| ExRiGuy |
A local dealer (Radley) has 4 low mileage apparently used 2008 Sports for sale for $34,xxx. Looks like $33-35k is going "asking" rate for a Sport overall that stickered at $46k a year ago, either 07 or 08. Not sure what I had in mind, but that seems a bit low, no?
With the $2k incentive to dealers on the MDX it really seems like we can expect depreciation in line with your average domestic -- not something I was hoping for at all and is a bit of a let down.
What's to blame? Can we really blame gas prices -- the MDX isn't too far off from your average minivan as mileage and functionality goes. |
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| phins2rt |
quote:
Originally posted by ExRiGuy
A local dealer (Radley) has 4 low mileage apparently used 2008 Sports for sale for $34,xxx. Looks like $33-35k is going "asking" rate for a Sport overall that stickered at $46k a year ago, either 07 or 08. Not sure what I had in mind, but that seems a bit low, no?
With the $2k incentive to dealers on the MDX it really seems like we can expect depreciation in line with your average domestic -- not something I was hoping for at all and is a bit of a let down.
What's to blame? Can we really blame gas prices -- the MDX isn't too far off from your average minivan as mileage and functionality goes.
Probably more perception right now than anything. SUVs across the board have fallen out of favor. I suspect minivans will be next.
The depreciation only hurts you when you sell so keep it a loooooong time!! |
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| G. COLTON |
"The depreciation only hurts you when you sell so keep it a loooooong time!!"
A very true statement. I never consider depreciation as a factor is buying or keeping a vehicle. In fact I never even think about it other than at times when I read something like this.
I have never found that depreciation has any bearing on the quality or ride of a vehicle. Nor on the basic comfort I feel when driving or riding in my car. Depreciation has no effect on the reliability, dealer service nor fuel economy.
My feelings are that if you cannot afford to get nothing for your vehicle when it's life if over than you should not buy it.
G |
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| JeffK |
Actually, depreciation is something that everyone should consider - unless you are a trust fund baby.
When we started driving (at least when I did) cars cost less than $3,000 so depreciation was not a huge consideration.
But with the average cost of a new vehicle now north or $25,000, depreciation is the major cost of ownership.
With cars costing more than $40,000 depreciation of 50% or more after only three years, that is a loss of $20,000.
If I owned (I do not - I lease) that loss of $20,000 would affect me.
As I have posted many times, in uncertain times, leasing shifts the uncertainty of depreciation from the lessee/owner to the manufacturer/lessor where it belongs.
JeffK |
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| gmc74 |
To the original poster, that price seems low to me.
There is a significant difference in value if it is an 07 or 08, and mileage is going to be a factor as well. I believe you stated they are 08's, in which case something doesn't smell right. Do some investigating and figure out what that is.
As for depreciation, if you are going to drive the car until it has little to no value (i.e. 10 years or so) then depreciation means nothing.
If you are going to drive it for 3-5 years, then it means everything. Like any investment, you want to get as much out of it when you sell it.
Leasing isn't for everyone, since you could be on the hook for unknowns like damage and overage on the mileage. It isn't a bad choice if you are going to keep the car in good shape, the miles down, and want to get rid of it in 2-3 years.
Personally, I am not a fan of a lease, unless it is in a business's name, then I get it. |
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| phins2rt |
quote:
Originally posted by JeffK
With cars costing more than $40,000 depreciation of 50% or more after only three years, that is a loss of $20,000.
It's only a loss if you sell the vehicle. If you sell your car every 3 years than leasing would be much more attractive and should be considered. |
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| JeffK |
Not really.
This is not an "unrealized loss" as when you are holding a stock that has gone down in value.
There is always a chance that the stock price may recover.
This is a real loss - there is no chance that the value of the car will increase.
The loss in equity is there and real - whether you sell the car or keep it.
JeffK |
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| phins2rt |
quote:
Originally posted by JeffK
Not really.
This is not an "unrealized loss" as when you are holding a stock that has gone down in value.
There is always a chance that the stock price may recover.
This is a real loss - there is no chance that the value of the car will increase.
The loss in equity is there and real - whether you sell the car or keep it.
