Which Is The More Financially Wise* Old Car?

Sunny, 2004.

Sunny, 2004.

Two years ago, we successfully wrapped up our Q1 Car Challenge to test if we could reasonably drop down to a single car for the two of us.  We then sold our Jeep, dropping down to a single car. However, our status as a one car household technically didn’t last all that long as within a couple of months we ran across an ebay auction for Sunny, a bright yellow 40+-year-old Mercedes Benz sedan that had a long history in our lives. (The full story is here.) So we bought Sunny and shipped her to Florida sight unseen with the intention of restoring her to greatness (she had clearly been a bit neglected in the years since we saw her last). She has been sitting on our back patio under a cover waiting for us to finish our kitchen renovation before starting in on a Sunny renovation. (So we’ve been functionally a one car household while Sunny waited patiently for us to be ready.)

While the kitchen renovation isn’t done, it’s certainly getting closer and some of the brainstorming and planning for a Sunny restoration is starting to get a little more real. All of which is making us pause and wonder – is this really the right old car for us?

Let me back up for a second. Mr PoP is a bit of a car guy. He loves tinkering with old cars (something he hasn’t really had a chance to do much of since moving to Florida almost a decade ago). But he also loves fast cars and while he’s always liked Sunny, his not-so-secret car crush is on a Honda that’s now 20+ years old. That is, the Honda (or Acura) NSX.

For those of you who don’t have the benefit of an NSX-obsessed spouse who shows you pictures of various 20+ year old supercars regularly, think of this as an early 1990’s Honda version of a Ferrari. They’ll be re-releasing the NSX for the 2017 model year and it’ll cost $156K. That’s more than we paid for our house! Needless to say, we would not be in the market for a new one. But even the ones that are 20+ years old would still be more expensive than any other car we’ve ever purchased. By a long shot.

Since cost (and space in our little house) precludes us from both restoring Sunny AND purchasing an NSX, Mr PoP and I are definitely both on the same page that this is an either-or proposition. There are definitely some emotional items at play in this discussion, but for today, we’re just going to look at this from a financial perspective (we’ll hit on some of the emotions in a subsequent post). So what do the finances look like for each option?

Sunny

Sunny is currently under a grey car cover and has a couple of sliding closet doors leaning against her. =P

Sunny, in 2016 on our back patio.

First off, Sunny’s got ~$2,300 in sunk costs put into her. That was how much we spent buying the car on ebay, shipping it to Florida, and installing it in a temporary “storage stall” on our back patio. But these are sunk costs. Not restoring Sunny isn’t likely going to make us able to recoup much if any of these costs (in no small part since some of the more expensive and easy-to-part-out parts of Sunny had already been removed before we got her – ie the $1200 Blaupunkt radio that happens to be the same model that was put in Porsches of that era).  So while I note these costs here to be thorough, they’re not part of the comparison for our forward looking purposes.

Pictures make Sunny look pretty great, but she’s actually in pretty rough shape. With the rust holes in her floors, you could propel the car in the same manner that Fred Flintstone does.

Note the positioning of Fred's feet... You could do the same in Sunny right now.

Note the positioning of Fred’s feet… You could do the same in Sunny right now.

Based on Mr PoP’s back-of-the-envelope estimates of what it would cost to restore Sunny, we’d be looking at spending an additional $20K, and that would be with Mr PoP doing most of the work himself. Though costly to restore, the replacement value according to a car insurance company would actually be pretty low, so insurance would probably be pretty reasonable (we currently pay ~$600/yr to insure our one car), though it wouldn’t actually cover much if there was damage to the vehicle since it wouldn’t take much of an accident to total the car from an insurance perspective. Using the 4% rule to estimate what we’d need to add to our pile of investments to pay for this expense in perpetuity, we get $600*25 = $15K.

Sunny would also be a “forever” car – that is, inasmuch as any 40+-year-old car can be kept and maintained as a “weekend car” forever. This is good since we won’t have to consider depreciation’s cost. But bad in that if (hopefully when) we take a possibly multi-year boating sabbatical (an idea/dream that we’ll probably talk more about on the blog at some point in the not-too-distant future), we’d need to pay for storage and maintenance on it while we’re gone. Car storage isn’t cheap around here, so we’d count on it being a minimum of $150/month. Say we take off for 2 years, we’re looking at $3.6K.

This puts our ball park estimates for long-term Sunny restoration and ownership (excluding already sunk costs) at:

$20K (restoration) + $15K (insurance) + $3.6K (sabbatical storage) = $38.6K.

Let’s call it $40K to include inevitable repairs or going over on the restoration budget.  This is NOT a small chunk of change. And we’d never recoup a dime of it.  But what would an NSX cost?

An NSX

One of the NSXs (Mr PoP thinks there are at least two!) that are currently owned by others living in our town.

One of the NSXs (Mr PoP thinks there are at least two!) that are currently owned by others living in our town.

