Cost of ownership of buying a "fun" 3rd car (and keeping it for 20 years)

PushingMyLuck · 06:06 AM

A friend wants to buy a new Porsche as a weekend car, but he was having a hard time justifying the $800/mo lease for a car that might get driven 3000 miles a year. Of course, I advised him to just buy the car outright and keep it for 20 years. Isn't that how people do it? That got me to thinking about total cost of ownership of an exotic. I was thinking more about people who lease exotics (rappers) vs. enthusiasts who buy/own the car for many years. What is the best way to calculate this?

How about an example? 1993 Porsche 911 MSRP was $55k. 20 years later, trade in value today is about $20k. Netting out the sale price, you’re out $35k to own the car for 20 years. That’s about $100/month. Is that right?

Today, a late model Porsche 911 with 20k miles can be had for $50k. Basically a new car. Assuming you have the money, what is the cost of owning this car for 20 years? $50k "self-financed” over 20 years comes out to $275/mo. But, you’d still have a residual value of $15k-$20k.

Numbers might be off, but can you net that residual right off the top? So, you only take a $30k loan for 20 years at 3% = $166/mo. (The main flaw here is that I am ignoring the time value of money)

The general premise holds, regardless. Owning an exotic for 20 years is a fraction of the cost of leasing a new $800 exotic every few years.... The key to this analysis is that the 3rd weekend car barely gets driven. Many people own these cars for 20 years, since they are often the 3rd car, and see little use. Most 20 year old 911’s are lucky to have 100k miles on them.

If the desire is to enjoy a true driver’s car, it appear that it can be done very affordably. But, if the goal is conspicuous consumption to impress others with the latest/greatest, then this analysis doesn't apply.

Anyone done this type of analysis and have anything to add?

cellison · 06:25 AM

your analysis is basically correct, but i do know people who are the enthusiasts that get the latest and greatest and hang on to them for 1-4 years then get the latest and greatest. they aren't rappers or posers but are true enthusiasts who like the newest technology, performance, and prefer not to tinker. some finance some pay cash. either way they can afford it and it is just a matter of cash flow and what they like. I'm more old school. i like to buy stuff at the bottom or near toe bottom of the depreciation curve, i can work on them as part of the hobby, keep them for a longtime, and yes it keeps the cost of ownership down.

i know an older (early 60s) gentleman who wants to get back into a Porsche 911. he said it will be his last new car he will buy and he wants a new one and will keep it until he dies. it won't be a 3rd car for him but he will only drive it 3-5k / yr so it makes sense for him to go this route.

back to the analysis question, for most cars more times than not buying an older car (with some appreciation potential) and keeping it for 20 years is cheaper than buying new car and holding over the same timeframe. a lot of it has to do with the new car and the actual depreciation of the new car as some depreciate like crazy and stay low, while some depreciate a little and hold their value well and may tend to increase in value a lot quicker.

looking at your example of the 93 911: if you bought a standard 911 it would be correct. however if you bought a 93 911 RS, the car costs less new than the standard version and today sell for above what the sticker was new.

to me it is more what you like, and determine if you can afford it over the long haul..

DGriz · DGriz's Garage

+1 with Charles regarding depreciation.

Buying a new exotic that depreciates quickly is actually losing you money. Buying an older, pre-depreciated 911 does not. You may have lost the opportunity to invest or spend those funds elsewhere, but after 20 years you may likely get it all back plus some.

Also consider the "bang for buck" discussion. A buddy owns an early 80's Alfa Romeo Spider as his 3rd car. He has a beater 200,000 mile Suburban for hauling and ski trips, and a new Mercedes sedan for his business "appearance" car. We can knock all three for various reasons, but he's said many times that the Alfa has by far produced the greatest enjoyment over the past 10 years for his paltry $5000 investment in it.