JeffK
I guess I look at it this way. I hand over 40K and get a car. Whatever happens to that car's value over time is insignificant. My 40K is gone, never to return. The only time the depreciation would effect me is if I sell the car. Then less money would be returned to me based on the depreciation. The real "loss" is the 40K lost at the beginning of the transaction and the lost opportunity of that money. |
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| JeffK |
Dear phins2rt
Of course you are right.
However my point is that depreciation is a real loss. . It does not matter if you sell the car or keep it.
Most expensive items that we buy, do not depreciate but actually appreciate. Think of your home for example.
Boats and planes also depreciate - but those tend to be luxury items whereas a car is both a luxury and a necessity.
Every article you will read about the cost of ownership - depreciation is the number one factor.
JeffK |
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| MDX4now |
There is definitely something to be said for not putting large sums of cash into a depreciating asset. (I.E. a car)
There is also something to be said for people not wanting to rent their vehicles for the rest of their lives.
Would my money be at better use working for me in some other form (stock market, money market, etc.) than locked into a vehicle? Possibly, but who knows?
Personally, I like having the security knowing I can keep my car for as long (or as short as I want)...I make the rules with my car, not the manufacturer finance company.
BUT that's me, and I completely understand why people lease (and I'm talking about the people that can afford to lease OR buy...not the people who lease just to get into a car they can't really afford).
I think we all can agree though that when push comes to shove, driving your car till the wheels fall off is most certainly more cost effective in the long run than either trading your purchased car in every 3-4 years, or locking yourself into a $20,000+ dollar lease every 3 years...in which case resale value shouldn't be a huge factor. |
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| kingmdx |
I think everyone factors in depreciation when buying a vehicle ...but extrapolating to lets say 8-10 years after owning/purchasing a new X...the X isn't worth anything much..I would have lost 40k purchasing basically ...a leaser would have lost 8-10 years of leasing money... probably driven a new vehicle every 3 years or so ...but still that's a bigger loss than 40k. But as it's been said it depends on your life and what you deem important etc that will help you make your own personal decisions in life...
If i was to look on the shorter term 3-5 years ...well ..actually this article will explain it better from consumer reports:
Comparing auto-financing options: How to decide whether a loan or a lease is more economical for you
It starts:
It's up there with baseball vs. football and creamy vs. crunchy. Which is better: financing or leasing a new car? Leasing is often touted as the option that gives you "more car for less money." This month, the Consumer Reports Money Lab set out to test that premise.
You come up with your own opinion after reading it :) |
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| JeffK |
I have read the Consumer Report article.
What they fail to do is to adequately figure in the loss of income when buying a car vs. leasing and the tax savings of leasing vs. buying.
For example: My monthly payment on my '06 MDX is $520 per month, including NY Sales Tax - with no money down. I could have bought my MDX for about $33,000 plus NY Sales tax at 8.625%, $2846, for a total of $35,846
I figure use of money at 6%. That means I lost the use of 6% on $35,846 for 36 months, or $6452. This loss of use of money must be added into the purchase price of $35,846. That means my '06 MDX really cost me $42,298.
The total of my 36 lease payments will be $18,720.
Subtract $18,720 from the cost of $42,298 equals $23,428.
If at the end of three years my MDX is worth more than $23,428 than I would have been better of buying than leasing.
If my MDX is worth less than $23,428 I am better off leasing than buying.
From KBB.com my MDX is presently worth: $23,000 see: http://www.kbb.com/KBB/UsedCars/Pri...QuizConditions=
I still have 18 months to go on my lease.
Clearly in October 2009 when my lease runs out, my MDX will be worth less than it is today and substantially less than $23,428.
Anyway you cut it, with a rapidly depreciating car, leasing is financially better than buying.
JeffK |
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| phins2rt |
Jeff,
Don't you still need to factor in the opportunity cost of the lease payments over the three years? And again, if you drive the car for a longer period (5-7 years), leasing loses its advantage. I think if you are buying a car every 3-4 years, leasing is an option. Buy and hold folks do just that, BUY. $.02. |
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| gmc74 |
quote:
Originally posted by JeffK
I have read the Consumer Report article.
