Category: Finance

The communally reinforced mantra is that collision coverage pays little for old cars. My experience is contrary. I had generic collision and comprehensive coverage on my Nova. They were for “market value,” or what someone would pay for the car on the open market. Market value itself already factors age, so it is not like there are additional deductions because of age.

I got a check for about 5800% of what I paid for semiannual collision and comprehensive premiums. I only had to substantiate the car’s value with receipts and comparable sales ads. A 58:1 ratio is a good payout. (By the way, the insurer assessed my car at double the value of a 2001 appraisal; some appraisers are apparently idiots.)

With my experience, I have to question the value of “agreed value” insurance. Unless there is something extremely unusual about the car (e.g., it’s a Tucker or a real Yenko Nova with 5,000 miles), it is easy to determine actual market value for the vast majority of old cars.

Also: “stated value” insurance is just a crippled market-value policy. It only means that in the event of a total loss the insurer’s maximum payout is the stated value. It does not guarantee that you get the stated value. (See http://www.lelandwest.com/Stated_Amount_Explained.cfm.) If you have the choice, I think a plain vanilla collision policy is far better than a “stated value” policy.

If you have a street driven car, and your car’s actual cash value (minus deductible) is significantly higher than the premium (I would shoot for at least a 20:1 ratio), then I think vanilla collision and comprehensive coverage is smart.

My lovely wife poked a fatal hole in my depreciation argument.

It is true that a newer car for her would depreciate more quickly. But that doesn’t matter in our situation. We were planning on replacing Jennifer’s car in 2007 anyway. A newer car for her will depreciate regardless of whether we buy it now or in two years.

So the rule is either an inexpensive, non-project Nova for Aren or a newer car for Jennifer. That’s what’s best for the family.

Figuring out what to do for a replacement car is a mind-numbing.

Both Jennifer and I want for me to have another Nova. So I’ve established a critical criterion on a replacement Nova: it cannot be a project car. This means it has to be virtually rust-free, the exterior must be reasonably attractive, the interior has to be in good shape, and all major drive train components have to be recently replaced or rebuilt. I have time to maintain an old car and do some minor improvements, but I do not have time for a major restoration.

I got a fair valuation and settlement for my Nova from the insurance company. (Who says it doesn’t pay to have collision coverage on old cars?) I’ve been looking for replacement Novas for weeks, and I cannot find anything acceptable that doesn’t run around 150% to 200% of the settlement value.

This leads to conundrum two: if I am going to spend 150% to 200% of the settlement value, wouldn’t it make sense to replace Jennifer’s car? It is a 7 year old Chevrolet Monte Carlo with 122,000 miles. Who knows, it could give us another problem free 75,000 miles, but this is a Chevrolet after all!

So over the past few weeks we’ve been doing our Consumer Reports research and checking local classifieds. We’ve whittled down our choices to a Chevrolet Impala and a Honda Accord. With the Impala we think we can do the base 3.4L engine, but we prefer the LS trim line which comes with a 3.8L. On the Accord we only want the 3.0L 6 cylinder. We’ve been in a 2001 Accord with the 4 cylinder, and it was totally underwhelming.

Today we test drove a 2001 Chevrolet Impala LS (3.8L) at a Cadillac dealership in Plano. We were reasonably impressed with that car. Overall it was like a roomier and more spirited version of my wife’s Monte Carlo. But it just had the general GM cheap fit and finish feel. Plus it had a lot of doo-dads that we didn’t want like heated seats, sunroof, leather seats, and so on. These aren’t bad features, but we don’t want to pay extra for them. And gee whiz, what the hell is this Onstar crap? No, thanks. I’ll use my cell phone and AAA, and I’ll remember to not lock my keys in the car! Plus this is a domestic model; the fewer parts means the less stuff to break. The sales manager was begging us to buy it for 75% of asking price before we left. (We are not ready to make a purchase yet, so we politely declined.)

Then we went to a Richardson Honda dealership and tested out a 3.4L Impala. It was a base model, and it was totally underwhelming. Jennifer hated the column shift. (Poor baby! I liked the extra space on the front seat. :-P) The handling was far worse than the LS; the car almost seemed to wobble every time I made a correction. We heard a lot of clunking from the front end every time I steered, so I have to wonder if something wasn’t right? Still, the 3.4L engine seemed to strain too much. Plus the 3.4L engine has problems eating intake manifold gaskets. (Oh, the memories.)

So next we tried out a 2002 Honda Accord 3.0L. I was very disappointed that I liked that Honda a lot better than the Impala, even the Impala LS. Overall it felt superior in every respect. The only flaw, if it is a flaw, is that the cabin seemed narrower. The other flaw is that a comparable Accord is about 25% to 50% more expensive than an Impala. That’s not a trivial amount of money.

In retrospect, my impression of the Honda Accord could have been colored by the fact that we drove a horrible Impala right before testing it. I want to drive an Impala LS again just to make sure my judgment is accurate.

This is where we stand on the car purchase decision. I still would really like a Nova. I think that if I ran the numbers, a Nova that fits my criteria, even if it costs 50% to 100% more than the insurance settlement, would still be a good deal mainly because it would not depreciate much. Depreciation is a real expense that a lot of people foolishly ignore. A newer car, be it an Impala or an Accord, will depreciate to next to nothing by the time we are done with it. However, Jennifer’s car is getting “up there” in mileage. I am not sure how much life is left in it before we’re going to have to shell out for major expenses.

Fortunately, we’re in no rush. It hasn’t been much of a problem to live with one car, and we don’t see any immediate need for another car. We’re going to continue eyeing newer cars for Jennifer. But hopefully the right Nova will show up…

(Jennifer just now adeptly pointed out that either of the likely outcomes will be that she “wins” or I “win.” We still support each other, but it’s just weird. Argh.)