Not an Italian luxury car.
No. Pareto was the Italian economist that came up with the 80/20 rule. He figured out 20% of the richest families held 80% of the wealth (this is probably worse nowadays). More generally stated, the 80/20 rule says that 80% of the results come from 20% of the inputs, you spend 80% of your time doing 20% of your tasks, etc, etc.
I bought my 92,000-mile 1997 Honda Civic LX in 2003 for $6,000 cash and right away I changed the timing belt and water pump, which added a little over $600 to my investment. It is one of the best purchases I have ever made.
Why do I call it a Pareto?
I didn’t have this in mind when I bought it, but “a Pareto” would give you 80% of the features of other cars with %20 of the cost of said cars. I achieved the 20% cost part by buying a used car but also by buying a regular plain vanilla midsize sedan.
At the risk of overanalyzing: In 2003, the average cost of a car was $21,663, my Civic would have been $16,010. Doing the math the $6,000 I paid would be 20% of the $30,000. Maybe I paid too much for it, or rather, I bought “too-much” car (post). In fact, after buying it I had a little bit of buyer’s remorse. I had just got my first professional job in the US and spent on a car! all the cash I accumulated from the new job… It was still a good decision overall.
Hondas (and Toyotas)
Japanese cars are made to last. Change the oil frequently, and they will run forever. OK, maybe not forever, but mine is now 23 years old and has got 235,000 miles and I plan to keep it “forever”.
Hondas have a very good resell value. Of course, by now the car is so old that I would never get anyone to pay me what the car is worth to me.
That’s the KBB value estimate for a private transaction (no dealer involved). Actually, I doubt I could even get those $2,000 advertised. And the thing is if I had to get myself a car as reliable as mine I’d probably have to spend more than twice that (more about car replacement below). So it is a keeper.
Car depreciation
It is well known (or it should be) that cars lose 20% of their value the moment you get them out of the dealership lot. There is very good depreciation data at https://usedfirst.com/cars/honda/civic/
Here is a chart built with the data:
Since the data provided only goes down 12 years, and my car is 23! I added a few more rows assuming an extra 5% depreciation per year, which approximates the current $2,000 value pretty well.
Maintenance costs
Of course, the flip side of depreciation is the maintenance cost. As the car gets older the depreciation loss goes down but the maintenance cost goes up. By buying a Honda Civic I get the second most reliable make (after Toyota) and also a very common car that’s been made for decades and of which millions have been sold. So by now there are non-OEM parts available for everything and parts are very affordable (I get mine from rockauto.com).
Timing when to buy and sell a car
The website I referenced above indicates in their chart that the best time to buy a car is when it is 2 years old because in that year the yearly percent drop in car value has a little break. You can see (in the first chart above) that the slope in the first two years is a bit steeper than for the third year onwards.
There is a better way to calculate when to buy a car, and when to sell it.
There is a somewhat classical topic in operations research called the “Equipment Replacement Model” that would balance out the lower depreciation costs of older cars with the growing maintenance costs. I have this in my very long to-do list. I plan on modeling it with Excel Solver (my gig).
Road trips
I like road trips. I learned to drive and got my own car kind of late in life but I actually enjoy driving and I prefer driving much better than flying (I hate planes and airports…). So in the last few years, I have taken an almost annual road trip to see the country. Back when I was working full time one of my few luxuries was to rent a cheap economy car for these trips, to have some sense of security and backup, that I assumed rental car companies would give me(?), and to “protect” my car/investment.
However, after leaving the full-time workforce I began cutting some fluff and now I have already taken my Honda on three long-haul trips to both coasts, each trip with more than 2,000 miles and one with more than 3,000. It worked quite well! Almost perfectly, the only issue being a busted AC hose on the last few days of a Summer trip, including the two days to get back home… We sweat a bit but it was OK. It is fixed now.
My car “at the office”
You almost never know what your coworkers’ houses look like, maybe you meet their family or see a picture of them, but you always, always, know what car they drive if they drive one. And anywhere I’ve worked (since I bought my Civic) it’s always been cheaper than any of my co-workers’ cars. And amongst the very cheapest in the whole garage or parking lot.
Downsides
The only few downsides have been rare and mostly out of my control: in 2005 another car slammed it between the passenger-side doors (it took more than $2,000 to fix it), and it was stolen twice in 2018 and 2019 (a trend?). Both times I reported the incident to the police and it was found in a couple of days. I learned from the cop returning it that it is the most stolen car in America because it is very common and when the keys wear out they tend to suddenly work on any other Civic… Maybe it was designed for Japan?
What do you drive?
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