Mr PoP often tries to downplay the cost of the NSX, “It’s just a 20-year-old Honda, after all!” But we both know NSX ownership would not be a cheap proposition. (Mostly I know this because Mr PoP has been successfully anchoring the cost as high as possible in my head for years now…)  These 20-year-old Hondas had price-tags in the mid $30K range a few years ago, and today the ones Mr PoP would be aiming for (mileage under 100K) are generally selling for $40-$45K. Taking the mid-point of this range, let’s say that we’d be able to get an NSX that Mr PoP would like for $42.5K, hopefully that includes shipping to Florida. 6% Florida sales tax adds about $2.5K to that.

Unlike Sunny, though, the NSX wouldn’t be a “forever” car. It’d likely be a pre-sabbatical car. In all likelihood, we’d buy this car in late 2016 or early 2017, keep it for 2-3 years, and then sell it and use the proceeds to help fund our sabbatical. Thus, there are two costs to consider instead of the base purchase price – depreciation and the opportunity cost of the capital for the time when it would not be in other investments.

Depreciation is tough to estimate since these cars have actually been *appreciating* NOT *depreciating* in recent years. Still, I’d guess that even though it wouldn’t be our daily driver, the additional miles and wear and tear could easily eat up 10% of the purchase price ($4.25K) every year if these cars stop (or slow) their appreciation.

The opportunity cost of the capital is also tough to pin down since we can’t predict returns over the next few years, but we can use 5%/year. This is the value that we use for our long-term projections of our portfolio, and would come out to $2.125K/year.

Then we get to the operating costs. While we haven’t priced it yet, insurance is bound to be expensive. We figure somewhere in the 2x-4x range of what we are paying for our current car. The midpoint of that range would be $1.8K/year.

And to be on the safe side, we should also account for at least 1 speeding ticket per year at $500/ticket. Hopefully these wouldn’t happen, but let’s just say a speeding ticket in an NSX would surprise me a lot less than Mr PoP’s recent illegal U-Turn ticket.

Adding up these costs, we get:

$2.5K (tax) + {4.25K (depreciation) + $2.125K (opportunity cost) + $1.8K (insurance) + $0.5K (fines)} * 2-3 years

= A range of $19.9K – 28.5K for 2-3 years of ownership.

So, we’re looking at ~$10K/year for temporary NSX ownership.

A note on gas, etc: Since both Sunny and an NSX would take premium fuel, would have roughly the same (truly awful) fuel economy, and would be driven approximately the same number of miles, we’ve omitted these costs from both for the comparison.

 

So where does that leave us?

Sunny would be $40K to own “forever”. An NSX would likely run ~$10K/year to own for 2-3 years. Given that neither of these would be a particularly wise financial move if all we wanted was a car to transport us from A to B (we already have a 10-year-old car which does that rather nicely), which is the better option financially?

Honestly, we’re not really sure which is the better (less bad?) move financially?

What do you think?

*Originally we wanted to use the word “Frugal” in the title, but let’s be real. Neither of these cars could be remotely considered frugal.

39 comments to Which Is The More Financially Wise* Old Car?

  • They both sound very expensive to me! I only plan to spend £80,000 – £90,000 on a house lol. But, taking your costings into account, and the sheer enjoyment Mr Pop would get from restoring it, I think Sunny is your best option!

    • admin

      You’re definitely right that they’d both be expensive! Our house was right in the range you’re looking at when you convert it from $USD, so we know either of these will be a lot of money for something we can’t live in! =)

  • I was looking forward to this post, and more so to what you guys actually decide. I would vote to buy the NSX, and then put it in storage during your year or two on sabbatical. Mr PoP is always going to regret selling the NSX, if you ever sell it, and the NSX has collector car potential.

    Looking forward to what you decide. Have a great week guys :)
    -Bryan
    Income Surfer recently posted..Potential Investment Thoughts- May 2016My Profile

    • Regrets are tough to predict… But I’d hope that he’d have fewer of them if the money that came from the sale of an NSX was shoveled into something else cool like a boat!

    • mrplantingourpennies

      I think that neither one of us wants to pay the storage fees-it just feels too close to putting your crap in a storage facility! The collector car argument cuts both ways too-I don’t want to be worrying about the car every time I drive it!

  • Few thoughts on your calculation

    1)Why have you added opportunity cost for NSX and not for Sunny? Should you not be adding the opportunity cost for the 20k that you will be spending in restoring Sunny for apple to apple comparison?

    2) When you will sell NSX, will you be buying a new car to replace it? If yes, should you not add the transaction cost (tax) + insurance cost of the new car to the NSX calculation for apple to apple comparison with Sunny?
    Vivek @ LifeAfterFI recently posted..Favorite 5, out of the 63 blogs that we read!!My Profile

    • Re #1 – I think I don’t think of the opportunity cost of sunny because since we’d never sell it to recoup any of the money so it’d just be an expense. With the NSX, I think of it more as an inefficient temporary store of money, so the opportunity costs matter. Maybe this isn’t GAAP, though?

      With #2- the answer is probably not anytime soon, but perhaps eventually… though at that point we may just buy one car to replace the NSX and our current daily driver, so insurance costs would be replacing the daily driver costs which are already built into our financial projections.

