Swapping out a $25k toy every couple years?

I was reading luxinterior's thread a couple days ago about buying an E46 M3, and someone mentioned that he could buy one, try it out to see if he likes it, and probably sell it for the same amount as long as he takes care of it.

So that idea got me wondering, is anyone buying a new fun car every couple years and in so doing avoiding a big depreciation hit? If I were able to put together $35-40k for a car +repair fund would I be able to keep rolling it over with losing a ton of money?

To give you the idea, here's a hypothetical: You buy an E46 M3 well this year, look hard, and find a deal for $18k, then sell it well in a couple years for the $18k. You're only out the maintenance and repair costs ("only" being relative here.) So you replace it with, say a $22k Cayman S, same deal, sell it two years later for the same $22k. And on and on.

I've noticed that most cars don't depreciate a ton over a couple years, it seems like the key would be to make sure you are holding the car when the model gets canceled or the next generation comes out. Is anyone doing something like this? Does it work?

http://dougdemuro.jalopnik.com/i-owned-a-lotus-elise-for-free-and-so-can-you-1445088457

This all comes down to how well you shop and sell. What you are really doing is playing the bottom of the market against the top of the market.

So if your playcar is selling for 18-22k and you can get a 22k deal for 18, then you have a very good chance of getting all your money back when the market slides to 16-19k.

This works very well for classic cars. They typically go on the market five years after a resto. They tend to sell for 50% of restoration cost. The funny thing is that the depreciation curve seems to stop at this point. If you buy at this stage, then you have a very good chance of selling withing 5 years for exactly what you paid.

This is pretty much what I plan to do in a few years as part or my 3 car plan, except with shorter stays possibly. A DD beater that is not too expensive to swallow my 50-60 mile commute/ bad weather (the Camry is doing a remarkable job so far). Something like a miata/mr2 spyder as a back up DD and sport car. And then a 3rd car that will be rotated after 6 Mths to a year of ownership. I have been looking at older jag XK8, Porsches, or maybe even something like a Ferrari 328. Buy in late winter for a good price. Drive it through spring and put it up for sale in the summer or hold it for a year and then sell it.

sanman wrote: This is pretty much what I plan to do in a few years as part or my 3 car plan, except with shorter stays possibly. A DD beater that is not too expensive to swallow my 50-60 mile commute/ bad weather (the Camry is doing a remarkable job so far). Something like a miata/mr2 spyder as a back up DD and sport car. And then a 3rd car that will be rotated after 6 Mths to a year of ownership. I have been looking at older jag XK8, Porsches, or maybe even something like a Ferrari 328. Buy in late winter for a good price. Drive it through spring and put it up for sale in the summer or hold it for a year and then sell it.

I have onwed a number of cars like this as well, and the depreciation cycle can make car ownership very cheap on any type of a special interest car. For example....fine a 7th gen celica GTS for 8 or 9 large with 50 K on it, drive it 100K, and sell it for 5 large. That's a very cheap 100,000 miles of driving. I would love to know more about Boxster depreciation, as a Boster at 15-25K seems like it might be at a low point in its depreciation cycle, and worth a damn good look.

I think this is a lot more probable on a $5000 car/budget than on a $25000 car/ budget. Other than outliers like the Elise most $25,000 cars are not done depreciating, and the ones that are will probably have high maintenance costs. $5,000+- seems to be about the bottom of depreciation of mass produced enthusiast cars.

There are plenty of cars like the Elise or the M Coupe that hit the bottom way way above $5k. The trick is finding them. Some 911's have bottomed out. Which ones? Early Boxters where people are afraid of the motors are down at or below $10k. Are Caymans going to go that low? I don't think so, but will good examples go down to $25k or stop closer to $20k like the M Coupes did?
You can wait yourself right out of good cars this way. I said for years that I'd buy an M Coupe when they dipped below $15k. Some did but they were junk. Anything reasonable stayed above $20k. Lots of guys were waiting for $10k 964 911's. That ship sailed.
It's a tough game.

NOHOME wrote: What you are really doing is playing the bottom of the market against the top of the market.

That's exactly my thought.

I've had a small amount of success doing this with motorcycles (I paid $1600 for my '07 Yamaha XT225, then sold it for $2000 2 years later), but of course bike prices are very seasonal, not sure this will work as well with sports cars.

My strategy has been to buy decent-but-not-perfect cars, "fix" whatever they need, enjoy them for a year or two, then move on. My E36 M3 needed a cooling system and new seats. My Miata had some surface rust and needed tires and shocks. My 951 had very tired paint. My current GTO has a lot of stone chips, neglected paint, and some minor interior issues. Stuff I can handle, and I've become pretty good at detailing. So I can generally break even or even make a little. But I've been playing in the $7-12k area, too.

Been doing this for a few years now only in the 8-10K range. I'm on my 3rd "toy" now and it's pretty cheap. I sometimes even upgrade a little. Usually 3 years is time to change to a new one. I'm getting close to time for a new one. Works even better if you have a driver that is paid for.

Datsun1500 wrote:

bgkast wrote: I think this is a lot more probable on a $5000 car/budget than on a $25000 car/ budget. Other than outliers like the Elise most $25,000 cars are not done depreciating, and the ones that are will probably have high maintenance costs. $5,000+- seems to be about the bottom of depreciation of mass produced enthusiast cars.

