-priced-at-6800/

          This used to be listed in a faq on the elio website. It seems that the site was changed. Perhaps the numbers will be finalized at a later date. Somewhere they estimated a combined 60mpg for typical driver, though YMMV.

    • Hi C_lover,

      I love the Elio in concept – but whether it will ever see daylight as a production vehicle people can actually buy remains to be seen.

      I wish them well…

      • No way can they sell the Elio for $6800 if they manufacture it here. Cost of doing bidness here is just too high with all the regs and taxes and BS. and good help being next to impossible to find.

        Next problem is: If they get it classified as a car, it will then be required to have airbags and back-up cameras and all that crap.

        And I’d imagine with those outboard front wheels, they’re gonna be kinda delicate. One minor hit, and the car is totalled. Throiw it out and buy a new one.

        Fuel economy is an elusive and expensive pursuit. Gimme any old plane-jane car from the 60’s- old Falcon; Fairlane; Comet; Rambler, with a straight 6. Some of ’em would get close to 30MPG; they were bulletproof; and you had enough steel around you so as not to get killed when someone plows ya.

        • Nunzio,

          Elio is classified as a motorcycleaccording to the feds. (<4 wheels) I think Elio is using the term auto-cycle.

          The economy figures I have seen quoted (49cty/84hwy) seem reasonable given the weight and profile of the Elio, but I am still waiting for the official mpg numbers.

          Regarding safety, it appears to be as safe as other small cars. If built, let the public determine if the small car is safe enough. I am willing to trade some weight and size in the unlikely chance I am involved in a crash for every day better economy.

          Regarding the wheels, I would expect the quality and durability to be similar to other cars.

          Regardless of any shortcomings, I would like to see this car available for public purchase in the hope of encouraging better (and more) choices for the public in general (and me specifically 🙂 ).

    • http://carbuying.jalopnik.com/the-ten-most-dependable-cars-you-can-buy-on-ebay-for-le-1640355343

      Have to agree with their #1 pick of the Land Cruiser.
      My boss t-boned an early 2000’s Taurus at low speed last winter with his ’98 LC (luckily nobody was injured). The Taurus was totalled (low value car vs. repair cost) and had to be hauled away on a wrecker and the LC just had some paint missing from the front bumper.
      That Toyota is built like a tank but can be a PITA to work on at times and parts are somtimes expensive. The boss’ LC has over 260k miles and has not needed a whole lot of repairs though some of them were expensive.

  5. Great piece as usual Eric!!!!! Some great discussion and commentary as well. My son and I have 3 vehicles, the newest of which is 12 years old. There was a black gentleman in Jackson, Mississippi, who had set up a production shop in the “war zone” off the main grid that specialized in building “custom” cars. Typically old bodies refurbished with a mish mash of new guts, no spy gear if possible. While his big money clients were rich lawyers and doctors doing stealth hotrods (Imagine an MG Midget with a V8, 6 speed, beefed suspension, new rear end differential.) He was increasingly seeing smaller to midsize clients wanting to refurbish and improve older vehicles. Had we not moved I had planned on doing something along those lines. I list this to suggest to the readers he is on the path of the future. We just have to start saying no to big sis.

    • Rebuilding cars for daily driving is going to be a business in the not too distant future I think. Then the media will be filled with scare stories and the few bad actors. Then the entire business model will be crushed by government.

    • Thanks, Ernie!

      I agree with you and Brent that refurbishing older cars is going to be a growth opportunity business. ’90s-era stuff especially. Relatively simple (TBI rather than PFI or DI, for example) and yet “modern” in all the ways that count for a reliable, everyday driver.

  6. I believe used vehicle prices today are in a bubble; and the bubble is going to burst.

    All of these “blue books” are also creating too much of a disparity between what people are asking for older cars, and what buyers are willing to pay. This is creating a stalemate on the private market. Sellers won’t sell for a realistic price; buyers won’t buy at the unrealistic prices- so they fix-up what they have or buy new.

