I’m going to file this away with my other Vehicle Maxims but as the title suggests, it’s really more of a theory than a hard and fast rule.
I could have also called this “Swade’s justification for all the silly cars he’s bought” but I don’t want to give my wife any more ammunition than she needs 🙂
The difference between what you pay and what you sell for, along with certain costs of ownership, can be considered as rent paid for the pleasure of owning a vehicle. By avoiding big losses on selling (especially depreciation), you minimise your rent and maximise your pleasure.
It’s relatively rare that someone owns a vehicle for life. Most of us are simply caretakers who look after a vehicle before passing it on to the next owner. We effectively ‘rent’ the car with the rental costs comprising the difference between purchase and sale prices and any money spent improving the car. I put registration, fuel and servicing costs down as operational expenses.
My task (and yours) as someone who likes to own different cars, then, is to minimise the rent. That gives me a good vibe because I’ve preserved my investment in the vehicle, I’ve managed to enjoy a great car at very little cost over the period of ownership and I’ve (hopefully) left myself in the best possible position to replace one interesting vehicle with another when it comes time to change cars.
How do you do it?
You buy something desirable – the supply/demand equation is what preserves price. Buying something that’s regularly in demand isn’t hard – people are looking for Corollas all the time – but buying something that’s in demand and interesting can be a bit tricker. You have to go in with both eyes open.
You have to preserve condition – when you’re thinking about buying a car, you have to look to future when you’re going to sell again. You need to make sure the vehicle’s kept in superb condition so as to make it stand out amongst similar vehicles for sale. If you can get a diamond in the rough that won’t cost the earth to improve, all the better.
You have to buy smart and sell smart – identify the right car at the right time in its life cycle, negotiate the purchase well and know how to market the car well when it comes to selling. Good photos and an accurate description make a hell of a difference when it comes to getting your ad seen.
It’s not often that people make money on buying and selling a second-hand car in the open market. Dealers can do it because they pay rock-bottom when they trade a car in and they offer the convenience of an easy exchange. Private buyers like you and me are a different story. Bottom line: most of the time you’re going to lose some money on the purchase and sale of a vehicle.
The key is to minimise the losses and be philosophical about what they represent. Those losses are the rent you pay for the enjoyment of owning the vehicle that you choose.
Buyers of brand new vehicles pay a higher rent thanks to depreciation but they’re buying greater safety, fuel economy and lower maintenance costs. Buyers of classic vehicles should pay lower rent because depreciation should be minimal (if you’re buying smart) but they’re likely to take a hit with higher operational costs. They’re buying character and paying for the freedom to buy whatever they want from any era rather than simply what’s being sold by manufacturers right now.
It’s all a balancing act and mostly a philosophical one, but for those with a jones for the second hand car market, it’s a handy thought process that’ll help you make it through the night 🙂
Addendum: before anyone points it out, let me acknowledge that what I’m describing here is basically known as the theory behind leasing when it comes to new cars.
Your lease charge is the cost of depreciation, expected wear and tear, etc, over a specific term at which time you hand the vehicle back.
The difference here is that the car can be of any age, make, color or creed, the ‘lease’ cost isn’t determined until your ownership is done and you have some abaility to determine what that lease cost will be by the way you buy, sell, maintain and select the vehicle.