Bristol · Bristol's Garage

Yes, I have done the same kind of math. My 1st, 2nd, 3rd, and 4th cars are all Porsches. All bought used. All bought cheap. All maintained at low cost by me personally. So every day I drive a Porsche to work. Which one I pick depends on the weather. Each car gets 3K to 5K miles per year. Each car gets driven regularly, except I'll pull one and put it in storage for ~3 months just to keep my insurance costs down and use that opportunity to make any upgrades. Really my biggest cost is insurance! The good thing is that my wife is an accountant and understands the math and supports me in my Porsche hoarding. I've got two more cars that I am restoring that will be added into the rotation. I plan to keep all of my cars for 20+ years, and with the miles I'm putting on them I believe that's a reasonable expectation without major rebuild costs. Also, when I do finally sell off some of my cars I don't plan on taking a loss at all, which is what you are figuring. If you are smart in your buying and can work out some horse trading you can restore a car (even a 911) very cheap and still do a quality job. I have a 1986 Carrera in the rotation now that I have less than $10K total invested in. The 1975 911S that I am restoring will cost me a total of $4K out of pocket when I am done - with a newly rebuilt 2.7L engine, new interior, new Fuch wheels, and new paint! I do not plan on selling that car for $4K though in 20 years!

So, yes, I do believe it is quite reasonable to have a nice exotic Porsche for 20 years and to own it affordably. But I would go further to say that it doesn't just need to be your 3rd car. You could also have Porsches as your 1st and 2nd cars, and 4th, and 5th, and 6th....

Kirk

Matt Monson · 08-21-2013, 09:50 AM

The number that is missing there is service/upkeep on the car. A twenty year old Porsche, even with only 60K mi on it, is going to need looking after, including some major service work beyond brake pads and tires. I would say that a fair addition to your calculations would be $1000-1500/yr in service costs above and beyond the purchase price and gas/oil in the vehicle.

PushingMyLuck · 06:41 PM

I personally am on these forums to research buying a 1980s SC/Carerra 3.2,
but my friend would be someone who feels more comfortable with a modern car.
In fact, the newer, the better, for the typical consumer.

964: 1989-1994
993: 1993-1998
996: 1998-2005
997: 2004-2012

964, 993, 996.....They all seem to be within the same ballpark price, for various reasons.
For a non-purist/non-DIY guy, which model is the best bet?
I think my friend can find a car like the 996 for $30,000.

Is there an article or link that compares these 4 models? Pros and cons?
For example, the 996 gets a scathingly negative overall review here:
http://www.thetruthaboutcars.com/2010/08/porsches-deadly-sin-1-1999-porsche-911-996-3-4/

Or an article with common failures, like this one:
• Rear main oil seals: Just like the Boxster, the 996 suffers from leaky rear main oil-seals. And, just like the Boxster, it’s a £20 replacement part with £500 labour, due to accessibility issues. It can make sense to swap the clutch at the same time.
• Intermediate shafts: Another niggle shared with the Boxster is intermediate-shaft bearing failure. The bearing goes and the shaft can wobble. When it does that, the pistons and valves have a punch-up. It’s a £7-8k fix.
• Radiators:The radiators in the nose are made from very thin aluminium, which can corrode and is susceptible to stone chips, with consequences for both the engine’s coolant supply and the air-con.
• Sat-nav: Don’t pay extra for a car with the optional sat-nav – it’s so dated these days that it’s nicer to have a car without it. Don’t you have the app on your iPhone 5?
Used cars: how to buy a second-hand Porsche 996 | Road Testing Reviews | Car Magazine Online

Lastly, thanks for all the helful responses. I am just making a VERY rough calculation. I didn't include costs like maintenance. I was not implying owning a sports car is cheap, just that it may be more affordable than people assume, in light of a few factors (Buy used, buy outright, own the car for a long period of time, realize a significant resale value) instead of assuming you need to pay $1200/mo to lease to get into one of these.

racer · 08-21-2013, 06:50 PM

One item briefly touched on is the maintenance issues.. Most 20+ year old 911s, for instance, have had a motor rebuild ($5-15K). Per the internet, almost all 996/boxster engines will need to have a replacement motor ($10-20K). These are large ticket items that often can't be financed.

Leasing a new one finances the depriciation but in many cases, the maintenance can be either "free" or financed in, so true OOP expenses would be the Lease, gas, oil, insurance.

Buying a new car is rarely ever the smart economic choice.. it is the emotional/irrational choice and a Porsche should be both an emotional and irrational enjoyment!

SilberUrS6 · 08-21-2013, 06:55 PM

Quote:

Originally Posted by PushingMyLuck

I personally am on these forums to research buying a 1980s SC/Carerra 3.2,
but my friend would be someone who feels more comfortable with a modern car.
In fact, the newer, the better, for the typical consumer.

There are so many different ways to go with your question. The question might as well have been "My mate has $30000 to spend. What kind of car should he get?" I answer "Porsche". And that answer is the answer to your question.

