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Originally Posted by iboomalot
I would buy a Prius today if the car wasn't so pricey and resell value so low. Its large enough to hold my family of 5 and gets killer MPG.
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If people depreciated vehicles as a business would depreciate a vehicle then resale values would not be an issue. If a company depreciates a vehicle in 3 years, they are assuming that the vehicle has no more value left by the end of 3 years. So, if you let go of a vehicle after it is fully depreciated and you walk away with money in your hand you are always a winner. Of course, managerial accounting is always a game of what if, and what do you want to see out of a situation.
But most folks don't run a depreciation account on their vehicles. So, that means they then judge the financial position of a vehicle by resale value, which is a totally false way to value a consumable item. A consumable item is only totally useful and provides 100% value to the user if the item is fully consumed (or in the case of depreciation, a period of time has elapsed in the term of ownership and a financial adjustment has been made to the bottom line to indicate that the item has no residule monetary value). Since vehicles are not an investment, but a capital outlay and vehicles have a limited lifespan, which is not definite and varys from user to user, resale value is an incorrect way to value a vehicle, or even determine what to purchase. I work in an environment where some people trade cars frequently. Those cars are not fully consumed. They are trading off vehicles which have many more years and miles of life in them, usually just so they can have something newer. I have yet to see a trade which was justified by a change in family or other status. Very monetarily foolish. These folks are being beaten by depreciation. However, the folks which buy and drive a car until it drops are the ones where depreciation has no effect.
I did not trade my old car when I purchased the Prius. Why? Because it still runs, has basicaly no trade-in value, has limited private sale value and is more valuable to me in my driveway as a second car, and winter beater than it would as cash in my pocket. It is costing me nothing, aside from oil changes, and incremental insurance cost, and minor maintenance to keep it in my driveway and prevents me from having to make the Prius my primary car and subject it to yucky winter weather. There have been times this winter where the weather was so bad that I didn't drive the Prius for over a week. Good for the Prius, good for my peace of mind.
My advice to everyone is to never trade-in a vehicle. Purchase new and drive till they drop. If you want a new car down the road, use your savings to purchase one, keep the old one around and split your driving between the two. By spliting mileage you increase the life of both vehicles and you always have a beater laying around to use when weather is bad or otherwise.
1003 miles a tank personal record. 74MPG calculated. HCH1 CVT
