Considering a new car

I've always thought it economical to defer that new car purchase by maintaining the one I have. Tom & Ray at Car Talk say "there is nothing cheaper than running an old car into the ground.... It's NEVER cheaper in the long run to buy a new car." But I keep wondering -- how do I know when I've officially "run it into the ground," i.e. when it's not economical to keep maintaining it?

When
* You worry too much about being stranded or seriously inconvenienced -- like missing a plane, or
* It spends to much time in the shop, or
* The repair/rental cost in any 6-month period exceeds the cost of 6 months depreciation on a new car, and is likely to continue to do so. E.g. when the body starts to go.

"Here's a standard rule of thumb about used cars. A car loses 15 percent to 20 percent of its value each year," [Bankrate.com] There's also the interest cost on the loan, which is roughly 6% per year. If you live in a state that calculates the registration based on vehicle value, it'll cost you that rate, e.g. 1%. If you have to pay sales tax on your car (we don't) there's also that cost - right out the window in year one, though you might amortize it over the car's expected service life.

In a no-sales-tax state, six months depreciation, interest and registration on a $30,000 car would be at least 11% (i.e. (15+6+1) * 0.5). or $3300.

You could argue that 15% "year one" depreciation is an excessive charge if you always keep your car 8 years. But it's still 12.5% compared to the 15% we used.

My 10-year-old Lumina APV van still has some depreciation cost, but not much. It looks to have a private sale value of about $1000, and a trade-in value of about $500.

Edmund's Automobile Buyers Guide, AutoSite, Kelley Blue Book, CarPrice.com and NADAguides.com are among the sites offering timely pricing information as well as shopping and negotiating tips. [Bankrate.com]

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Wow, I've been looking around the Car Talk site and it is has some great articles, including a spot where you can recommend your favorite local mechanic.

Bond time?

The Federal Reserve on Tuesday lifted a key U.S. interest rate for a 13th straight time but signaled, as one economist put it, the "beginning of the end" of a 1-1/2 year credit-tightening campaign.

Don't count on that pension

Verizon Unveils Major Changes to Retirement Benefits

Verizon Communications announces it is overhauling its retirement benefits. The company said it will freeze its pension plan and restrict retiree health benefits for some 50,000 non-union employees. To replace its existing pension program, Verizon will offer a 401k retirement savings plan. [All Things Considered]

So the retirement program won't grow to the point a these employees were thinking it would, by the time of their retirement. And Verizon is making lots of money today -- but it's re-positioning to compete with Google, cable companies, etc. -- and acquire MCI that had no pension program. The 401K option is a match up to 6%. Sears, Fleet Boston and others have recently decided to stop expanding traditional "defined benefit" pensions too.