By on April 19, 2011


Gareth writes:

Thanks to reading all the ‘Hammer Time’ series! I cruise local online estate auctions from time to time and a 1996 Accord LX has popped up, auto trans, and under 90km. From the photos it looks clean, based on the other contents of the auction it has been gently used by old people, and I will be going to inspect it Monday per the Steve Lang guidelines. The car is sold with emissions test and a safety certificate which on their face indicate a lack of glaring issues.

I’m in the midst of finishing law school, writing bar ads, and moving to a Big Law job – which starts in August and where I won’t need a car. Through May and June I need to do a decent amount of driving, 12-20 rental car days worth, and if I had a car I’d do a few more.

As such I’m exploring bidding on this car, using it for 2 or 3 months, then selling it with the hope of rental costs washing with the ownership costs and selling it as revenue neutral or for a small profit. As the car is ultra clean and low km I believe there could be some profit left in it. Currently the high bid is $1600, $1650 to top.

Calculus: My daily rental cost (tax, fees, etc..) from ERAC = $35, 12 days = 420, 20 = 700.

Costs to put Accord on the road: 550-850 (depending on my hold-back for repairs amount and taxes). No debt carrying costs as this would be a cash transaction.

Registration: 20
Plate sticker: 74
Hold-back – repairs: 200
Used Vech Info Pkg: 20
2.5 mths insurance: 213
HST (13%, variable): 300

Market prices for 1994-1997 Accords (pulled from local Autotrader, CL, Kiji)
Mean~= 2250
Median~=2200

However the majority of the comparator group are 200km-350km with somerust/ragged/riced issues.

US KBB prices:
Trade: 3,700
PP: 4,500
Retail: 5,900

I would not spend more than $2300 on it (incl BP). I don’t care that its an auto, easier to sell and all rentals will be slush boxes. Issue: In your opinion will I be able to sell this on in 2 months or so? At what price? Should I pull the trigger on this? Thank you! The knowledge and assistance, TTAC makes my life better.

Steve Answers:

This is one of those questions that LOTS of foreign graduate students and H1-B’s have to consider. They are almost always my favorite
customers because of their frugal and intelligent approach to… renting.

It will all boil down to two things. The price you pay and the condition of the vehicle. I will say that the Accord has extremely low
mileage and a nice demographic. Heck, I would bid a few hundred more just because of the ease of financing this type of vehicle at tax
time.

You already know my two cents on this. I would haggle a bit on a two-month rental and then bid on this one up to your comfort zone.
Definitely get the vehicle inspected and pay NO attention to Kelly Blue Book or the other pricing guides. You are bidding on daily
transportation with low miles and a Honda badge on it. In my market that’s worth at least $2800 but yours may be a bit more depressed than Atlanta.

If I were broke and I wasn’t a car guy, I would just rent. Forget the hassle. But if you can afford a small financial adventure… buy. You
may even be able to make it into a nice side business for you that benefits all your non-car owning friends. Just make sure they have
full coverage insurance before you ever give them the keys.

Before Sajeev answered, Gareth updated with :

Don’t worry about putting your thoughts into this – the price has gone to/close to my high retail estimate (2,800 and climbing) and the
numbers no longer work for me. I will say the Steve Lang method works re: static evaluation of cars (looking at parts, oil, coolant) – the
car was rust free, OEM only parts, and all service data from dealer.

Then Sajeev answers:

I talked to Steve before throwing this email thread in the “cylindrical file cabinet”, so to speak: we came to the conclusion that you don’t need to own a car. You don’t like this Accord, spending enough time on the math to suck all the fun out of the ownership experience. Then again, I bought my daily driver (Lincoln Mark VIII) for $5400 cash, simply amazed by its condition and rare options/colors. It was a mostly brainless, totally heartfelt decision.

As Steve as mentioned in his “Rent, Lease, Sell or Keep/Scrap” column, many used car lots will make you a deal on a rental, without the
overhead costs of the big name rental agencies. And, if you are lucky, the car in question will have more options and character, so maybe…just maybe…this can appeal to both your head and your heart.

Good luck with that.

Need help with a car buying conundrum? Email your particulars to [email protected], and let TTAC’s collective wisdom make the decision easier… or possibly much, much harder. In a rush? Don’t be shy about asking to cut in line.

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7 Comments on “New or Used: …Or Neither?...”


  • avatar
    Syke

    Yes, I know (and agree with) that ownership of a car is a dollar and cents proposition . . . . . . but really, if all this bookkeeping is all you can think of in owning any car, don’t bother. Go resurrect an old bicycle, get yourself in shape while commuting, and bank the damned money. Don’t want to pedal? 50cc scooter. You’ll be just as miserable and even more parsimonious.

    If you can’t get enjoyment out of driving a car, why drive? There’s got to be cheaper, equally miserable, ways to get around.