The best, newest car he can get for the money spent. Personally, if it were my money, I would be looking around for a nice 996TT. Modern, undervalued, fast as hell, reliable.

In order to be of more help, I would need to know more about your friends expectations, driving style, access to skilled help, financial position, and general idea of how the car is going to be used. That might narrow down the search a bit. And save a bunch of headaches from typing in a giant load of useless (to your friend) info.

PushingMyLuck · 08-21-2013, 07:04 PM

SilberUrS6, he just wants an "exotic" German sports car and a status symbol. He will not race or track it. It will be a grocery getter, like his other 2 cars. He can afford whatever issues come his way, but clearly no one likes to overspend on buying a lemon. I am just trying to present him an alternative to leasing for $1200/mo.

Lots of people have said 996TT as a deep value play, right now.
Any comments on the very negative 996 article I posted above?

racer · 08-21-2013, 07:14 PM

996TT used a very different engine than the one in the "base" cars. Regular 996 motors are called M96 motors. The 996TT motor is based on the older aircooled car engine designe. They have a 964 part number. No intermediate shaft. No real RMS issues either. The turbos have their own issues I imagine, but not the catastrophic failure issues of the regular car.

SilberUrS6 · 08-21-2013, 08:23 PM

Quote:

Originally Posted by PushingMyLuck

SilberUrS6, he just wants an "exotic" German sports car and a status symbol. He will not race or track it. It will be a grocery getter, like his other 2 cars. He can afford whatever issues come his way, but clearly no one likes to overspend on buying a lemon. I am just trying to present him an alternative to leasing for $1200/mo.

Lots of people have said 996TT as a deep value play, right now.
Any comments on the very negative 996 article I posted above?

Well, I don't know if I'd call the 996TT "exotic", but it certainly isn't common. If I were to suggest something that would really turn heads, it would be a fully-restored SWB longhood car. But that's not modern. In fact, it's about the opposite of modern.

The negatives about the 996 are about the cars with the M96 engine. The 996TT has the Metzger engine. I would never spend any money on a regular 996. I would not hesitate in buying a 996TT. The article you posted applies to the regular 996, not the 996TT.

Matt Monson · 08-21-2013, 09:27 PM

997, hands down. I don't know how many people I've dealt with who bought a $30k 996 turbo and needed $10-15k service in the first two years of ownership. The cheap ones were ridden hard and put away wet.

Though the car I would really get isn't on the list. I would get a 987.2 Cayman for $40k +/-

mpetry · mpetry's Garage

As stated above there are a LOT of ways to go with this question. If your friend wants a weekend driver that is fast, fun and reliable, here's what I'd suggest - find a nice 2001-2004 Carrera with low miles for around $25K, do the big fix and put the clutch, water pump, and IMS bearing in it, along with all the other stuff that should be done at the 60K service, pay the bill ($8k), drive and enjoy.

I passed on a real nice 2001 Carrera for 17K and it was a lot of car for the money. If I didn't have my SC I would have bought it.

I think the main thing on these modern cars is that the newer they are, the more expensive they are to maintain, and less "friendly" to owner maintenance / repair. An oil change, plugs, and belts on a turbo can approach $1000. But I see no reason to avoid the 996 cars, as long as you do a PPI and are can afford the "big fix".

rwilner · rwilner's Garage

I think the economics are rock solid if you buy an older car with a solid following and lots of data points for market value. I went through a similar calculation to your friend (albeit with smaller numbers) when I bought my 914. Here was my logic:

I needed to have a car that was fun to drive, because life is short and I spend lots of time in cars. So you have 2 options: combine your fun car and daily into one car, or get 2 cars -- a practical daily and a fun "weekend" car (I drive mine during the week too).

Combining your fun car and daily driver for me basically meant buying a BMW -- it's the only car that offers 3 pedals, enthusiast performance, and practicality (try getting an audi with a clutch these days). Getting one with all the goodies, if you get a good deal on a CPO one, means you're into it for $50k...plus insurance etc. And, you've got the "BMW tax" for parts when it's time to maintain it.

If you split them up you have lots more options. At the time I bought a 2-year old honda accord 5-speed for 12k and my teener for $8k. As a bonus...the accord was pre-depreciated, so when I sold it I actually got back what I paid for it (!!!), and the teener I actually sold for a few bucks more when that time came. That BMW, when it came time to sell it, might have been worth half of what I paid.

