At some point in your life you have heard the phrase “blue book value” as it relates to a car.
But what is lost is the truth, Blue Book Value is a value used by a car dealer to establish a sale price of a car at time of advertising it for purchase.
Unless you are selling your car Blue Book Value is not relevant. What is important is how much will it cost you to buy another car, not how much a month plus insurance, but how much total will you shell out, you still have to maintain a new car, put fuel in it and it has the same chance of a tire blow out as your old car. Your car is not an investment what it is worth to sell has nothing to do with what its worth to keep, it is a important part of your life, keeping ownership costs under control is important but buying a car keeping it for 200,000 to 300,000 will keep costs down much more so than buying three new cars in the same time frame.
Somewhere along the line we have been “tuned” into thinking that there is some dollar amount that represents a stopping point into keeping your car on the road, and we should just buy a new one. That somehow buying a $20,000.00 car makes more sense financially than putting $2500.00 into the car you already own. This is and has always been a ploy to keep new car sales up. My parents had the same family car for as long as I can remember. Yes we commute further distances now but the good cars of the last decade will go three times as many miles as the cars of the 70s.
Whats worse is most people finance the $20,000,00 and don’t realize just how much more that actually costs. Payments are easy but payments on $2500.00 ends a whole lot sooner than payments on $20,000.00. If you buy a $20,000 car today it will depreciate more in value the first day than the amount you will most likely put into the car you own right now. By five years time, your shinny new car will be a mirror image of what you traded in 5 years earlier only your out of pocket will be more like $30,000. Credit has been cheap and easy and we have treated cars like a disposable item such as a paper plate and this has caused an impact to our environment and a strain on our natural resources.
As I sit and watch the proceedings in Washington concerning the Big Three and there bailout. I listen to the experts comment about why the bailout is needed and why it isn’t there fault. I have to admit they had a business model that has really imploded. They built the cars we would buy, charged crazy money for the same fuel economy my 1967 ford pick up got in High School added heated leather seats and a drop down DVD and bingo we had to have it. There was a decade long upgrade cycle going on regardless of needs.
Yes at some point your life changes, your family grows, you change jobs and it makes sense for all sorts of reasons to buy new. I am only talking about the upgrade cycle of a new car purchase.
So when trying to figure out your cars blue book value, instead think about your savings account and how much of it you will keep, by keeping your current car . What is the “total value” of keeping your car another 5 years.