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  #1  
Old 08-17-2017, 10:35 AM
Kaboom88 Kaboom88 is offline
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Get new $60k BMW vs keeping 8yr old SUV 4 year cost to own closer than you think!

Wrestling with idea of trading in my paid off 8 year large sized domenstic SUV vs new BMW for $60k.

Trade in offered is 13k.

OPTION 1: KEEP SUV FOR 4 MORE YEARS (tco estimates from edmonds)

Down payment 0
monthly loan 0

Insurance same
fuel same
Maintenance 2200/year
Repairs 1500/year
Residual Value after 4 year 6000

SUMMARY OPTION 1: $15k added expenses for 4 years, left with $6000 asset at end


OPTION 2: TRADEIN SUV TO PURCHASE NEW BMW FOR $60000

Trade - in reduces 60000 - 13000 = $47000
tax comes to almost $6000 for total cost of $53k

Costs
Down payment $4000
Monthly loan aprox 1000/month = $48000 4 years

insurance $20 less than SUV per month = $1000 savings
Fuel $40 less than SUV per month = $2000 savings

Maintenance 0
Repairs 0

Residual Value after 4 years estimate $33k (note although i am buying new it is clearance model with first year depreciation discount shaved off the MSRP)

SUMMARY OPTION 2 $50k added expenses for 4 years, and left with an asset worth $33k

COMBINE BOTH OPTIONS:

OPTION 2 HAS $35K EXTRA COST OVER 4 YEARS, BUT AFTER THE 4 YEARS YOU ARE LEFT WITH A MATERIAL ASSET THAT CARRIES $27K MORE VALUE!!

NET OVERALL 4 YEAR COST DIFFERENCE (35 - 27) = $8000 !!!!!!

So for just $2000 per year extra, i get to drive a brand new loaded BMW instead of my old SUV which will also yield non-financial benefits such as:
- Pride and Status that comes with a late model BMW vehicle
- No need to worry about which part is going to break down this month
- New tech features like blind spot warning, real time traffic, Digital connected drive
- Surround View, Pedestrian Collision warning, etc etc

AM i missing something from my calculations? The interest rate is 1.5% offered for this, and i rounded it into the monthly payment. And i know there is some opportunity cost, but dont think with this short horizon it would be significant.
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  #2  
Old 08-17-2017, 02:25 PM
Carbon Fiver Carbon Fiver is online now
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What's the $2200 every year maintenance ($8800 total)?


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Old 08-17-2017, 02:39 PM
Kaboom88 Kaboom88 is offline
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Thats the quoted edmonds Maintenance per year for my model SUV. Covers things over those 4 years like all the oil and filter changes, as well as the regular maintenance items like brake job, transmission fluid change, spark plug change, rotations, new tires etc etc. With older car out of warranty those get pricey. Mine is a caddillac, their labour rates are high.....i suppose i could shave off some if i take to a third party service center.

Last edited by Kaboom88; 08-17-2017 at 02:43 PM.
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Old 08-17-2017, 06:09 PM
Carbon Fiver Carbon Fiver is online now
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I still think $8800 sounds way high for "maintenance" (excluding repairs) when the only annual thing you'll need is oil changes, the rest (brakes, transmission, spark plugs) would be maybe once each over the 4 years. Tires you'd wear with either car, so that's a wash, you'll have that expense on the BMW.

With the BMW you'll have to pay the maintenance in the 4th year, it's only covered for 3, and that could easily be $2000+ for oil, cabin filter, brake fluid flush, probably brakes ($1500), maybe spark plugs.

How can the SUV still depreciate over 50% when it's already 8 years old, that's near new car depreciation? Depreciation should have levelled off, so there's another couple thousand. Your $8,000 difference can easily be $15,000 or more with these.
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Last edited by Carbon Fiver; 08-17-2017 at 06:10 PM.
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Old 08-17-2017, 07:49 PM
Kaboom88 Kaboom88 is offline
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Thanks for raising these points as potential blind spots I may have overlooked.

by the way I should point out all my figures are in Canadian $$$. So take 20% off these figures for US equivalent.

With respect to the annual maintenance of 2200 per annum, that might not be all that unrealistic. I know spark plugs and another component is due very soon, that alone was quoted to me as $2000. That doesn't include the 3 times/year oil change.