  • Isnt’ Mr. 1500 also a big NSX fan? Maybe he could rent it from you guys while you’re on sabbatical. He gets the car of his dreams (but doesn’t have to buy it) and you guys get someone to love it while you’re gone! Winning!
    Gwen recently posted..House Hunt Update: Shelving the SearchMy Profile

  • I think I’m glad I’m not a car person. Obviously this choice is an emotional one moreso than a financial one. You have to look at the whole package of each car individually and not directly compare financials. Don’t forget to include hassle/joy of tinkering/repairs.
    Nicoleandmaggie recently posted..What should we listen to during a long upcoming road trip?My Profile

    • This. Since you have the cash available for either option and will likely not have a big hit to your lifestyle, you should go with which one just feels better. I’d think about this in terms of your goals and “mission.” I’ve been doing that a lot recently with decisions — trying them on and thinking about what fits best in my ultimate goals for life.

      There’s not a right nor wrong decision here; there’s just the decision you decide to make.
      Leah recently posted..Life LessonMy Profile

    • “I think I’m glad I’m not a car person.” I with I was the same. How to I crush my juvenile desires for fast, beautiful machines?

      • mrplantingourpennies

        Yeah, I dunno if the best way to live life is crush all the dreams you had as a kid. Isn’t the point of FI to accomplish your desires, or at least the ones that are most important?

      • I’m a travel person. That’s plenty $$ too. I think the operative phrase here is “you do you.”
        Leah recently posted..Life LessonMy Profile

    • And the emotions definitely play a major role. We’ve got a lot more written about the emotions, but it made more sense to break it up into two separate posts. That said, the finances also play into the emotions because committing this much money to a car changes other things… Which brings us more happiness – reaching financial independence 6 months sooner or having a “fun” car for Mr PoP?

  • I have a feeling that even if you fix up Sunny all bright and new that the NSX will still be a topic of conversation that ultimately leaves Sunny feeling jealous and not appreciated. I’m not a car guy, but taking a run at the NSX for a couple years would probably satisfy the need, although like Bryan said would Mr. Pop ever really want to sell it without regretting it? Maybe sign a contract of sorts, like a 3 year deal with the NSX. Good luck and honestly I like the Sunny the most;)
    Steven recently posted..Hip Pocket Launches Kickstarter Campaign for New Hip Money AppMy Profile

  • I’m partial to Sunny because the returns are more justifiable long-term and the story of the car is just too unique to compare to the NSX. But either one would be a fun toy and a fun project.
    Done by Forty recently posted..Budget Porn: Our 2015 SpendingMy Profile

  • NSX! NSX!! MSX!!!

    Did I mention that I think you should go with the NSX?

    Who knows, maybe I’ll take it off your hands when you sell it? I’m partial to silver (Mr. PoP’s black is good though too), manual transmission (is there any other way?) and only tasteful modifications.

    Let me know if you’d like me to check out any in Colorado.

    Now get to it.
    Mr. 1500 recently posted..Performance Update 40/50: Dumpster Fire EditionMy Profile

  • Hmmm.. Lesser of two evils. I vote for Sunny, but only because it’s cooler.
    Norm recently posted..Keeping Birthdays FrugalMy Profile

  • Mama PoP

    This is a tough choice. Did I mention that I got my red Lexus convertible after I retired? I don’t really understand why Sunny has to be a forever car OR why the NSX isn’t a forever car. They could be sequential cars.

    Since you would have Sunny or the NSX plus your daily driver, why not sell the daily driver when you go on your trip and let Sunny or the NSX have the garage instead of storing it somewhere. Or, put a car back on the lenai when you leave.

    It’s good to have long term goals. Has the NSX been a long term goal for “long enough” already?

    I say go with your gut. Remember the “right way” to flip the quarter when it comes to important decisions. :-) You might be overthinking this. Just set a day to decide, put the quarter in the air, and see what comes up. The important point is that you don’t have to do what the quarter says. Rather, you do what your heart decided when the quarter was in the air.

  • The whole conversation makes me hyperventilate.

    Ex-DH and I owned a car just like Sunny, only it was white. I loved that car! But it was freaking expensive to maintain when it wasn’t 40 years old. The very thought of trying to restore and maintain it now: scary.

    BTW, we got rid of ours when they brought in unleaded gas. We were told the car would run on the stuff, sort of, but sooner or later the engine would have to be replaced. So might want to check: maybe the engine is newer than the car.

    Suggestion: sell all the rolling stock and buy a Camry. 😉
    Funny about Money recently posted..Life in these United States…My Profile

  • My first car (purchased in 2004) was a 1980 Mercedes Benz, 300D series, also yellow. I wish I had it back, but I couldn’t afford to fix it when I got into a fender bender in 2009, so I sold it.

    All that to say that if I ever get to buy an impractical car again, it will be a yellow Mercedes. I would stick with Sunny. Buy the NSX after your boating expedition.

  • Sue

    I inherited two classic cars from my father and I plan to leave them to my kids. I’m a sucker for sentimentality so Sunny gets my vote!

  • Just a thought

    word on the street is there is a black stallion that sunny would love to go running with!

    All joking aside, do what makes you happy. Never know when I am gonna get that Porsche.

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