I disagree. You can do it on any level with the right car. Honda S2000's are the same price with 75k miles as they are with 125k miles, buy one with 75k miles now and sell it next year with 90k miles for the same price. I'm currently doing it with an Audi R8, I'll drive it for 2 years and sell it for what I paid for it.

This is true, but the TTL hit is higher the higher you go.

Datsun1500 wrote:

bgkast wrote: I think this is a lot more probable on a $5000 car/budget than on a $25000 car/ budget. Other than outliers like the Elise most $25,000 cars are not done depreciating, and the ones that are will probably have high maintenance costs. $5,000+- seems to be about the bottom of depreciation of mass produced enthusiast cars.

I disagree. You can do it on any level with the right car. Honda S2000's are the same price with 75k miles as they are with 125k miles, buy one with 75k miles now and sell it next year with 90k miles for the same price. I'm currently doing it with an Audi R8, I'll drive it for 2 years and sell it for what I paid for it.

That may be, but that assumes you can put all those miles on the car in a short period of time. As time continues so will depreciation, because the "next" S2000 (Fat chance ) or R8 comes out.

I did this with my boxster and my e55, bought in the 20,000 mile range and sold in the 36,000 mile range for a wash. There is very little depreciation between 20-30000 miles.

The 7%+ you pay in tax hurts. At least in Ohio. Need at least $1700 to break even.

Rusnak_322 wrote: The 7%+ you pay in tax hurts. At least in Ohio. Need at least $1700 to break even.

That's the part that always gets me. It's tough to take the tax hit each time.

I usually don't break even with mine but the way I look at it is this...If I get a car and it only costs me less than 1K a year, that is nothing. And if I get to drive a really fun car for that little....bonus.

This^^

I don't actually expect to break even. After tax, insurance, maintenance that later owners will want to see done by a pro mechanic, and the occasional repair I'd be thrilled to to just keep it under a couple thousand a year in operating costs.

It's true that tax, title and insurance, and maintenance can get you. The goal, I think would be to enjoy the cars for as little of a loss as possible. I know in MD any car over 20 yrs old qualifies for historic tags at only $50 or so and is emissions exempt.

Rusnak_322 wrote: The 7%+ you pay in tax hurts. At least in Ohio. Need at least $1700 to break even.

Another reason I like to stick with private transactions.

Tom_Spangler wrote:

Rusnak_322 wrote: The 7%+ you pay in tax hurts. At least in Ohio. Need at least $1700 to break even.

Another reason I like to stick with private transactions.

You don't avoid taxes with private transactions...?

OSULemon wrote:

Tom_Spangler wrote:

Rusnak_322 wrote: The 7%+ you pay in tax hurts. At least in Ohio. Need at least $1700 to break even.

Another reason I like to stick with private transactions.

You don't avoid taxes with private transactions...?

You do if you break the law and put on your title that you paid $250 for your $25,000 car. You get caught and you can forget about breaking even anymore. also I can imagine that if you totaled your car and had to sign over the title to the insurance company for payout that they may raise a red flag that your $250 car has a replacement cost of $25,000

ShadowSix wrote:

NOHOME wrote: What you are really doing is playing the bottom of the market against the top of the market.

That's exactly my thought. I've had a small amount of success doing this with motorcycles (I paid $1600 for my '07 Yamaha XT225, then sold it for $2000 2 years later), but of course bike prices are very seasonal, not sure this will work as well with sports cars.

This is just flipping cars any way you look at it. The trick is to find people like me who are not interested in "selling" their used cars. When I am done with a car, its like changing girlfriends...I want it gone tomorrow as a first priority.

Vendors of this mentality inhabit the entire price point, the trick is to identify them. There will be lots of "I don't give a F**k clues if you know how to look.The cars in my case will be well cared for mechanically but never washed or vacuumed since they left the dealer, so lots of room for upside with detailing.

Tom_Spangler wrote:

Rusnak_322 wrote: The 7%+ you pay in tax hurts. At least in Ohio. Need at least $1700 to break even.

Another reason I like to stick with private transactions.

Georgia's legislators were purchased by the Dealer association, and thought they needed to even the market by charging 7% in the initial for private sale. Kinda ruins the buy/sell often market with a 7% hit each time.

The bill of sale value means nothing to them. they only look at fair market value. I hate lobbyists.

I factor in the usage of the car as well. The millage I put on a car is the usage and thus I am willing to accept the cost of it. I also don't expect a car that has 50K miles at 5 years old to sell for the same money 2 years later with 75K miles on it. If you do I think that is an unreasonable expectation for most cars. Unusual or special 1-2 year only production models are different but for the most part the price of a car that is less than 10 years old is driven by the millage on it no matter how great the maintenance record is.

Rusnak_322 wrote:

OSULemon wrote:

Tom_Spangler wrote:

Rusnak_322 wrote: The 7%+ you pay in tax hurts. At least in Ohio. Need at least $1700 to break even.

Another reason I like to stick with private transactions.

You don't avoid taxes with private transactions...?

You do if you break the law and put on your title that you paid $250 for your $25,000 car. You get caught and you can forget about breaking even anymore. also I can imagine that if you totaled your car and had to sign over the title to the insurance company for payout that they may raise a red flag that your $250 car has a replacement cost of $25,000

I'll just say that you're making a lot of assumptions in that post and leave it at that.

However, I will say that the idea of paying sales tax on something that's already been sold (and had tax paid on it) strikes me as a huge load of BS.