    Another problem: The “good old cars” (pre high-technology) are getting so old as to need major restoration to keep going; while most of the newer cars (even 15 years old now) are technological nightmares which are expensive to fix/have all kinds of BS to go wrong/are hard to work on.

    And as another poster mentioned, too many people today can’t save up a few thousand bucks in cash, but are willing to make payments every 2 weeks and pay $9K for a $2500 car if they can finance with $300 down. So again, the private used-car seller loses.

    Add to that, that in many states you have to pay taxes on a car every year (In mine, even if it’s not registered!!!) and/or have to have them inspected, and all that other BS. It all adds up to used vehicles being not very sound investments- as much as I’d like them to be.

    I used to buy and sell cars regularly, but these days, even I don’t want to mess with them. Too much hassle; too much gov’t interference; too few people with cash; and too much junk out there, which needs expensive repairs (and a lot of them) to sell with a good conscience.

    My only interest now in cars, is maintaining cheap personal transportation. My ’99 F250 is as modern as I’m willing to go. Hoping to get a ’73-’87 Suburban as my next vehicle- simple and bulletproof. Trouble is, like most of the good ol’ vehicles: Any one which has survived without major rust issues, is worth 5 times more today than it sold for when it was brand new.

    We’re heading for a scary place with automobiles. Soon, the masses will likely be relegated to driving new super-cheap Asian econoboxes.

    But as for older cars: Like anything else: Never buy at the top of the market- and i think we are at or close to the top of the market.

    • Hi Nunzio,

      For me, the “sweet spot” is cars (and trucks) made during the early-mid 1990s. They have much better body integrity (in general) than the older stuff and their drivetrains are (compared with today’s stuff) relatively simple and so economically rebuildable, if you have the DIY skills and tools to do so.

      One of my favorites – to cite a specific example – is the early ’90s Chevy 1500 truck. TBI on top of a 350 small block backed by a four-speed OD automatic or a five-speed manual. Almost as simple as a ‘1970 model, but “modern” in terms of its driveability and also very easy to rebuild/maintain. The rest of the truck is also pretty basic and – assuming a rust-free shell/frame – doesn’t need much beyond a fresh coat of paint, maybe, and a basic suspension/brake system going-through….

      • eric, you came around. There are still many of these trucks and most are still straight if not nice. For the last few years, they have been the ONLY older pickups used in the patch. Vast amounts of Big 3 pickups not more than 3 years old, most brand new, with these old 3/4 and one ton’s still out there doing the dirty. Only one pipeline company I know that has “old” pickups and they’re all GM generally ’07 or a bit newer along with their new pickups.

        I noticed this year that many of the pipeline companies with regional HQ out in the boonies already have a section of the yard devoted to dead Dodge’s and Fords(more Dodge’s by far) but none of the GM companies have a junkyard.

        Hell, the company I work for, a small start-up on a shoestring has two locations, both with dead Dodge’s and Ford’s(not many Ford’s since they found out quickly to not buy them). I get back and forth to a big rig with an old(2005) Chevy 2500 HD 6.0L 4WD and everything except the windshield cleaner reservoir is fine with ice cold a/c. Somebody ordered it right too for some tastes. Manual door locks and windows and leather seats. After a long day you can put the cruise on 90 and nearly go to sleep. No, none, zero of the Dodge’s that age have working a/c or cruise. None of the Ford’s run…..at all. In fact, most of the Ford’s went to Ritchie Bros. long ago and the money made from them plus some extra went to buying old GM’s that were older that the Ford’s and still working hard. It takes a tough truck to pound lease roads I can assure you.

      • Hi Eric,

        In theory I’d agree with you -but I had a ’91 3500 series, and I’ll tell you, I didn’t keep it long. The suspension was wishy-washy (Ball joints instead of king pins, etc.); The half-assed ABS system made the truck DANGEROUS (unstoppable) in the rain; the interior was delicate; etc. But true, I never did have a problem with the 454 TBI. I ended up replacing it with an older F350. But yeah, even that Chebby was tits compared to these new vehicles!