I know brake job is due next year. I don't think that figure is too high. I just had the engine light come on a month ago, they determined it was just a hydro solenoid that needed to be replaced, which itself cost $72, but the 3 hours it took to diagnose to find the problem, and to install it, plus all their fixed costs I ended up with a $530 bill.

My new tires on the Beemer could last 4 years, I have low annual mileage. But I know the ones on SUV won't last another 2 years.

As for that 4th year maintenance, not sure if its different in the states but here in Canada we get full 4 year coverage, so technically no cost for me in the 4th year, except regular wear and tear item......so maybe brake pads could be billed should they wear out...but like I said I live close to work so relative low miles.

As for the depreciation, I just looked up my same model car on auto trader and trolled for ones that were 4 years older, thats where I got the residual value assumption. They were going for $7-8k, so I figured $6k if I were to trade in.

Perhaps I am using a little 'biased' math to justify that new car, maybe repairs could be minimal as I have kept it in great shape. But with repairs they can go higher too!

But alas...you are right it could go higher...but I don't think it would get to the 15k mark difference. Maybe to 10-11k over the 4 years? Even then I think its worth it.....
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Old 08-17-2017, 07:52 PM
Kaboom88 Kaboom88 is offline
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carbon I forgot to ask.... thats a nice 5 series you got there!! I see it has drivers assistance, but not the plus package. Does it include collision and pedestrian detector where the car will apply the brakes itself? Or is that only in the plus package?
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Old 08-17-2017, 07:57 PM
Carbon Fiver Carbon Fiver is online now
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Originally Posted by Kaboom88 View Post
carbon I forgot to ask.... thats a nice 5 series you got there!! I see it has drivers assistance, but not the plus package. Does it include collision and pedestrian detector where the car will apply the brakes itself? Or is that only in the plus package?
Thanks. My Driver Assist is only the blind spot warning (nice) and surround cameras (indispensable). Didn't notice you were in Canada. USA lost the 4th year maintenance, nice you still get it. Good luck with your new car!
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Old 08-18-2017, 06:54 AM
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Learn to do your own maintenance. If you do then keeping the PAID OFF suv makes a lot more sense.

Your projected new car payment is more than my house payment, and I don't live in a crap house.
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Old 08-18-2017, 08:01 AM
Autoputzer Autoputzer is offline
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You must have been talking to a BMW salesman, recently. You should never confuse a BMW salesman for a financial advisor.

One of the fastest, most comfortable, stylish ways to get to the poor house is in a shiny new BMW. I'm taking a friend up to Spartanburg next month to pick up a leased M240i. I took him up there in 2014 to pick up his leased M235i. I pick him up at his house when we go on these trips... the poor house.

As a general rule, a car will depreciate 25% (of MSRP) the first year; 20% of the book value the year the warranty expires, it goes over 100k miles, and the year it becomes seven model years old; and 15% the remaining years. So, a new $60k car would depreciate $15k ($60k x 25%) the first year. That one-year old car worth $45k would depreciate $6750 the second year ($45k x 15%) the second year. That 15% or 20% annual depreciation of an older car is far less than 15% or 20% depreciation on a newer car.

Here's a chart of depreciation of a $60k vehicle using the rule-of-thumb rates above. The last column, (Average Annual Depreciation Cost To Date) -(Annual Depreciation Cost), is how much you could spend in that year on maintenance and still be money ahead over buying a new car.

My 2014 535i had an MSRP of $73k. Discounts and taxes pretty much cancelled each other out. So, it pretty much cost me MSRP. Larger BMW's depreciate faster than smaller ones (as a percentage, not just in dollars). I put $17k in options on a $56k base-price car. Options depreciate faster and further than the base car, usually down to zero. So, the annual depreciation rates for my car in the first three years were higher than the rule-of-thumb rates. Based on my previous BMW's, I'm budgeting $2k/12.5k mile year in maintenance and repairs for second four years and second 50k miles. Here's my actual costs for the first three years and projected costs for the next five years. In the first four years, maintenance, depreciation, and capital costs will be just over $1.00/mile. But, for that second four year, 50k miles stint, they will likely be less than $0.50/mile.

