Paying cash for Cadillacs

[Bruce Nunnally]

So far we don't know what the depreciation rate will be on the 2008 CTS. It appears that the new redesign is going to sell like hotcakes, and be very popular.

Edmund's ( http://www.edmunds.com ) is a general automotive site that offers a variety of analysis tools, including True Price to Own ™.

I selected a 2008 CTS with the DI 3.6L and the optional Performance Collection for analysis; this is a minimalist selection if one wants to get the best performance at the lowest price, which should help depreciation also:

The image above is an image, so the lines which appear to be links are not real links. You can however go to edmunds.com select the 08 CTS, then Pricing, then select the options you prefer. When you get to the last step, instead of selecting get Dealer quotes, choose the tab for Reviews & Specs. Then from the side menu choose true value pricing.

Also, total cash price was $44,712 so was full MSRP. Save $4K back to invoice (good luck getting an 08 at invoice) and the depreciation is $8K.

Strikingly, they predict a $12K loss in value in the first year, and an additional $3.7K in year 2. So, by waiting til 09 or 2010 to pickup a lightly used 2008 model, one can save 12-16K!

In other words, over $500/month for waiting for a 1 year / 12k mile used version if their predictions are correct. That's quite a savings (again, we don't know yet as there have not been any 1 year old 08 CTS's yet. It is a prediction based on other Cadillac depreciation).

I have been reading Dave Ramsey's Total Money Makeover ( http://www.daveramsey.com/ ), and similar info at other sites. Now I am on a drive to save up and be able to pay cash for my next Cadillac, and to purchase a 1-2 old Cadillac and avoid some depreciation. So say a 1 year old model with 12k or a 2 year old model with 24k miles. Then drive the Cadillac for 4 years/60K miles, and trade it at that point for another 1 to 2 year old model. Always under warranty hopefully, and always be in a position to pay cash for the next one. The hard part is getting started on the new plan, as right now I am having to finish paying for my 05 WHILE saving for my 08 model. This is a lot like paying for 2 cars at once. The ability to skip the first year of depreciation and over $4K in finance charges on each Cadillac does seem persuasive.

Plan:

Buy a 1-2 year old Cadillac with 12-24K miles: $28-$30K

Save for replacement: $480/month

Drive for 48 Months, 60K miles

Resale Value of Cadillac with 72K-84K miles and 5-6 years old: $8-10K?

Cash saved at 48 mo x 480/month: $23K

Total value in cash/trade to pay for next 2 year old Cadillac: $31-33K

(Rinse, repeat)

[Ranger]

Bruce,

I have always paid cash for my cars. When I bought the DHS last year (when we met for dinner), it was 3 yrs old. Had 17K on it. Listed for $48K. Payed $23K. Certified and warrantied til '09. It's the only way to go IMHO.

[Bruce Nunnally]

Before I bought the 2004 CTS, I was trying to be smart. I started saving away what I predicted the payments would be for a year or so. This allowed me to have a nice down payment put together, and to insure that I could fit the payments into my budget. There were not any used 3.6L CTS's then, since the engine was new that year. When I traded the 04 for the 05 CTS, it was at the same payments and for a couple grand down, so seemed a fun new car rollover. This was not smart financially, but it was fun, and it was a learning opportunity. The Dealer gave more than the book value for my trade, and the new car was discounted, but still was a large depreciation loss for a 1 year old car. Meanwhile, I started another savings fund for the 'next' Cadillac, so that after 5 years with the 2005 I would have the down payment for the replacement for the 05 ready.

Thankfully I owe less on the 2005 CTS than it is worth, but paying it off while I am upping my 'down payment' fund to prepare to pay for the next car is hard. Hopefully after I can continue at the $480-500 /mo savings for the next Cadillac, and so on.

One confusing thing is on the surface both plans (save up to pay cash, or take a loan) appear to have $500/mo payments, so why not just go write a note (loan) on a new CTS now? But as I was trying to show in the numbers in post 1, the difference between paying cash for a 2 year old Cadillac and getting a loan for a new Cadillac is about US$15K/1year or $18K/2years. At my house that's a lot of money to avoid spending. In terms of value, driving my 2005 CTS for another 31 months (as opposed to buying an 08 CTS now) saves $500/month!

Still on the fence as to whether to put $1.5K into an extended warranty to make sure my 05 stays in warranty for its entire stay at my house. I am pushing to pay it off by midyear next year, which saves some interest, and ensures that for the time it is not under warranty I would at least not have car payments and repairs. I think it is a safe bet that it will not need major repairs in the time I have it (first 75K miles) , but it is tempting to buy into the warranty and drive it another 2-3 months on the back end to save the difference or so.

Having cash in hand to buy a Cadillac gives you a lot more options. Even when Cadillac is offering 0% interest loans on new cars, the alternate is often $3-4K cash back (0% or cash back); this means you are really having to fore go (pay) $3K for the "0%" loan. But the huge difference in first-year depreciation is hard to miss.

Meanwhile, may be some very interesting private party deals on CTS-V's when the new 09's come storming out and lots of the CTS-V guys are swapping to the new supercharged cars.