What they fail to do is to adequately figure in the loss of income when buying a car vs. leasing and the tax savings of leasing vs. buying.
For example: My monthly payment on my '06 MDX is $520 per month, including NY Sales Tax - with no money down. I could have bought my MDX for about $33,000 plus NY Sales tax at 8.625%, $2846, for a total of $35,846
I figure use of money at 6%. That means I lost the use of 6% on $35,846 for 36 months, or $6452. This loss of use of money must be added into the purchase price of $35,846. That means my '06 MDX really cost me $42,298.
The total of my 36 lease payments will be $18,720.
Subtract $18,720 from the cost of $42,298 equals $23,428.
If at the end of three years my MDX is worth more than $23,428 than I would have been better of buying than leasing.
If my MDX is worth less than $23,428 I am better off leasing than buying.
From KBB.com my MDX is presently worth: $23,000 see: http://www.kbb.com/KBB/UsedCars/Pri...QuizConditions=
I still have 18 months to go on my lease.
Clearly in October 2009 when my lease runs out, my MDX will be worth less than it is today and substantially less than $23,428.
Anyway you cut it, with a rapidly depreciating car, leasing is financially better than buying.
JeffK
Now figure that same thing on 5, 7 or 10 years.
In 10 years, the person who bought the car has a car with a value of a few thousand dollars for the $40k they sepent
You have a shiney new car that you don't own, have paid over $62k dollars over the last 10 years, not to mention the property tax associated with a brand new (or almost new) car every year, which can be very significant when compared to a car that is 5, 7 or 10 years.
would it be better to pay $40k over 5 years for an asset of $5k in 10 years, or $62k over 10 years for an asset of $0 (or less than $0, if there is mileage overage or dings) in 10 years? |
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| JeffK |
You are correct on the use of money on the lease payment. However, this will be an increasing amount – you of course are not paying the entire lease payment up front.
I have done a spread sheet analysis factoring in all of the above plus the extra maintenance after the warranty period – the 5th, 6th and 7th years, plus the additional wear and tear expenses.
Basically, assuming normal depreciation, the breakeven is between the 6th and 7th year.
With accelerated depreciation, like the MDX is presently experiencing, the break even period is further out, somewhere beyond the 8th year.
Also keep in mind I have not put any money value on driving a new car every 3-4 years with all the modern technology and safety features that new cars possess.
I for one like driving a new car or a car no more than 4 years old, covered by a bumper to bumper warranty, as opposed to driving a 7 year old care with 80,000 miles plus on it.
I have posted extensively on this subject.
JeffK |
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| keremoner |
| I can't believe that there is all this depreciation discussion here. All cars depreciate unless you can hold on to it untill it MAY one day become a classic (which 99% of the cars don't!). So you buy your car to enjoy, much like a plasma or LCD TV but with more utility of course. If you are like me, you drive it 10-12 years and then sell it for a couple of thousand dollars. Cars are not investment vehicles like a home or stocks. If you want a car as an investment vehicle, buy a 1953 Mercedes Gullwing or something (which you couldn't drive for daily use if you wanted it to maintain its value or appreciate) |
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| Blackura |
One thing you're forgetting about depreciation is that if you lose your car due to an accident or theft, you MUST eat all that depreciation. Buying a slowly depreciating car shields you from that. If you lose your job in the crap economy of 2008 and must sell your car, you also lose big (on top of being suddenly unemployed).
Had you bought a junker of an old Civic for $900 a few months ago, you could re-sell it today for $5000. A better invesment than a gullwing for sure.
And keep in mind that the ugly blue Geo Metro XFi the singer drives in that freecreditreport.com TV commercial is worth far more than the SUV he laments not owning. Ironic. |
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| DAC17 |
quote:
Originally posted by JeffK
Actually, depreciation is something that everyone should consider - unless you are a trust fund baby.
When we started driving (at least when I did) cars cost less than $3,000 so depreciation was not a huge consideration.
But with the average cost of a new vehicle now north or $25,000, depreciation is the major cost of ownership.
With cars costing more than $40,000 depreciation of 50% or more after only three years, that is a loss of $20,000.