    I’d much rather owner a clapped out 25 year old Fiat Strada that I can occasionally (in between repairs) toss around the curves in my neighborhood than go through what you just put out.

    • 0 avatar
      Educator(of teachers)Dan

      Like your ideas but a 150cc won’t be much more expensive and will give you more speed to give you a cushion when speeding up will get you out of danger faster than breaking. 

  • avatar
    jimbowski

    How should I approach a used car place to inquire about a rental?  Should I go for the really small lots with clean cars?  Or the lots with cosmetically challenged cars?

  • avatar
    Sinistermisterman

    Despite Steve’s excellent advise on auctions, I’d just like to throw in my 2 cents worth. I’ve bought 8 cars at auction over the years, and in all cases they were bought as second cars or cars I would flip after a quick bit of work and a polish. I would never buy a car at auction that I immediately needed to rely on after buying it. Why? Well 1 of the cars I bought suffered a head gasket failure 25 miles down the road from the auction house after the engine got hot – and another ended up being a niggly b*stard that required several hundred dollars work even though it appeared to be a dealer queen with excellent service history.
    Don’t get me wrong, you can find some excellent bargains at auctions, but unless you are a total expert like Steve, prepare to be dissapointed every now and again.

  • avatar

    Ah, the best laid plans – I am sure Steve and Co. would have suspected that there was no way a Honda with that mileage was going to end up going for that little – especially when the auction was online.  In my experience at public auction, Honda’s and Toyota’s (recalls be damned) often get bid up to blue book values, and often by people with little to no knowledge of the car’s condition.  At police and estate auctions, for example, you may know the car hasn’t been registered in 5 years, and all the dmv costs associated with that, but chances are there is some schmo who doesn’t, and is willing to pay bb for it.

  • avatar
    Scoutdude

    One thing you mentioned is that if it was your car you’d use it more and I don’t see that factored into the equation. The other thing I don’t see factored into that equation is insurance on that rental car, the LDW can be steep and if you don’t have your own insurance or a credit card that will cover it that can add substantially to the overall cost of renting.
     
    So yes a smart buy will probably cost you much less and if done right could even leave your wallet a little thicker when all is said and done. The key is a smart buy and if your looking at estate sale stay away from the Hondas and Toyotas particularly the low mile units, they are likely to be bid up to full retail. If you are looking at estate sales look for a Buick, Taurus, Panther, or the ultimate would be a 96 or earlier Mark VIII. Those aren’t as likely to be bid up to full retail and will go for trade-in or less.
    A big key to break even or make a profit is not to spend any money on the car that doesn’t increase it’s value. In general that means only doing cosmetics as that’s what the average buyer focuses on. So that means no rubber band powered cars that are due or overdue for that $$$ expense like that Honda. I can’t tell you how much money I’ve made over the years from people who bought a car because it “looked good” had that special color, or flashy wheels and then brought it to me to “inspect” after it was too late. Spend money on a full detail before you spend it on a tune up if the car isn’t running poorly. Speaking of cosmetics color is very very important, stay away from anything in the brown faimly, oranges, or yellows. If it is small or remotely sporty red, red, red. If it is one of the cars I suggested black, silver, blue or pearl white is a good choice. Green’s work good on SUVs but have traditionally made cars hard to move. As mentioned above chrome wheels (even wrapped with bargain basement, half bald, or mismatched tires wrapped around them) are also a big plus for moving it quickly when it is time to sell.

  • avatar
    G___

    Thanks to Steve, Sajeev, B&B for the feedback.

    As noted the car went for more than I was willing to pay: 4,100 including BP and tax. 

    I will likely rent from ERAC, any dealer around here that will rent wants, understandably, full insurance. Renting and insuring over w/CC is much cheaper than the 100/month for comprehensive plus the 150 break fee after 2 months of use.

    @Syke:
    -I’ve bought/owned when I haven’t done the full calculation – it was expensive but damn I loved that Saab, most of the time.
    – This one would be pure financial calc given the nature of it (buy, use, +flip) vs. rent
    – Car was for long distance trips, bike/anything else is n/a. Was not for commuting.
    – – – i.e multiple trips to neighbouring cities/regions of 600 km to 2000 km round trips

    @jimbowski
    Good question – I’m sure if you emailed Steve directly he’d respond.

    @Sinistermisterman
    Good advice. In this case w/the safety cert, dealer records, and the inspection I had as much/if not more confidence than if purchasing a used car from dealer/private party.

    @ Scoutdude
    Good advice on resales.

    CC insures the rentals. $35/day out the door is mean total cost from ERAC.

    I thought about building in the “more use” but that was a fudgy variable that couldn’t be costed properly. i.e. Another $200 for 5 days of rentals would be prohibitive re: taking off to the cottage for a week but I’d totally jump in a car I had and go, fuel/wear costs be damned.

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