Cars don't last forever. It's been my experience that maintenance costs skyrocket when a car gets over 100k miles. My 2002 M3 cost me $7k in maintenance between 102k and 110k miles.

"Forever" gets a lot shorter if the car is exposed to road salt, too. Parking a car in sunlight, especially in lower latitudes like Floriduh, also takes its toll on a car.

At some point, a car becomes too unreliable to do what it's supposed to do. I don't consider a car with over 100k miles to be roadworthy for a schedule-critical road trip, and most of my road trips are or were schedule-critical (driving schools, weddings, funerals, vacations, holidays, business trips). Back in 2013 I went to M School in Spartanburg. My M3 was so old and had so many miles (over 110k) that I took my newer beater car, a 2007 Chevy Cobalt (the anti-BMW), instead. On the way home, driving that miserable POS car, I had a "rest stop revelation." When I got home, I sold the twelve year old M3 and ordered the 535i.

I like BMW's. But, I also have a firm grasp of financial reality. So, I take exceptionally good car of my cars (even the Cobalt) so that they will give me enjoyment for at least ten years and 100k miles.

Keeping my 535i eight years (or more) will save me about $25k over replacing it after four years. My dealer has sent me three spam e-mails and at least three letters saying that I am eligible to "upgrade" from my 2014 535i to a 2017 540i for "only" $44k out of pocket.


If you want a new BMW and you can afford one, buy one. But, don't lie to yourself about how much it will cost you.
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Old 08-18-2017, 08:40 AM
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crazy4trains crazy4trains is offline
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Quote:
Originally Posted by Autoputzer View Post
You must have been talking to a BMW salesman, recently. You should never confuse a BMW salesman for a financial advisor.

One of the fastest, most comfortable, stylish ways to get to the poor house is in a shiny new BMW. I'm taking a friend up to Spartanburg next month to pick up a leased M240i. I took him up there in 2014 to pick up his leased M235i. I pick him up at his house when we go on these trips... the poor house.

As a general rule, a car will depreciate 25% (of MSRP) the first year; 20% of the book value the year the warranty expires, it goes over 100k miles, and the year it becomes seven model years old; and 15% the remaining years. So, a new $60k car would depreciate $15k ($60k x 25%) the first year. That one-year old car worth $45k would depreciate $6750 the second year ($45k x 15%) the second year. That 15% or 20% annual depreciation of an older car is far less than 15% or 20% depreciation on a newer car.

Here's a chart of depreciation of a $60k vehicle using the rule-of-thumb rates above. The last column, (Average Annual Depreciation Cost To Date) -(Annual Depreciation Cost), is how much you could spend in that year on maintenance and still be money ahead over buying a new car.

My 2014 535i had an MSRP of $73k. Discounts and taxes pretty much cancelled each other out. So, it pretty much cost me MSRP. Larger BMW's depreciate faster than smaller ones (as a percentage, not just in dollars). I put $17k in options on a $56k base-price car. Options depreciate faster and further than the base car, usually down to zero. So, the annual depreciation rates for my car in the first three years were higher than the rule-of-thumb rates. Based on my previous BMW's, I'm budgeting $2k/12.5k mile year in maintenance and repairs for second four years and second 50k miles. Here's my actual costs for the first three years and projected costs for the next five years. In the first four years, maintenance, depreciation, and capital costs will be just over $1.00/mile. But, for that second four year, 50k miles stint, they will likely be less than $0.50/mile.

Cars don't last forever. It's been my experience that maintenance costs skyrocket when a car gets over 100k miles. My 2002 M3 cost me $7k in maintenance between 102k and 110k miles.

"Forever" gets a lot shorter if the car is exposed to road salt, too. Parking a car in sunlight, especially in lower latitudes like Floriduh, also takes its toll on a car.

At some point, a car becomes too unreliable to do what it's supposed to do. I don't consider a car with over 100k miles to be roadworthy for a schedule-critical road trip, and most of my road trips are or were schedule-critical (driving schools, weddings, funerals, vacations, holidays, business trips). Back in 2013 I went to M School in Spartanburg. My M3 was so old and had so many miles (over 110k) that I took my newer beater car, a 2007 Chevy Cobalt (the anti-BMW), instead. On the way home, driving that miserable POS car, I had a "rest stop revelation." When I got home, I sold the twelve year old M3 and ordered the 535i.