If I owned (I do not - I lease) that loss of $20,000 would affect me.
As I have posted many times, in uncertain times, leasing shifts the uncertainty of depreciation from the lessee/owner to the manufacturer/lessor where it belongs.
JeffK
Yep; that's exactly why you should lease these larger, thirstier vehicles. Sooner or later, the large cars/SUV's, crossovers and trucks will all be depreciating big time. Some have already started. |
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| MDX4now |
How about we all just enjoy our vehicles and stop complaining as if we all have a Daewoo on our hands?
My car could drop an extra $10K tomorrow in value, but you know what? OH WELL. I own it, I can't do anything about it, so I might as well keep it, get my money's worth, and move on to worrying about more important things in my life.
We all have very nice cars, no matter what they may be presently worth or how we paid for them...end of story :rolleyes: |
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| phins2rt |
quote:
Originally posted by MDX4now
How about we all just enjoy our vehicles and stop complaining as if we all have a Daewoo on our hands?
My car could drop an extra $10K tomorrow in value, but you know what? OH WELL. I own it, I can't do anything about it, so I might as well keep it, get my money's worth, and move on to worrying about more important things in my life.
We all have very nice cars, no matter what they may be presently worth or how we paid for them...end of story :rolleyes:
Well said MDX4now! :29: |
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| BillHeart |
Crap,
I wrote a big post and it got zapped.
Oh well.
From someone who watches the wholesale market on MDXs like a hawk, I am seeing some weird things right now...
However, as a rule, used MDXs remain quite strong.
If you can buy a low mileage 2008 MDX Sport for $33-35k, buy it.
No. I take that back. Buy ALL of them, because dealers are still paying $36-37k at auction for 07 Sports with 10k miles on them!
My guess is that they are retired service loaners, frequently we have cars come out of loaner status at ridiculously low prices, I just took in an 06 TSX with Navi for just UNDER $15,000 as a retired service loaner, the car had 28k miles and normally that's a $20k wholesale car.
Personally I don't see why Acura brought out the $2k incentive money other than it's helping us put deals together in a weird way.... we're using it to help get people out of their trades that more often than not they are very upside down in.
See, Acura's sales are in the tank, but not in our market. Last month they were down 17% or so nationwide, but the TSX was a big part of that. Historically my store moves, oh, I dunno.. about 15 TSXs a month. Last month we sold 5 or 6 because we were basically out of them. We have one left, we sold it on the 2nd and it was about the last one we had, it's going out on Friday. I haven't had an 08 TSX to sell in weeks. However, the new ones are flying off of the shelves for us, but we weren't allowed to sell them until April 26th!
MDX sales do remain strong for us, the market/district/zone etc that our store is in is not down like in other parts of the country, but what's killing us and costing us sales are all the people trying to get out of Escalades, Navigators, Expeditions, Tahoes, etc. Everytime I get called to appraise a big V8 powered SUV I cringe, what's helping us sell MDXs is that they get good mileage for what they are, 7 passenger SUVs. I just had a lady in with an LR3, it was a 30k mile 2006. Now, 6 months ago that truck was worth, I dunno, $25-26k, right now it's worth $20k or so to me.
But MDXs aren't taking hits like that, the Rover is down, easily, 20%. Domestic SUVs are faring far worse.
However, let's look at what I am paying for used MDXs, heck, I just bought 4 of them the other day.
Back in January I bought a 2005 Base MDX with 44k miles on it for $19,000. Right now that same truck is worth about $17k or so, more than that if it's Aspen White pearl.
At the same sale I also bought a 38k mile 2004 Touring with Navi for $18k if memory serves. Right now that same vehicle is worth about $16,500-17k or so.
It's almost June.. so we're a good 5 months in from Mid January, so how are they tanking?
What I can tell you is that for some reason Honda Finance is finally pricing them cheap on VIPS (A website, hfcarsales.com, that we can buy lease returns on) I just bought 4 on VIPS on Thursday and, for the first time in Memory, they were cheaper on VIPS than they were at the auction!
Say what you will about Gas prices, or the economy, but the facts are stubborn, MDXs are certainly NOT crashing in Value. |
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| JeffK |
BillHeart:
I know we have real estate brokers who are telling us that we have hit bottom but we know better.
