The True Cost of Buying a Car

You've driven a hard bargain and gotten a good price on the
vehicle you just bought, but do you know for sure that those upfront
savings won't be eroded by the cost of owning the vehicle?

Obviously, if a car costs more to maintain or guzzles more
gas than a similar make and model with a slightly higher sales price,
your initial savings may be devoured by these subsequent costs. Costs
of ownership for similar class vehicles can vary by thousands of
dollars, yet consumers often overlook the lifetime costs of owning and
operating a vehicle as they search for a good deal on the initial
purchase. "How do you get a handle on that?" asks James Bragg, a
consumer advocate and author of The
Car Buyer's and Leaser's Negotiating Bible, pointing out the
many factors that affect how economical a vehicle is to own and
operate.

You have to consider more than fuel or repairs, Bragg says.

"The biggest cost of owning a car is the difference between
what you pay for it when it's new and what you get for it when you
sell. Some cars drop like a rock while others hold their value really
well."

When looking at how economical a vehicle is to own and
operate, many consumers do tend to look at out-of-pocket operating
costs like fuel and repairs rather than fixed costs like depreciation,
says Joe Wiesenfelder, an automotive expert at Cars.com.

"Buyers should always consider the cost of ownership, but the
fixed costs should be the main concern, he says. It's not unusual for a
vehicle to depreciate $10,000 in three years, yet it would be unusual
for you to have operating costs close to that, especially during the
warranty period."

Calculating ownership

There are resources that can help. Intellichoice.com puts out
two CD-ROMs, "The Complete Car Cost Guide" and "The Complete Small
Truck Cost Guide," that provide cost-of-ownership information for each
model year. They show the five-year costs of depreciation, financing,
insurance, state fees, fuel, maintenance and repairs. The total of
these costs is compared to the average total costs of ownership of
vehicles in its class.

The cost of repairs listed in these reports can be taken as
an indicator of a vehicle's reliability or dependability. However, some
very reliable cars may cost more to repair at each visit because their
parts cost more than other cars in its class, Butler points out. That's
why you might want to take a look at the J.D. Power and Associates
Vehicle Dependability Study each model year.

There's a bit of a correlation between depreciation and
reliability, Bragg says. Cars that don't need much in the way of
repairs tend to hold their value better than cars that aren't so
reliable. Yet some of those very reliable, value-holding vehicles may
cost more to insure because they may also be among the most-stolen
vehicles, he adds.

No one suggests that a consumer can plug these factors into a
matrix to come up with an absolute answer. In the end, weighing the
importance of these costs depends on personal circumstances and
preferences. For instance, Bragg says that safety is his first
consideration, and safety is a factor whose value each individual must
determine. It won't show up in anybody's list of ownership costs.

Even when considering measurable costs, "you're going to have
to determine which is going to be more of a factor for your wallet,"
Wiesenfelder says. "If you do a lot of driving, you're going to want to
look at fuel-economy costs, but for most people that is not the biggest
cost. It's things like insurance: If you have a vehicle that's on the
most-stolen list, then insurance could be a huge differential."

There are plenty of resources online to help. Here are some
good ones:

• Edmunds.com has a display of the True Cost to Own, which
  is information on the additional costs involved, not only in a vehicle
  purchase but also in the ownership. For instance, there is always fuel,
  maintenance and repair costs awaiting the car buyer.
• Cars.com presents top 10 lists of residual values from
  Automotive Lease Guide, most frequent theft claims from the Highway
  Loss Data Institute, and its own 10-best and 10-worst vehicles for fuel
  economy. In addition, it presents J.D. Power and Associates'
  Dependability Study going from most reliable to least reliable.
• Intellichoice.com publishes its "Best Overall Values of
  the Year" list in six vehicle classes: cars over $24,000, cars under
  $24,000, SUVs over $30,000, SUVs under $30,000, trucks over $27,000,
  and trucks under $27,000. For instance, the site picks the 2004 Toyota
  Avalon XLS four-door sedan as the best overall value in cars over
  $24,000. The cost of ownership is figured on a five-year basis, and the
  approximate costs of depreciation, financing, insurance, state fees,
  fuel, maintenance and repairs are listed. The total of these costs is
  compared with the average of the total costs for other similar
  vehicles. In the case of the Toyota Avalon XLS, the five-year cost of
  ownership would be $33,074. The average for similar vehicles would be
  $37,093. So the Toyota would offer a savings of $4,019 over five years.
• You can also search Intellichoice.com for the costs of
  ownership of specific vehicles and how those costs compare with the
  average costs of other vehicles in its class. The site also allows you
  to make side-by-side comparisons.

Do your research well, and you'll know whether that
manufacturer's rebate is a good deal or just an invitation to pour
money down the drain after you take delivery.

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