        I was just thinking: On the new vehicles, just the cost of all the crap on them that I wouldn’t want- Satelite radio; Air bags; Back-up camera; black boxes; etc. -just all that junk would likely cost more than a complete older car!

        • I agree about the ABS that cost me my truck and a new one….on dry pavement, It just refused to let the brakes work. Once rebuilt, I unplugged it and the brakes were great. What you call wishy-washy suspension is simply more sophisticated than a Ford. I worked hell out of mine and loved the suspension. Of course mine was a 4X4 diesel.

  7. Unfortunately, I didn’t pay attention when my grandfather would fix what ever particular “$50” wreck I was driving that week.

    In the past, my strategy was to buy new on a three year loan and keep “paying” myself until it died. Eventually, I could pay cash for cars. Seemed to work for me.

    Last car, with “zero down and zero interest”, my financial advisor convinced me to take the free money and leave the cash in my portfolio. I’ll drive it until the wheels fall off which means it should last about 9 years.

    What I’ll do then I have no idea. What the economic climate will be I have no idea. But I’ll adapt since it’s obvious that the “only constant is change”.

    Keep up the good work and good advice.

  8. Another important point: used/less expensive = lower insurance premiums and lower personal property taxes (which are ridiculous here).

    I learned my lesson in 1993. Bought a new car which was the biggest lemon ever manufactured. Never. Again.

    My young adult kids also only buy used cars and trucks. Their peers are completely bewildered that they don’t have a $300-$500 monthly car payment.

  9. The Frontier you bought in 2002 for $7200 would cost you $9000+ today due to the cruelest tax of all, inflation. Also, you are in the car business and can probably ID a good deal better than the average Joe.

    That said, I have bought my last new car for many of the reasons you cited. I don’t need or want all the new shit the stuff into cars today. I don’t want my car hacked or tracked. And I definitely don’t want to go through the agony of new car negotiation and red tape so I can write a check for the next 7 years. My problem is, I can only do routine maintenance, so my repair costs go up and up to keep my baby running smooth. I mean, not many people have lifts, welding kits, engine hoists, diagnostic equipment, or most importantly the know how. I love my truck, but I don’t want to be its slave.

  10. I typically avoid new cars/trucks based on personal preference, so I’ve amassed my own little fleet of drivers spanning 1955 to 2000. The 2000 (Jeep XJ Cherokee) is easily the most reliable, while still about as simple as a brick. The ’55 (Willys CJ3B) is second place. Other than routine maintenance and fairly routine points changes (according to Grandpa it destroyed points regularly since he bought it in ’59) it is about as trouble free as you can ask for.

    • Guapo, I just bought 1999 4.0 L “6” Cherokee 2D, 92k miles. Automatic. For son in college. I am a little nervous about repairs, and being able to afford them, since it has needed alot of work since I bought. Any tips? Anything that “really needs to be paid close attention to” for it to perform reliably? Any repair guides you might suggest? THXXXX

  11. Or, you could do like me. I buy used cars, fix them up and turn them into money makers–namely taxicabs. I net around $500/month/vehicle, and since I never spend more than $2k on a used car, for me it’s a pretty good investment. A used, early 2000s Lincoln Town Car can be had around Arizona for about $2k, and will last 3 to 5 years as a taxi, netting me $16K to $28K over the life of the vehicle. Of course by the time I take it off my fleet & replace it, it is DONE. The last one I sold had about 300k on the odometer. Before that, I stripped and scrapped one that had 515k miles on it.
    Usually I just keep them on the road until they get hit by some jackass, then pocket the insurance money, and buy another one.

  12. I think Eric is saying if you want a used car to drive , then in the future it will be more expensive. Buying one as an investment would be foolish. I am personally looking to re-motor my 84 Dodge slant six pu. My ’07 Dodge pu costs me 5to8 hundred bucks every time I have to fix something. Usually some contraption that Papa Gov requires to save me from myself. I can’t work on the ’07 but I can work on the ’84. I’ve got 2 recalls on the ’07 now and have to wait for October to take it in. I lost one key to it .too and that will be another 100 bucks just to program.

