Optimum Sell/Trade Time

[Lubehead]

I've got a 2010 X535d. I love it and it's my work vehicle. It's my second E70, the first being a 3.0. I put an average of 25k annually on the truck, and it has about 56k as of today.

I'd like to hear opinions and input on what may be the optimum time to sell this truck and get into a new one. I know the diesel is good for a lot of miles and that ultimately it's the roll of the dice as to what maintenance costs I wil incur over the next, say, 50 to 100k miles. From a financial perspective what is the best case scenario? I know this has several answers and one is not necessarily superior to the other, but I think it may be an interesting discussion; i.e. should I always turn them over every 2 years and never be without a warranty or perhaps keep it till 75 or 100k or beyond expecting the residual value to still be significant enough to repeat and start again.

I have a very successful business associate who operates an aggregate company. He buys crushers, and sells them after 3 years. The first two years are warranted and the 3rd year they are not. He has an excellent reputation such that the seller of the new crusher gives him top dollar for the used which has a ready market. His philospohy is that every day down he loses about $15k so he operates on the basis of the least amount of downtime as he generally incurs no repair cost for the crushers he operates. This is a good analogy to what I am looking to do, just looking to fine tune the best point to obtain the lowest operating cost given my vehicle of choice.

[JDM-20L]

In business down time is lost revenue, but I can't see how that philosophy can be applied to a depreciating asset? aka BMW X5

With time it is obviously going to depreciate and with more mileage comes more maintenance.

I think the best way to assess this is to base your case on some facts.

I'd run some scenarios based on what previous history you have with depreciation and upkeep cost.

base the scenarios on the same time frame and factor in all expenses and what not.... as I understand it, you want to work out whats going to cost you the least off your bottom line.

[ard]

Originally Posted by Lubehead

I've got a 2010 X535d. I love it and it's my work vehicle. It's my second E70, the first being a 3.0. I put an average of 25k annually on the truck, and it has about 56k as of today.

I'd like to hear opinions and input on what may be the optimum time to sell this truck and get into a new one. I know the diesel is good for a lot of miles and that ultimately it's the roll of the dice as to what maintenance costs I wil incur over the next, say, 50 to 100k miles. From a financial perspective what is the best case scenario? I know this has several answers and one is not necessarily superior to the other, but I think it may be an interesting discussion; i.e. should I always turn them over every 2 years and never be without a warranty or perhaps keep it till 75 or 100k or beyond expecting the residual value to still be significant enough to repeat and start again.

I have a very successful business associate who operates an aggregate company. He buys crushers, and sells them after 3 years. The first two years are warranted and the 3rd year they are not. He has an excellent reputation such that the seller of the new crusher gives him top dollar for the used which has a ready market. His philospohy is that every day down he loses about $15k so he operates on the basis of the least amount of downtime as he generally incurs no repair cost for the crushers he operates. This is a good analogy to what I am looking to do, just looking to fine tune the best point to obtain the lowest operating cost given my vehicle of choice.

I'd have bought a warranty before 50k...so now your resale is very much reduced. Whats a 2010 with 56k and no warranty worth? 35-40k?

I also note you refer to 'maintenance' costs between 50-100k...I think you mean mechanical breakdown, ie the un-scheduled stuff- and not brakes, oil, etc which is all 'maintenance'.

Had you added a warranty, the next two years would have only cost you ~15k. Now a new car will cost you 30k+ more.

There is no getting around the steepness of the depreciation curve.


My 2 cents....

[JCL]

OP:

Since you don't pay for downtime, you can't really use the crusher example, except to the extent that your partner has a fixed plan and sticks to it.

You can buy an extended warranty from BMW (not aftermarket) if you act before you have 50,000 miles.

Since you have relatively high annual mileage, you will get clobbered on depreciation flipping vehicles so often. I would try buying an extended warranty to take it to 100,000 on your next one, and plan on selling it with a year left at a more standard annual mileage, ie 85,000 miles. You will get 3.5 years out of it. That way you can sell it with a BMW warranty with nominally a year left on it. Takes the risk down for a lot of purchasers, which will help your resale value.

I wouldn't buy a maintenance plan, I would have an independent mechanic that knew BMWs that I trusted if I wasn't doing the work myself.

I don't agree that the diesel is good for a lot of miles any more than the gasoline engine. But I think both are fine, it is other things that will hit you, whether it be suspension rebuilds, transmissions, or electronics. The engine is the last thing to worry about.

[Lubehead]

Gentlemen, thank you for your replies. I'm not so sure that the example has no relation to a vehicle that is used as a sales tool. If the vehicle is out of service, it's not being used and does not provide the service for which it was procured; that's downtime in my book.

As far as the extended warranty is concerned, I considered it, but rejected it based on assumed risk/loss. Assuming the warranty cost $3k or so, I don't see how the purchase of it would get me $15k more. Especially with my original plan to keep the vehicle beyond 100k miles as at that time, any extended warranty has no resale value, so the expense of the extended warranty is viewed as a crap shoot; i.e. will I spend more than the cost of the extended warranty over the next 50k miles? Possible, but I think not, that's why I didn't go for it.

JCL's comment has merit and is what I was looking for. The real question in that scenario is what is the vehicle actually worth with and without an extended warranty at that time. Does a vehicle sold at an auction get a premium if it has an extended warranty?

And Ard, good point and thanks for clarifying, the maintenance I was referring to includes unexpected costs incurred by stuff not working like it should.

As to the diesel vs gas argument, you've stated that you like gas and I appreciate that, but fueling up at the station represents "downtime" and I can tell you that I spend less time there than I did with my 3.0.

[JDM-20L]

The commercial term downtime usually equates to lost revenue, Seeing how it doesn't bring you any (actually the opposite in any scenario) I don't see how you can take this approach.

I know what your getting at but as pointed out... that depreciation curve is ugly.

Stop thinking & keep enjoying it I say.