I like BMW's. But, I also have a firm grasp of financial reality. So, I take exceptionally good car of my cars (even the Cobalt) so that they will give me enjoyment for at least ten years and 100k miles.

Keeping my 535i eight years (or more) will save me about $25k over replacing it after four years. My dealer has sent me three spam e-mails and at least three letters saying that I am eligible to "upgrade" from my 2014 535i to a 2017 540i for "only" $44k out of pocket.


If you want a new BMW and you can afford one, buy one. But, don't lie to yourself about how much it will cost you.
A lot of good points AutoPutzer, but I disagree with you on one thing:

I have two vehicles with over 100,000 miles and I consider both to be roadworthy for what you call schedule-critical road trips. I would not hesitate to drive my 99 Tahoe, with 177,000 miles, across the U.S. It would not be the most comfortable and relaxing trip, but nonetheless I am confident I would arrive on schedule. In addition, I would not hesitate to drive my 2002 530i, with 118,000 miles, across the U.S. too.

If you take exceptionally good care of your cars, and I have no doubt that you do, then arbitrarily saying that your vehicles become unreliable after 100,000 miles is unfounded. A modern, well-maintained vehicle can provide excellent service well beyond 100,000 miles.
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Old 08-18-2017, 09:04 AM
Kaboom88 Kaboom88 is offline
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Putzer, thanks for the analysis. This is the kind of critical feedback I was going for.

All points well taken, but i do have a couple of adjustments to that.

There are two main differences in my case. One, i have 4 years full maintenance coverage starting now, not just 3.

Also, the first year depreciation hit you are using seems too high. 25% is a big chunk, and when i peruse the secondary auto market sites I see that my model, the X4, One year olds are consistantly only 15-19% off the new sticker price. Granted that is asking and they might drop another one or two grand but 25% seems very high.

Also, I am in a very unique situation, where the dealer was met with overstock on this model due to the 2018's coming in way earlier than planned (BMW canada mistake), so I am essentially getting this car at a discount to the sticker new price of 18%, so they are taking the 1st year depreciation hit, and still giving me a brand new car. hence in my case after 4 years mine should still be one year less on your scale and retain about 55% of residual value.....which is exactly what i assumed in my calculation.

I wish i could just plug in the numbers with these new assumption into your sheet. the first year depreciation already discounted for me, and also the 4 year maintenance plan we get in Canada instead of 3. Also, I will probably just average 9 - 10 k Miles a year, so mine might depreciate a little slower than others.

Still, its definitely going to be extra $$$ over 4 years compared to keeping my old box on wheels.......but not as much as I would expect, And that difference (as long as I am not too far off!) is something i can definitely afford, an extra 2500 or so a year to drive that X4 rocket!

i wish I could do the car maintenance myself, but i can not. not mechanically inclined, also done have garage or equipment.....im a bit of a lightweight in that regard

Last edited by Kaboom88; 08-18-2017 at 09:07 AM.
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Old 08-18-2017, 09:11 AM
Autoputzer Autoputzer is offline
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My 1992 Nissan Sentra SE-R rode the flatbed twice at about 98k miles for a fuel pump. It turned out to be a common problem with those cars.

My 1996 Nissan 200SX SE-R never rode the flatbed in the 127k miles I had it. But, I had a 2000 mile business trip to south Texas in July without air conditioning. My mileage reimbursement paid for the new compressor I needed.

My 2000 Silverado had a water pump go bad at 40k miles. But, that was a re-fill and limp to the shop. It could have been a flat bed ride if I was on a road trip, though. I sold the truck at 74k miles. That was the only vehicle I bought new that I sold before 100k miles. I sold it because I needed a small passenger car for business trips. But, I sold it for half what I paid for it, and that was after six years.

My 2002 M3 rode the flatbed twice: 70k miles for a massive oil leak, and at 110k for an ignition coil. At around the twelve year mark I started having to wait for parts to come from Germany, though. I also scrubbed a road trip (and take the Cobalt) due to an air conditioner failure at around 95k miles.

