C2Jeff

I think what he meant was that what appears at first glance to be a horrific price difference, upon further analysis taking into consideration actual ownership costs, the price difference isn't quite so horrific, after all. If a car costs someone $120K and it depreciates 30% in 2 years, that works out to $18K per year, or $1500 per mointh. A $60K car that loses 40% actually costs the owner $12K per year or $1,000 per month. The real difference then, between a car that costs twice as much as another, may only work out to be $500/month. And I'm using much greater depreciation on the BMW than I am on the Corvette. Were I to ise 20% or 25%, the difference in cost of ownership would be minimal or non-existent. That levels the playing field because one can't claim that it's not fair to compare two cars that have such vast price differences. Thre is probably some price difference between the Vette and the M6, but not nearly as much difference as the face value difference between MSRPs.

Therefore, one can compare both cars on the track and the loser shouldn't complain about price difference. In reality, a few months down the road these M6s won't have a buyer's premium to pay and when they can be bought for $95K with gas tax, there will be no significant difference in ownership costs between the 2 cars and then we will need to face the fact that we could own an M6 and enjoy its superiority over the Vette, although it would be totally disloyal to the Vette.

Can you still say you couldn't care less about depreciation now that it isn't so ''goofy"?

Two-Lane Blacktop

EXACTLY. Your reply is thorough and gentlemanly.

jschindler

This is one of those comparisons that sounds good on paper, but doesn't work out so well in reality. There are a few reasons why. The biggest reason is that you are saying they are not so different in cost of ownership based largely upon resale value. What you are saying is that the cost doesn't get close until you sell the cars. When you are buying the cars, and when you are making payments on them (or utilizing your cash from savings), the difference is the full amount.

And what does your argument say for what happens when you do sell them? Does the music suddenly stop and you go back to driving a Mustang? No, you start all over again, and usually buy another car of equal value to the one you just sold.

You also must factor in the opportunity cost of the additional money you are spending. And you still have to be able to afford the additional money when you spend it. An M6 costs 30,000 more than a Z06. If you are making payments over five years, that is a whopping $600 a month (which is now a $36,000 difference over the five year loan). For most people, these are big differences. And let's not forget that in every day driving (let's forget this silly top speed comparison - hardly relevant) a Z06 still is significantly fast than an M6.

'06 Quicksilver Z06

Very well put and very hard to argue with. And you didn't even have to factor in maintenance costs

C2Jeff

Please don't misunderstand: I was not necessarily advocating that viewpoint, but was trying to explain it because it was apparently being misunderstood. My first line read:

"I think what he meant was that what appears at first glance to be a horrific price difference, upon further analysis taking into consideration actual ownership costs, the price difference isn't quite so horrific, after all."

In actuality, I can afford to own either car and the cash flow issues of making higher monthly payments would not affect my personal cash flow; this isn't true for many Corvette owners, I don't think. Even if it can be shown that ownership costs of an M6 are lower than a C6 (which can't be shown because it's just not true), most people simply cannot afford the monthly payments necessary to realize those cost savings since they don't get realized until the cars are sold.

C2Jeff

Sorry to harp on this subject but I think many people judge a car by how much it iwll cost them per month, rather than how much it will cost them over the entire time they own the car. Let's say that 3 years ago you had the choice to buy a Mercedes SL55 AMG with an MSRP of $95,800 but couldn't afford it so you bought a 2003 C5 convertible with an MSRP of $54,000. Your monthly payments fit you just right so you figured you were going to save $600/month or more by not buying the SL55.

Today you go to trade your car in and find it has a trade-in value of $28,600. This means that the cost of ownership on the Vette (not counting variables like tires, gas, repairs, etc., just depreciation) comes to $25,400.

But your buddy, who had a higher paying job and could therefore afford the higher monthly payments, went ahead with the SL55 at the same time you got your C5. Now he's trading his in today and he's getting $67,700. His cost of ownership (depreciation) comes to $28,100.

The difference between what he paid for his car over the 3 years of ownership and what you paid is only $2700. That works out to only $75/month over the 3 years you both owned your cars.

These figures are taken from Kelley Blue Book and all parameters were kept equal so as to not skew the results in either direction (all defaults at Kelley's site were left as-is, same mileage was used, same "Good" condition was used, etc.).

Your buddy's costs were still higher than yours ($75/month), plus he paid interest on a higher loan than you did, so his costs were definitely higher than yours, but not anywhere near what you'd have thought when you consider the vast difference in original MSRPs of the 2 cars.

If you can afford a more expensive car's loan service and can fit the monthly payment into your budget, in the long haul it will not cost you as much as a less-expensive car that does not retain its value as well. That's the premise the original poster of this idea was trying to convey and I hope I've explained it adequately.

On a personal note, since I can afford the M6 or the SL55, you'd think I'd have gotten one, but I prefer the C6, regardless of their performance edge.

jschindler

Well, I hate to harp on it as well, but you seemed to have totally missed my rebutal. I fully understand your point. And yes, I agree that many people concentrate on payments.

But my point was that you still have to "front" the money for a more expensive car, even if it does make up for it in the long term.