    • Hi tolemo. I once had an 83 dodge van with the slant 6. Got all of 10 mpg if it had a load, and very very slow. I put in a 318 and got heaps more power, and an increase of 5 mpg. Paid for itself in 3 months. Motor and transmission cost me $200.

      Did all the work myself, it was an easy swap.

      • Match power to the job. It’s something bean counters at trucking agencies can’t grasp. I had a friend that received a new tractor with a red top Cummins, 550 hp with the rest of the fleet. They then turned them all down 200 hp to save fuel. So he dogs along for a few months and they’re crying about using so much fuel. He tells them if we had more power we wouldn’t use nearly so much fuel. Of course not being truckers they can’t understand being at the bottom of a hill doing 55-60 you’ve had to stay WOT to get that speed since you came over the other hill at 40- 45. So he tells them if you’ll turn those trucks back up they’ll be doing 20 mph faster starting up those hills and you won’t have to keep it nailed every inch of the way. They finally told him they’d turn his truck back up but to tell no one. After 3 months they looked at his and the rest of the fleet’s fuel useage and turned the entire fleet back up. Idiots.

    • tolemo, those Dodges are something eh? We have a fleet of them and they are continually on a long, long waiting list, like 2 months to get into the shop. Their electronics are horrendous. I spoke with the co-owner a couple weeks ago. He complained he couldn’t get a couple trucks into the shop and the shop told him the problem he was having wasn’t a Dodge part but an aftermarket. So, how come I have a dozen of these POS all with that part I bought right there from your dealership? That cut it for him. And the repair bills for ours are generally a few thousand and it’s mostly bullshit stuff. He said he was going back to GM.

      Good for him since at that time I was running a hotshot load with a 550 just out of the shop. The guy who normally drove it(I seldomly drive anything but a big rig)said it had more power but since it had all those bad code lights on in the dash, the cruise wouldn’t work among other things. Great, one day out of the shop and we’re back to square one. I get in it and ease into it and nothing happens. So I sorta put my foot into it and nothing happens again but after a few seconds it turns on and tears off or sorta tears off, not much power there. I drive it on the floor for a while and then it picks up and begins to run pretty good. After a bit though it feels like stepping on a rotten orange. This goes on the entire run. But, the biggest problem, the one that’s plaguing all of them is overheating. I run along and have to back out and let the temp go down for a few miles, then put my foot back into it and it runs ok for a while and then starts to run hot again when I’m going uphill and have to stay in it. The only saving grace of the entire run was a great interview(Outlaw Country) with John Prine who did some of his own songs as well as recordings by Kris, Johnny Cash, Roger Miller, Steve Goodman and other artists doing his songs. I got a good laugh from Talk Dirty to Me in Hawaiian. Sirius is the only good thing about that truck. After a couple years I have begun to see that the cheap price of Dodge trucks is more than made up with huge repair bills.

  13. Eric, you have me convinced, and I have no interest in all the crap they have added to new cars for quite some time. Do you have a suggested sweet spot, cars of a certain year or earlier, which are a good value and avoid all the latest expensive innovations? I am currently driving a 2003 Volvo.

  14. Eric,

    I was a car salesman at a Ford dealership for quite a while so I have quite a lot of experience with sales pricing of vehicles. It’s amazing how high used vehicle prices have remained. 2-3 year old F150’s, Silverados, and Tundras with 20-60k miles are selling for 2-5k less than new here in Houston. If you have half a brain and can negotiate a good deal, you can expect to pay 7k-10k below sticker on a new truck.

    Challenger Hellcats sold within an hour of arriving at dealers with $20k markups. Fully loaded 2015 F150’s don’t last a day at the local dealerships. Price doesn’t matter because the only thing people care about is monthly payments and many people here enjoy the higher salaries provided by the oil business. Nobody buys vehicles cash anymore.

    It all reminds me of the 2007 financial crash. I was selling Hondas back then. All car companies were selling record numbers of cars one month then overnight the banks stopped lending and the whole house of cards came crashing down.