The last full year that I owned the M3, I would have been money ahead in the long run buying a new BMW. The twelfth year cost me more in maintenance and depreciation than the average for the first eleven years. ... yet another spreadsheet.

Frau Putzer's 2006 Honda Accord's first flatbed ride was at 130k miles, for a starter. A power steering pump went bad in that timeframe, but it didn't require a flatbed ride. We still use the car for non-schedule-critical road trips, though.

My 2007 Cobalt has yet to ride the flatbed at 110k miles.

It's a combination of repair costs as well as reliability that motivates me to get rid of a car at some point past 100k miles. Maintenance and repairs for Frau Putzer's Accord has been about $6k from 100k to 140k miles.

If I put tires on a car with over 100k mile on it, I've probably screwed up.

I have about 25 to 50 1000 mile road trips coming up in the next 18 months. I'll be visiting the construction site of our new house 500 miles away. I'll be doing this every one to two weeks. Most of these trips are not schedule-critical though. I'm saving the Cobalt and maybe the Accord for these trips, so as to not wear out my BMW.
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Old 08-18-2017, 09:30 AM
Autoputzer Autoputzer is offline
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Originally Posted by Kaboom88 View Post
Putzer, thanks for the analysis. This is the kind of critical feedback I was going for.

All points well taken, but i do have a couple of adjustments to that.

There are two main differences in my case. One, i have 4 years full maintenance coverage starting now, not just 3.

Also, the first year depreciation hit you are using seems too high. 25% is a big chunk, and when i peruse the secondary auto market sites I see that my model, the X4, One year olds are consistantly only 15-19% off the new sticker price. Granted that is asking and they might drop another one or two grand but 25% seems very high.

Also, I am in a very unique situation, where the dealer was met with overstock on this model due to the 2018's coming in way earlier than planned (BMW canada mistake), so I am essentially getting this car at a discount to the sticker new price of 18%, so they are taking the 1st year depreciation hit, and still giving me a brand new car. hence in my case after 4 years mine should still be one year less on your scale and retain about 55% of residual value.....which is exactly what i assumed in my calculation.

I wish i could just plug in the numbers with these new assumption into your sheet. the first year depreciation already discounted for me, and also the 4 year maintenance plan we get in Canada instead of 3. Also, I will probably just average 9 - 10 k Miles a year, so mine might depreciate a little slower than others.

Still, its definitely going to be extra $$$ over 4 years compared to keeping my old box on wheels.......but not as much as I would expect, And that difference (as long as I am not too far off!) is something i can definitely afford, an extra 2500 or so a year to drive that X4 rocket!

i wish I could do the car maintenance myself, but i can not. not mechanically inclined, also done have garage or equipment.....im a bit of a lightweight in that regard
That fourth year of maintenance is just an oil change and maybe brakes if you time it right. In the big picture, it's trivial.

My 535i depreciated 26%, 18% and 24% in the first three years, using KBB.com "private sale" prices. So, in my case the rule-of-thumb for depreciation rates was low. That 15-19% you cited is based on the retail price (what the dealer charges). You can't get retail when you're selling your car.

All manufactures over produce cars near the end of the model year. They do this to get the "high discount" customers who wouldn't buy a car otherwise. You can save real money grabbing one of these alleged leftover lot bunnies. But, the car will have an extra year's deprecation included in it's book value. That is important only if you trade a car every few years, though. If you keep a car longer, those end-of-year discounts go into your pocket and stays there.

I'll change oil, rotate tires, and do brakes on my BMW's. But, they're too complicated for me to go much beyond that. I'm more adventurous with my Honda's and Chevy's, partly because they have factory repair manuals available.

Yeah, I'd rather be driving an X4 than an Escalade, too. But, just don't fool yourself about what that's going to cost.

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Old 08-18-2017, 11:59 AM
Kaboom88 Kaboom88 is offline
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Putzer, you sure know how the get the most out of your cars lives for full financial benefit driving them into the ground. On a pure financial point, that is always the best strategy to get maximum return for your $$, especially if you can do some of the maintenance yourself.

As for me, I'm a bit of a tech junkie and like some of these new digital tools and comforts that new cars nowadays offer.