So that's a $55k differential...$30k in purchase + $25k in resale...not factoring in insurance, parts, etc, which would likely have been more for the BMW than the accord (basically 0) + the teener (~ $1k/yr). That's a no-brainer.

As a bonus, I got to work on the teener which I enjoyed as much or more than driving it, and the savings over the BMW route made it very easy to justify buying the best parts and tools, seeing as how I would never get anywhere close to the BMW cost.

As long as you buy smart and maintain it properly, buying an old sports car of any make / model can be "free" in the sense that it's very possible to get back what you paid for it, +/- 10%, if that ever becomes necessary. So, if you're committed to having a fun car, the economics of buying 2 cars are rock solid IMO.

porwolf · 08-23-2013, 02:34 PM

Quote:

Originally Posted by DGriz

+1 with Charles regarding depreciation.

Buying a new exotic that depreciates quickly is actually losing you money. Buying an older, pre-depreciated 911 does not. You may have lost the opportunity to invest or spend those funds elsewhere, but after 20 years you may likely get it all back plus some.

Also consider the "bang for buck" discussion. A buddy owns an early 80's Alfa Romeo Spider as his 3rd car. He has a beater 200,000 mile Suburban for hauling and ski trips, and a new Mercedes sedan for his business "appearance" car. We can knock all three for various reasons, but he's said many times that the Alfa has by far produced the greatest enjoyment over the past 10 years for his paltry $5000 investment in it.

I have a different take on the classic new car depreciation: I bought a new 911 SC Targa in 1979 for about $25,000.-. At first it was my daily driver. Then I got an '82 FJ60 basic Landcruiser, a much more practical car for the big city and my skiing and windsurfing hobbies at the time. Now my '79 Porsche is 34 years old and still only has 50,000 miles on it. The biggest repair I had was the clutch replacement, early on, because of the original rubber clutch. My maintenance costs are minimal and I do small repairs myself. Annually, in average, it probably cost me no more than a couple of hundred dollars. Because of the age of the car the annual registration is about $130.- and the classic car insurance, full coverage, second car, is about $250.- a year. And, best of all, in dollar amount, the 34 year depreciation is zero.

racer · 08-23-2013, 02:59 PM

As to the OP, I imagine that, these days, the percentage of Porsche owners who buy and keep their cars for 5+ years is very small. I have to think that the majority are Leases and the majority of the leases are a company write off.

Sox Fan · Sox Fan's Garage

I think the OP's logic is spot on. If you buy high quality used cars and hold onto them for long enough, the actual price to own is very low compared to buying new and selling after a few years. Very, very low in some cases.

Of course there are ownership costs like service and insurance but that applies to anything you drive so it is really not part of the equation. And, if you hold onto something for a while, insurance costs can go down enough to offset some of the increased maintenance costs.

You just don't have the latest and greatest.

Matt Monson · 08-24-2013, 06:53 AM

I really think people should read the OP's posts more clearly. His mate doesn't want anything older than a 964 and is NOT a DIY sort of fellow.
Discussions of 914s and 911SCs are irrelevant to this guy. And they are truly apples and oranges to something like what is going to the 996 market in the next decade. The former cars are air cooled classics made in limited numbers before Porsche went mainstream. The 996 is the beginning of mass production for Porsche. 996s are never going to be collectible unless it is a Cup or GT3 variant.

That doesn't kill this guy's idea of how to cost effectively own one of these cars. But comparing owning an SC from near new to a 996 or 997 just doesn't work.

rwilner · rwilner's Garage

Matt --
Agree that the ownership experience is very different between an SC and a 996 (obviously), but the economics should be similar (barring outliers and catastrophies).

From the OP -- the hard part is calculating the residual value of a Porsche after 20 years, or 40 years.

In the short term -- new p-car stuff seems to hold its value pretty well. I know of a 2011 turbo S that sold recently for 88% of its MSRP. It wouldn't surprise me to find out it sold originally for that same amount.

techweenie · techweenie's Garage

I like the comment 'according to the Internet all Boxster/996 engines will need replacing...' Far from true. 95% of these engines will not need replacing. There are plenty around here with 200K miles and counting. However, "Internet wisdom" says these are iffy cars, and the resale value is consequently low. This creates a good opportunity for a high value purchase. Just better for long term ownership than short term.