But your post:
" Buy ALL of them, because dealers are still paying $36-37k at auction for 07 Sports with 10k miles on them"
Takes the cake!
I do not know what you are smoking, but I would like to buy a ton of it!
GET REAL!
What are trying to do pump up sales!!??
And please send those dealers to me: I have bridge connecting Brooklyn and lower Manhattan for sale.
JeffK |
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| BillHeart |
Jeff,
I run the Used Car department at an Acura dealership. So I attend Acura remarketing auctions every month at Manheim Auto Auction, I appraise all the trades that come into our dealership and, well, I am responsible for the used car department at one of the biggest Acura dealers in upstate New York.
Eh, what do I know, right? :)
Since you suggest that I am making this up, here's a screenshot of recent dealer auction activity on 07 MDX Sports... this is right from Manheim's website and shows ACTUAL market activity.
Pump up sales? LOL, how many times have I said that I AVOID used new body style MDXs like the plague? I have one now that I just took in on trade and would LOVE to get rid of! |
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| BillHeart |
I do want to mention that the one with 5k miles... I saw that car run across the block, it ran with the announcement "Unibody Damage", if memory serves it had a left quarter panel replaced and work done to the B Pillar.
IE: It had been hit harder than Rocky Balboa. |
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| BillHeart |
Here's BASE MODEL MDXs in the Northeast.
You know, they sticker at $41k or so, you can buy a new one for $36k I would imagine.
Again, I will buy every single 2008 MDX Sport that I can get for $33-35k with low miles.
Every Single one. I'll have checks cut tomorrow and I will buy every last one of them.
I don't want them for my lot. I'll ship them right to manheim and if I sell them for 2007 Money I'll still make 1-3k each wholesaling them.
Hence why I told the poster to JUMP on that deal! If you can buy an 08 Sport for the same money an 07 Base would sell at a dealer auction for, you really should do that don't you think? |
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| JeffK |
Here are the numbers as I see them:
Dealer cost on a new '08 MDX Sport is $42,300. From this subtract the $2000 incentive and the 3.5% hold back on MSRP, $1627, for a net cost of $38,673 or $$39,000. Dealers will be willing to sell this car all day long for $40.500.
Now you are claiming sales at Manheim of $36,000 on an '07 with 10,000 miles.
Expenses to clean up certify etc. will add another $1,000 for a total cost of $37,000.
Assuming the dealer wants a profit equal to the one on the new one, he must sell it for $38,500.
Call me crazy, but I personally think anyone who will buy a one year old MDX with 10,000 miles to save $2,000 is crazy and any dealer who thinks that they can sell an '07 for $38,500 in today's market is equally crazy.
Just my opinion - but based on actual numbers.
JeffK |
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| BillHeart |
I've been saying that on here for months!
Right now, buying a 2007 MDX is, to me, foolish. They are bringing silly money wholesale, and even if you look at what MOST of them sell for in our region (Which is not an average of $200 over invoice after the $2k) it's still silly.
Most dealers in our region average about $1,000 over invoice on MDXs. That's the overall average in the greater NYC area.
Do we all take cheap deals? Of course we do, but let's assume that $1,000 over ($1000 under figuring that we have the $2k to play with) is the going rate.
So let's say, on a Sport, that the average transaction price is in the range of $41,300 or so.
So I go out to Manheim and buy a 20k mile 07 Tech and get lucky and steal it for $35,000. Now I have an auction fee of probably $450. I have $200 transport to get it up here. CPO costs just went up 12 or 13% so that's now $580.
It's sitting on my lot, dirty, and I own it for $36,230.
Oh, wait, it has a couple of door dings.. that's $100 to fix them.
$36,330.
Better get it detailed!
$36,430
Now the shop has to look at it, that's 2 hours right off the bat ($192). Plus we have an oil change, wiper blades and floor mats. ($160 or so) Those are mandatory on a CPO car. At 20k miles I am probably due for at least front brakes at $187.50 labor plus $70 or so for pads so that's another $260 (Remember, a CPO car has to have over 50% pad life remaining. Assuming the tires are still meaty enough to pass the shop bill is only $600 or so.
