By the way, I think the original post/calculation was made by me, in a Mazda6 thread. I was just trying make a simple illustration on how poor resale vale can be offset by lower purchase price, from a financial point of view. There were a few assumptions though e.g. comparison should be cars of the same segment (in the example, both are d-segments), should be of same age, no change in new price (e.g. change in tax structure, etc.) bla bla... I was doing it out of boredom as I like playing with numbers.

@kadajawi: They are so many other domains that I did not factor in, like whether a car is true of its segment, rebate offers, free service offers, car reliability, spare parts costs, intangible costs (e.g. comfort, convenience, satisfaction, etc.)

I guess it depends on a persons' wealth. I'm a poor person, so I always make calculations when making or considering major purchases that costs hundreds of thousands. Of course rich guys can just splurge, or pay other people to calculate for them.

Yes, you can say cars aren't investments. We can consider them as lialibilties/losses. But the point of making some rough calculation to find out if we can minimize loss. My earlier calculation is just to show how RV can be overrated i.e. not exactly superb financially speaking. I'm not Sam Loo lah bros, don't shoot me.

Erm no, not since. The initial figures (brand new and resale car price of camry/407) that i used is from @Zenix IINM. The calculation can be easily replicated or modified, depending on what you want to calculate. Just to note, that I had no intention to buy either of the cars, it was just a very crude illustration, accountants will probably laugh at it.

Yes, that is one of the many assumptions. My summary was "low RV is offset by low purchase price". It's obvious that when both cars have the same purchase price but one have lower RV, then there's no need calculate anything. But note that the calculation is based on historical figures thus like all other financial estimates, does not predict future values. A safe disclaimer :)

Like I said, the point of considering RV is to manage/minimize your liabilities/losses. Financial prudence is about managing both the positives (assets/gains) and negatives (liabilities/losses). Like it or not, RV is a real issue. Middle income buyers in developed countries also look at RV as a factor. You'll see reviewers mentioning RV as as plus/minus points.

By cruching some numbers, you can estimate if the loss is "substantial enough" to stop you from buying the car you're eyeing. The question is then, are you willing to take the financial loss considering what you gain (e.g. safer, better ride) from a lower RV car? I think having a rough figure is better than to brush of RV just like that. Unless you love the car so much, or too rich to care.

Maybe next time I'll try to calculate Merc vs. Volvo or Audi vs. Bimmer. In these cases, RV may even play a role even though buyers of the cars above are not exactly poor.

You need to provide the RV of both cars of the same age (e.g. resale price after 5 years or so).

Edit: This is to avoid bias. I don't want others to accuse me of being unfair in my calculation.

This post has been edited by azfamy: Mar 8 2013, 03:08 PM

Intangible costs (e.g. satisfaction, convenience, etc.) are very much harder to calculate or converted into dollars and cents. Need to ask economist colleague. However, you've managed to answer your own question. Hypothetically, you're willing to lose $10k for 5-years of driving satisfaction. This "satisfaction" is subjective. But let's say we convert it into an ordinal scale, say Likert's 5-point scale. Assuming you're satisfaction level is 5 (perfectly satisfied) as opposed to a better RV car which gives you satisfaction level of 3 (so-so). Thus, you gain 2 points of satisfaction for a 5 year period at a cost of $10k. The next question is, what's your limit/dealbreaker? $20k? $50k? How many ringgit per satisfaction points per year is good enough for you? Ok so now it becomes more complex and less fun.

That "flaw" was intentional. The assumption was made purposefully (irrespective to whether it's true or not) for/due to:
1. Ease of calculation.
2. Lack of data for (maintainance/service) costs.

This statement is true depending who you ask and how they rate safety. Many parents (including myself) will never let their children get motorcycle license or ride bikes. Road traffic fatality rates are highest among riders. I also already saw too many cases of "unnecessary" severe head injuries and fractures resulted from "minor" accidents to the extent that i feel bikes should be banned. "Unnecessary" here means that it could have been avoided had they had drive instead of riding. For those who couldn't afford cars, use public transport instead.

Yup. But for the sake of impartiality, you'll need to provide:
1. Original car price (when it was bought brand new).
2. Resale price at a given time (e.g. after 5 or 7 years)
3. % or downpayment/interest rates. (irrelevant, if assumed to be equal).

Most developed countries put great concern on safety. They even wear full protective gear when riding BICYCLES. That includes helmet, elbow guards, knee guards, proper shoes, straps to keep the bottom part of your trousers from flaring out. When i was a student long time ago, i saw many lecturers put on all those gear on top of their office wear (suit+tie) when cycling to work. Yes, i understand our public transport is atrocious. But, to me at least, the risks of injury/death from bikes in Msia is too high. Convenience can take a back seat.