By same token, if we wanted to nourish ourselves with goal of minimum cost, we should only drink plain water, and eat oats with vegetables every meal. Everybody picks and chooses the areas of life where you want to save, and things where you want to live it up a bit.

My girlfriend hates to spend any extra $ on car that she doesnt have to. To her its just a thing to move her from point a to b. She does however like high quality wines and shoes, and pays for those things. To me, i dont care one lick about craft beers or wine, i actually prefer pure water to those, and shoes are just for me to walk comfortably from point a to b.

I would rather spend an extra $2-3k a year on a car that I feel passionate and proud of, with modern safety features, and I'll make my sacrifices and compromises elsewhere. You prefer to drive multiple cars to their end of life and maintain yourself along the way. Maybe you enjoy going out for steak restaurants with the $$ you save instead.

I think we are both right Its about where each of us prefer to spend our $$$....without being reckless about it !
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Old 08-18-2017, 12:38 PM
Autoputzer Autoputzer is offline
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Putzer, you sure know how the get the most out of your cars lives for full financial benefit driving them into the ground. On a pure financial point, that is always the best strategy to get maximum return for your $$, especially if you can do some of the maintenance yourself.

As for me, I'm a bit of a tech junkie and like some of these new digital tools and comforts that new cars nowadays offer.

By same token, if we wanted to nourish ourselves with goal of minimum cost, we should only drink plain water, and eat oats with vegetables every meal. Everybody picks and chooses the areas of life where you want to save, and things where you want to live it up a bit.

My girlfriend hates to spend any extra $ on car that she doesnt have to. To her its just a thing to move her from point a to b. She does however like high quality wines and shoes, and pays for those things. To me, i dont care one lick about craft beers or wine, i actually prefer pure water to those, and shoes are just for me to walk comfortably from point a to b.

I would rather spend an extra $2-3k a year on a car that I feel passionate and proud of, with modern safety features, and I'll make my sacrifices and compromises elsewhere. You prefer to drive multiple cars to their end of life and maintain yourself along the way. Maybe you enjoy going out for steak restaurants with the $$ you save instead.

I think we are both right Its about where each of us prefer to spend our $$$....without being reckless about it !
Yeah, I agree, mostly. But, for a 5 Series it's more like $6k/year, not $2-3k.

I admit that I'm enjoying the bells and whistles on my new(er) BMW, mainly the nav', cameras, playi things on iDrive, etc. I can also tell the difference between a 2014 H-K sound system compared to the 2002 H-K system. For this reason, I load up my cars with all the options I want.

In the Puzter universe having an old car in good shape is actually a status symbol, a sign of diligence and intelligence. In the Putzer universe we laugh at people who replace cars frequently (like my friend turning in his leased 2014 M235i for a leased 2018 M240i). We call it having a "short automotive attention span."

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Old 08-18-2017, 02:50 PM
rice_rocket88 rice_rocket88 is online now
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Location: Boston
 
Join Date: Apr 2014
Posts: 259
Mein Auto: 2008 535xi
If you can swing it.. do it. I agree.. those payments are kind of high, like new house high. I am still daily driving my E60 with 144444 miles on it the other day.. haha. I wouldn't hesitate to jump into it to drive across the company. Someone in a brand new M5 drove beside me and gave me the thumbs up, guess he liked what he saw.

With almost every one of my cars I factor in $1K a year in regular maintenance and repairs. I DIY absolutely everything, however, which makes a humongous difference. As mentioned, brakes, tires, spark plugs etc.. those last 4 yrs or so. If yours is up on the caddy.. then you certainly have to factor it in.

If it's not going to hurt you.. I'd go for the X4 in a heartbeat. I get bored of my cars easily and driving my wife's new X1 with all the HUD and tech is pretty darned cool. I sit back in my E60 and it's faster, more comfortable, quieter.. it is a 5 series vs a 1 series! But.. for me to trade my car in (yes they sent me a card saying it's time to trade in.. it's worth 6K in trade in.. which is an insult to say the least!) So.. I'll probably drive this until I break something so badly or someone offers me more money Or.... when the new M5 with switchable awd to rwd comes out.. I'll have to tell myself that I should save that $800/mo payment for my kids' college fund instead.. haha.
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