You've driven a hard bargain and gotten a good price on thevehicle you just bought, but do you know for sure that those upfrontsavings won't be eroded by the cost of owning the vehicle?
Obviously, if a car costs more to maintain or guzzles moregas than a similar make and model with a slightly higher sales price,your initial savings may be devoured by these subsequent costs. Costsof ownership for similar class vehicles can vary by thousands ofdollars, yet consumers often overlook the lifetime costs of owning andoperating a vehicle as they search for a good deal on the initialpurchase. "How do you get a handle on that?" asks James Bragg, aconsumer advocate and author of TheCar Buyer's and Leaser's Negotiating Bible, pointing out themany factors that affect how economical a vehicle is to own andoperate.
You have to consider more than fuel or repairs, Bragg says.
"The biggest cost of owning a car is the difference betweenwhat you pay for it when it's new and what you get for it when yousell. Some cars drop like a rock while others hold their value reallywell."
When looking at how economical a vehicle is to own andoperate, many consumers do tend to look at out-of-pocket operatingcosts 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 thefixed costs should be the main concern, he says. It's not unusual for avehicle to depreciate $10,000 in three years, yet it would be unusualfor you to have operating costs close to that, especially during thewarranty period." Calculating ownershipThere are resources that can help. Intellichoice.com puts outtwo CD-ROMs, "The Complete Car Cost Guide" and "The Complete SmallTruck Cost Guide," that provide cost-of-ownership information for eachmodel year. They show the five-year costs of depreciation, financing,insurance, state fees, fuel, maintenance and repairs. The total ofthese costs is compared to the average total costs of ownership ofvehicles in its class. The cost of repairs listed in these reports can be taken asan indicator of a vehicle's reliability or dependability. However, somevery reliable cars may cost more to repair at each visit because theirparts cost more than other cars in its class, Butler points out. That'swhy you might want to take a look at the J.D. Power and AssociatesVehicle Dependability Study each model year. There's a bit of a correlation between depreciation andreliability, Bragg says. Cars that don't need much in the way ofrepairs tend to hold their value better than cars that aren't soreliable. Yet some of those very reliable, value-holding vehicles maycost more to insure because they may also be among the most-stolenvehicles, he adds.
No one suggests that a consumer can plug these factors into amatrix to come up with an absolute answer. In the end, weighing theimportance of these costs depends on personal circumstances andpreferences. For instance, Bragg says that safety is his firstconsideration, and safety is a factor whose value each individual mustdetermine. It won't show up in anybody's list of ownership costs. Even when considering measurable costs, "you're going to haveto 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 tolook at fuel-economy costs, but for most people that is not the biggestcost. It's things like insurance: If you have a vehicle that's on themost-stolen list, then insurance could be a huge differential." There are plenty of resources online to help. Here are somegood ones: Edmunds.com has a display of the True Cost to Own, whichis information on the additional costs involved, not only in a vehiclepurchase 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 fromAutomotive Lease Guide, most frequent theft claims from the HighwayLoss Data Institute, and its own 10-best and 10-worst vehicles for fueleconomy. 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 ofthe 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 ToyotaAvalon 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 theapproximate costs of depreciation, financing, insurance, state fees,fuel, maintenance and repairs are listed. The total of these costs iscompared with the average of the total costs for other similarvehicles. In the case of the Toyota Avalon XLS, the five-year cost ofownership 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 ofownership of specific vehicles and how those costs compare with theaverage costs of other vehicles in its class. The site also allows youto make side-by-side comparisons. Do your research well, and you'll know whether thatmanufacturer's rebate is a good deal or just an invitation to pourmoney down the drain after you take delivery. Bankrate.comis the Web's leading aggregator of information on financial productsincluding mortgages, credit cards, new and used automobile loans, moneymarket accounts, certificates of deposit, checking and ATM fees, homeequity loans and online banking fees. Visit Bankrate.comto get the tools and information that can help you make the bestfinancial decisions.
Source: Money & Work