But I will also say that very seldom does it work the way you suggest. Overall, a 95,000 car may hold a higher percentage of resale value, but the dollars seldom work as you suggest. If a 95,000 car only loses 30% over two years, and a 65,000 car loses 40% over the two years, the math says you lose less money on the 65,000 car. And in the real world, those are more typical numbers (yes, I realize there will always be exceptions). And, you didn't have to front the extra 30,000. Lost interest on that 30,000 if it were invested in a two year CD is about 3,000 over the two years, as well.

One more point. I happen to have a close friend who is looking at a SL55 as we speak. One of the reasons that cars like that seem to have such good resale value is that the price of replacing it has gone up so much. Base price on that SL55 is now over 125,000 - that is about a 30% increase. At the same time, the 54,000 Corvette is now about a 56,000 Corvette. By the way, my friend is looking at a lease, and after much negotiating (and he's the best negotiater I have ever met), he's looking at spending 45,000 over two years and having "0" equity when he turns it in. Suddenly it doesn't look like such a deal, does it?

C2Jeff

I'll try to keep this brief and addess your concerns about money fronting:

20% down on each = $10,800 for the 2003 C5 & $19,160 for the SL55

60 months @ 7% = $855.41 versus $1,517.56

After making 36 payments, Vette owner is out of pocket $41,595.12 and his car's Blue Book trade-in value is $28,600 but he still owes $20,529.84, thus his equity is $8,070.16.

After making 36 payments, SL owner is out of pocket $73,792.16 and his car's Blue Book trade-in value is $67,700 but he still owes $36,421.44, thus his equity is $31,278.56.

Sure, the SL owner had much higher monthly payments but he was building equity. Sure, the Vette owner could have put the cash difference into a CD and could have contributed the difference in monthly payments into an interest-earning account of some sort and have gained some interest on his money, say $4500 over 3 years (since you posited $3000 in 2 years). So Vette owner has $12K in equity and earned interest and the SL owner has $31,278.

Ownership of the SL for 3 years cost him $42,514*, or $1,180.94/mo.
Ownership of the C5 for 3 years cost him $29,595*, or $ 822.08/mo.

(*Calculations are: Cash up front + finance payment minus equity)

That works out to only $359/month difference, which is hardly the "horrific" price difference that was originally posted and to which I made by comment that you objected to.

If they were to keep the cars for 5 years and pay off the loans, the difference in ownership costs would be dramatically in the favor of the SL55 owner due to lack of depreciation.

I hope we've covered this to everyone's inderstanding and satisfaction and that no ones viewpoint has been minimized, trivialized, or gone unrecognized because all these calculations make my brain hurt!

Two-Lane Blacktop

With the Euro closing in on 1.30 to the dollar, I would expect the European sports cars and sedans to continue to rise in price and perhaps the M5 and M6 series used car market to follow suit. Personally, I buy everything cash and go through cars like Kona coffee.

Monts

Lets keep it simple:

Assume you pay cash for the cars, taxes, tags etc, and you figure the time value of the money (opportunity cost of the diefference), the SL55 cost far more, almost double.

LS1LT1

Same here, hence why car loan payments and/or interest on said loans mean little to me when buying a car.
Regardless of what I can afford, what is important to me is procuring a fast, great handling, domestic nameplate, good looking vehicle that doesn't cost as much as a small studio/condo LOL.
And IMO there's only ONE car that fit's that description.

ronsc1985

Aside from the financial calculations which I note do not include the operating costs the power to weight ratios are as follows in lbs/hp.

M5 8.024

C6 7.947

M6 7.818

Z06 6.264

It is obvious from these number all this talk about an M5 or M6 walking all over a stock C6 is not based on any physics. In the case of a Z06 it is obviously no contest. With respect to top speed this is primarily a decision by the design engineers about gearing and has little if any practical value. What does have some practical value is the poor fuel economy the M5 and 6 provide i.e. 12/18. Although this is not a big deal in cars of this price it does say something about the engineering or lack thereof in these cars which cost 100k or more.

I actually drove a M6 and thought about buying one but for the money I didn't think it was anything special but then again the only person I am interested in impressing is me.

Slow Vette

put the crack pipe down. the C6 Z06 has the same power and weighs like 800lbs less i think you meant top speed and not top end. no personal attack but im hoping you know the difference between the 2.

shopdog

Power to weight ratio matters for acceleration, but has no effect on top speed. Assuming appropriate gearing, top speed is a function of available rear wheel torque at RPM (another way to say horsepower) versus aero drag. The Corvette's Cd of 0.28 is almost certainly lower than that of a boxy sedan, so it requires less power to achieve a given top speed.

Slow Vette

true but look at his post(#40). he's talkin about the Z06 not having more top end than the M5.

heavychevy

You are mistaken the M5 is 3700-3800 lbs

LS1LT1

Maybe with the seats out LOL...listed as 4012 pounds everywhere I looked.

ronsc1985

That is correct and the M6 coupe is 3909.

heavychevy

My apologies! Bad info.

HyperX

A friend with a new m5 has to do a 5 step idrive sequence to put him ready to roll (fast off the line). He is really pissed about it. Whats worse, it all resets back to defaults when he turns the car off. So chances are, a ndw M5 would not beat you unless he did all the idrive fiddling.