    This time it’s going to be worse…MUCH worse. I see the writing on the wall when banks are approving $60k+ loans with 5-10% down and borderline sub-prime credit. It’s just like 06-07 and no one has learned their lesson. It terrifies me that our entire economy is just like the car industry. When the credit dries up, is will be an economic massacre the likes of which the world has never witnessed.

    • It seems as if Houston used car prices are about 30% higher than the rest of the country. Is that true? In any case, the asking prices of used cars is astronomical. If you have good credit, it seems like it’s a lot better to just buy a new one, although, I can’t afford $20k, much less than $30-40k. New car prices are way too high.

  15. I am in the market for another vehicle. However, I want new because I want something reliable, I know the history of the vehicle.

    I don’t want to run the risk of breaking down, missing work, etc… because I spent $5-10k on a used car.

    • Hi C_lover,

      New doesn’t necessarily mean reliable – just covered under warranty!

      Seriously, you can have problems with a new car, too. The upside with the used one is that if it has a problem, at least you didn’t pay a fortune to buy the thing – so you have money to fix the thing!

      • That is a good point. Compared to a $30k new car, I would need to spend $20k on repairs.

        But, used cars at that low of a pricepoint are most likely very high mileage. Plus going used you run the risk of lemons. Though I could imagine a used lemon is infinitely more sour, especially after warranty expires.

        Also by law, you have to pay tax on what uncle thinks the car is worth. Even if you get a better deal.

    • Apparently you have never heard of Carfax. With the car’s VIN you can see its entire history — maintenance, repairs, collisions, number of owners, etc. The vast majority of cars listed on Cars.com have links that let you see the Carfax report for free. 18 months ago I bought a “certified pre-owned” Toyota — but not before clicking on the Carfax link.

  16. Here’s my favorite definition of money – the most marketable commodity.
    As long as the gunvermin holds together, FRNs and digital records of them will remain as money. But when the trust starts to go, they could be worthless in a hurry.
    Bitcoins? What are they, and who wants them?
    Historically gold (and to a lesser extent, silver and other metals) has been accepted as money – the main reason being that it is usually pretty easy to find someone else who is willing to exchange for it.
    It is also ‘dense,’ having a high unit value, not requiring much storage space.
    And it is stable, especially compared with decomposing 4-wheeled vehicles.
    But it’s your choice. If you have the know-how and space to try to store/restore ‘classic’ cars – or anything else, for that matter, more power to you.
    In case you haven’t figured it out, I agree w/Eric that gold’s ‘value’ is as a store of value, not as an investment. If you are ‘investing’ in gold, you are a speculator. And the odds are always w/the house, just like Vegas.

  17. Hopefully not too many people here will take the highly dubious advice to buy rapidly depreciating items (cars) and holding them, hoping the ongoing depreciation is less than an anticipated rise in prices. That seems like a terribly risky speculative bet.

    • Well, Jim, the way I figure it, my ’02 Nissan has cost me effectively nothing to own for the past eight years. It is worth more today than I paid for it. I could “cash it in.” Or, I could simply enjoy what amounts to free transportation – or as close to it as one can realistically get while still having to pay for fuel and routine upkeep.

      PS: Taxes and insurance on older, paid-for vehicles are also much less than on new cars.

      • Hi Eric,

        I agree that buying a used vehicle rather than a new vehicle to actually use is a great idea, if the purchase price is right. But, to buy and then store with no intention of ever actually using it, with the added costs of paying for the storage space and vehicle maintenance?

        Nah, you’re better off investing your money in something that produces value, such as stocks in companies producing goods and services people want, rather than a vehicle that will keep decaying over time.

  18. Excellent article, Eric.

    A fun discussion could be had about which years comprise the “Golden Era” of used cars. IMO, that would be circa 2000 to 2005, when technology already had made cars quite reliable, economical and powerful. Also available with ABS and a full complement of airbags for those of us that want them, but lacking the latest electronics that make new cars so annoying, complex, “trackable,” and remotely controllable.

