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PENNY WISE AND DOLLAR FOOLISH????? 

Resale values are very important when buying a car.  Everybody knows that, but most people only hear part of the story.  It is very important when you run a large fleet of new cars, (the important part here is new) like a rental company would.  If we have a fleet of cars that numbers several hundred and that is being turned over every two years or more a couple of percentage points can make a substantial difference at the end of the day. 

Let as say we operate 200 new cars, each worth $20,000 that are replaced every 2 years, and between make A) and B) there is a difference of 2.5 percentage points in resale value.  If the car A) was worth let us say 50% after two years and car B) was worth 47.5%, than, in dollar terms car A)would be worth $10,000 and car B) would be worth $9500.  For most people a difference of $500 over the life of a car (usually 5 years or more) would be of little concern.  A business owner, how ever that operates 200 cars that are being replaced every two years would look at a difference of $500 x 200, a cool $100,000 every two years, $400,000 after 4 years and half a million for 5 years.

Usually the resale value is calculated as a percentage of the original new car recommended retail price. 

Example 1.             A car with an original RRP of $30,000 in 2000 that is worth

                        $15,000 in 2003, has a resale value of 50% (of it’s original value)

                        (The above example is based on an actual car and is an actual resale value, to             simplify calculations prices have been rounded)

Example 2.             A car with an original RRP of $30,000 in 2000 that is worth

                        $12,000 in 2003, has a resale value of 40% (of it’s original value)

                        (The above example is based on an actual car and is an actual resale value, to                         simplify calculations prices have been rounded)

Question:            Which is the better buy.     

Answer:            Depends on whether you intend to buy a NEW or a USED car!

NEW CAR BUYERS:            If you intend to buy a new car you would want a high resale

value to minimise the loss at the time of sale/trade-in.

USED CAR BUYERS:            If you intend to buy a used car that has a high resale value you will pay up front and thus nullifying the benefit of a high resale value.  A resale value, that may or may not be there in some years from now.

For more information contact

Erich Kannen JP #129296

Car Solutions Motor Vehicle Consultants

14 Marceau Drive

Concord NSW 2137

Ph. (02) 97447479 email. info@carsolutions.com.au

THE ECONOMICS OF LPG

1. According to the LPG Association, LPG consumption is approximately 27% times higher than petrol consumption.  

2. According to one of the local manufacturer’s tests the fuel consumption increases by 38% when LPg is used instead of Petrol. 

3. According to the same manufacturer’s tests there is also some loss of performance. (7.75% KW Power and 6.5% NM Torque are lost).  In practice the performance loss means to reach 100 Km/h will take an additional ½ second (so small that most people would not notice any difference).

4. To work out the cost effectiveness the following assumptions have to be answered:

4.1. The annual distance to be travelled (Km)

4.2. The vehicles fuel consumption (L/100 Km)

4.3. The average petrol cost ($)

4.4. The average LPG cost ($)

5. To estimate the petrol consumption cost the following calculate should be used:Km / x L/100 x $(Total distance travelled in Km x Litres of petrol/per one hundred Km, x the cost of Petrol per Litre = total annual cost.

6. A similar calculation applies for LPG, except that fuel consumption will increase by (38%) so the fuel consumption figure must be increased by factor of 1.38 and the LPG is substituted for the petrol cost.Km / x L/100 x 1.38 x $

7. The additional cost of a LPG car was as of 8.6.2003, approximately:

Mitsubishi Magna              $   800

Ford Falcon XT                   $1,400

Holden Commodore            $2,315

Toyota Camry/Avalon        $2,600

8. SUMMARY:

To recoup the cost of an LPG powered vehicle, travelling 20,000 Km p/A, the vehicles must be owned at least (only after that time will there be any potential financial benefit to the owner):

Mitsubishi Magna                      22 months (under 2 years)

Ford Falcon XT                        39 months (over 3 years)

Holden Commodore                  64 months (well over 5 years)

Toyota Camry/Avalon                72 months (6 years)

Minor variance occur depending on the assumed costs and the distance travelled.  The principal however does not change – Few individuals or companies retain vehicles for over 5 years.

For further information contact:

Mr. Erich Kannen JP

Car Solutions Motor Vehicle Consultant

14 Marceau Drive

Comcord NSW 2137

P. (02) 9744 7479 M. 0412 220303 e. info@carsolutions.com.au