Crap! forgot that it has a nick on the back bumper, $100 to get that airbrushed!
So now it's detailed, free of dings, looks beautiful and is certified and ready to go.
$37,130 is what I own it for. So I ask $39,995 and hope to get $38,700 or so.
Or you can buy a new Tech with the power tailgate, in whatever color combo your heart desires (Unless it's got Bordeaux gut, those don't exist except for the odd Pearl White one) for $2,000 or so more.
Hence why I always say there's NO sane reason to buy a used 07 right now. I figure in a year or so they will start to come in off lease, then they might come down enough to make sense.
FWIW, a lot of what's drawing the market on them upwards is the weak dollar creating a strong export market on used MDXs... most of them end up overseas. |
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| BillHeart |
quote:
Originally posted by JeffK
BillHeart:
I do not know what you are smoking, but I would like to buy a ton of it!
JeffK
Oh,
Parliament Lights. Most Gas stations have them :D:2: |
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| gmc74 |
quote:
Originally posted by JeffK
Call me crazy, but I personally think anyone who will buy a one year old MDX with 10,000 miles to save $2,000 is crazy and any dealer who thinks that they can sell an '07 for $38,500 in today's market is equally crazy.
Just my opinion - but based on actual numbers.
JeffK
I wouldn't think that a person would pay MSRP, or even close to it, but a buddy of mine that sells cars has it happen quite often.
I know it sounds crazy, but kbb has the value of an 07 sport with 11k miles at 44k for dealer SRP...
Jeff, I don't see any benefit for Bill if he is doctoring screen shots and feeding you a line of bull, which I don't think he is. On the other hand, you have been telling everyone that the depreciation of the MDX makes you the smart one because you lease, so you attacking someone whose information could make you look bad seems quite realistic.
I am pretty sure the only thing that is crazy here, may be you and your warped sense of reality... and people who pay KBB or MSRP of course. |
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| josephd05 |
| Here's my take on leasing. My previous two vehicles were leased, and my driving habits had me at 15-20k miles a year. Say you drive 15k miles a year for a 3 year lease, now you have to spend 800-1k on tires and also 300-1000 dollars on brakes, to then hand the car back to Acura? No thanks. Now if you drive 12k a year, you can get away without spending big bucks on maintenence. |
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| BillHeart |
Wow!
Kelly was somewhat accurate.. for once.
There's 3 easy ways to get a real money figure for a car that you own.
1) There's a website out there called ebuyfigure.com It's run by R Hollenshead Auto sales. No, you haven't heard of them, but they are the single biggest seller at Manheim Auto Auction, if memory serves they run more cars in a month than GMAC or Ford Credit.
They'll give you a figure that I have found to be realistic and the site even lets you print out a check right there.
2) Go to www.galves.com It's what dealers in the northeast actually use themselves. It's based on current market activity. It's not free, but good information rarely is.
3) Take your vehicle to 3 or 4 dealers who sell cars like yours and ask them what they will pay for it. You'll probably find that on a clean MDX worth about $20k the spread will be within $1k or so, so that's accuracy within 5%.
Then compare those figures to KBB or NADA. |
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| BillHeart |
| As a VERY rough rule of thumb, Nav (Tech) adds about $2k to the Value on a used one. |
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| bourmb |
quote:
Originally posted by phins2rt
It's only a loss if you sell the vehicle. If you sell your car every 3 years than leasing would be much more attractive and should be considered.
Is leasing possible or a cost advantage if I drive 21K/year? |
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| BillHeart |
If you did a 15k/yr lease on a new MDX (I ran it on a base, a tech won't have a much lower residual percentage) your residual is 55% of MSRP for a 36 month term, that's $22,500.50
If you do 21k miles per year, the $22,500 residual drops to $20,700.50 or 10c/mile x 18k miles extra.
In reality, a 3 year old MDX Touring with 63k on it would be worth more than $2,000 less than one with 45k on it, right now.
So in this case you may actually come out ahead by leasing it for 21k miles per year. Seems to add roughly $50/mo to your lease payment if that helps. |
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