    Those of you with the skills and tools might prefer cars from the mid 1960s to mid 1980s. Much easier to work on for yourself.

    But early 2000s products from Toyota or Honda shouldn’t need big repairs for many miles. And when they do, I’d rather spend a chunk to keep those cars running well than “buying new.”

    Used to be, we’d look forward to getting a new car, for all the engineering improvements that made them desirable. Today’s new cars certainly have new technology. But overall, that stuff makes them less, rather than more appealing.

  19. Three years ago a local Toyota dealer was selling used Highlanders for about the same price as new. The catch was very few buyers qualified for generous Toyota Credit terms but anyone making $350 per week could get a 20% APR used car loan. I suspect the same is true today.

    Best of luck selling your Frontier at KBB suggested values.

  20. I’d love to store my wealth in the form of older cars at the bottom of the depreciation curve. However, the problem for me is proper storage. Cars are big and require a good deal of space. Sure a good sized pole barn isn’t too much money the problem is acquiring the land and being allowed (by parental government) to build it. Gold and booze (and a few other things) don’t require permission and can be easily stored.

    • Yes, I’m a fan of “precious metals”, too.. gold, silver, copper, brass, lead, blue steel, stainless……. hard to have too many, storate is relatively cheal and compact, and who knows how useful/valuable they’ll be considering some of the creeping changes we see going down around us.

      As to the idea of older cars… my favourites are the late 70’s and into 80’s diesel mercedes. Still the cheapest cars I’ve ever had to keep on the road, parts stilll readily available and cheap, repairs easy, access is not bad, reliable, VERY comfortable to drive. Want something faster? The big V-8 powerd cars in the same bodies can be more than a little quick, though much larger appetites for fuel and not quite the longevity of the diesels. I’ve known the turbodiesel five cylinder cars to still be going strong with 500K plus on the clocks, no major work ever done. No, not even injectors.

  21. FWIW I’ve found that “book” values on used cars are typically inflated. Dad was trying to sell his well maintained/average condition ’06 Ranger (booked at $7500) for almost a year. He was asking $5500 and not getting any interest except from a certain Nigerian scammer. He ended up letting it go for $3500….
    I have only ever paid book price for a used car twice in my life, both times off a car lot, normally I buy from a private seller. Picked up my ’95 Roadmaster for $1500 three years ago (book sez $3k right now), the seller thought the opti was going bad but it just needed a cooant temp sensor.
    I have to agree that used cars have been holding their value (asking prices) moreso than in the past, and that there seems to be less used cars for sale by private owner though the car lots have plenty of used inventory (trade-ins most likely). I think those buy here/pay here places would provide some stiff competition for someone (that is not a licensed dealer) who tries to flip used cars on a cash only basis. Too many people that can’t seem to come up with a couple thousand dollars but are ok with paying few hundred every two weeks until they have paid for the car two or three times over.

    • DBB, good buy, great buy in fact. I was looking at a nice ’96 Roadmaster Station Wagon, the anniversary model for $3,000. The wife goes bananas I’m not driving a tugboat. Ok, I’ll buy it for me and get her a used Dodge pickup a friend has for sale. That way, all the shit she runs over and into won’t be a big deal and I’ll be in hog heaven when I get out of a big rig at the end of the day. She can trash that pickup inside and out and I can keep mine like new. Don’t know how many vehicles I’ve had people have asked if I’ve put new carpet and seats in. No, I just keep it clean and don’t trash it to begin with.

  22. “Today, six years after CFC (and 50,000 miles added to the odometer), the truck is worth $7,900 according to the NADA ”

    I don’t think you’re factoring in inflation (i.e., $7,000 six years ago is not worth $7,000 today), but I don’t think that subtracts from your point.

    I think the lesson people need to learn is that 99% of the time a car is a consumed good (like a sandwich), not an investment. You have it to use it, and at some point it will be used up. Maybe you can sell before it’s used up and get some of your money back out of it, but that’s not why you buy it to begin with.

    • exactly, and here in the rust belt they get used up even faster.
      (double post since I cant seem to master the internet :/)

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