Wheels

I’ve been known to forget my birthday, and I can never even remember what I had for lunch, but here’s one figure that has stuck in my head for two decades: $242.03.

That was the monthly payment for my first new car, a red Ford Mustang. It was, without a doubt, the best investment I ever made, and every time I cut my check to the Navy Federal Credit Union I congratulated myself on making such a wise buy…and after I paid it off, I had it for a solid decade, free and clear, baby, free and clear. Yes, I did ship it to Saipan.

That car stuck with me through more jobs, relationships, and home addresses than anything else I ever had; it was a welcome and friendly constant in a world of flux and uncertainty. It was reliable, because I maintained it since day one, in stark contrast to my jalopies of my school days which were at the mechanical mercy of the dumbest guy to ever own them in some dim past, and that’s never a gig for peace of mind.

Two decades is a mighty long time ago, especially for geeks like me who are ever mindful of inflation, so a recent ad from Triple J motors sent me reaching for my financial calculator. A Madza 3 car can be had starting at $134 a paycheck, says the ad, which seems so cheap that I ran the calculations just to confirm the claim. And, it does indeed check out. Putting things in monthly terms, the gig is a $290 monthly payment for 60 months, on a $15,900 new car, with a 15 percent down payment, and finance costs of 10.5 percent per year. The $134 per paycheck figure is based on a biweekly pay cycle, which is to say 26 periods per year; a fine way to budget your money, but the essential gig is still $290 per month.

Simply put, that’s not much money for a new car. A sharp buyer could probably cut the term down to 48 months and cut interest expenses a bit, but that’s not the point here.

Meanwhile, I have always been mystified by self-proclaimed experts in personal finance who lecture us on the fact that used cars are a “better buy” than new cars because “new cars depreciate.” Well, underpants depreciate, too, so should we all buy used underpants? I wouldn’t. Or how about a used hamburger with just one bite taken out of it? No thanks. There are very definite reasons why used items are worth less than new items. This is rooted in fundamental economic facts, and the markets reflect these facts, be they in cars or anything else.

We also have what can be termed the “reliability premium” for a new car. First of all, a new car has a warranty, of course. Secondly, there are no mysteries with a new car’s maintenance background, since there are no strangers in the equation. In summary, based on sheer logic, and from my experience, and the experience of my family, a new car is likely to be far more reliable than a used one.

When I amortize my new car acquisition costs over the years I can keep the cars, it comes to about what most people spend on cable TV and beer. Heck, the gasoline costs over the life of the vehicle, for the cases I’ve calculated, will be about twice the acquisition cost of the new car. Talk about getting a perspective on things. When I project a stream of auto costs over, say, 10 years, and then throw in a few thousand bucks for a reliability premium, I usually come up with “new” being more optimal than “used.”

By contrast, I’ve seen so-called consumer advocates perform these calculations, but they are biased toward used cars, and the inputs they use don’t jive at all with the numbers I’ve seen from my own experience, be they for insurance, maintenance, or repairs. Maybe some irresponsible dork out there is paying $2,200 a year for auto insurance on a new car, but it sure isn’t me, or anyone in my family…or anyone I’m on social terms with.

Whether a new car or a used car is better for you is, of course, an issue that can’t be solved in a general way. It all depends on your specific circumstances and tastes, and Saipan does have a lot of circumstances where used, disposable cars are more appealing than making a big investment in a car if you’re not going to keep it for a long time.

However, if you are going to keep your car for a long time on Saipan, then a new car is worth a look. I was pleasantly surprised to see that Triple J is providing consumers with a solid option on this count.

(Ed Stephens, Jr. is an economist and columnist for the Saipan Tribune. Ed4Saipan@yahoo.com)