W hen shopping for a car, you should look for the lowest price for the best quality. Right? Well, sort of … in the back of your mind, you realize that, all other things being equal, the car which gets better gas mileage is worth more than the one which doesn’t. But how much more? And what other factors should you consider? Depreciation rates? Cost of insurance ? How about maintenance and repairs? If all of this is giving you a headache, don’t despair. Edmunds.com has done much of the work for you, by calculating the true cost for owning any new or used car five years. I appreciate the work Edmunds has put into their “ True Cost to Own ” (TCO) projections, but I advise caution about simply taking all of their numbers at face value. You will need to use discernment because some of these numbers will apply to your circumstances and some won’t. Let’s give it a try by comparing a 2007 Honda Accord EX-L with 60,000 miles, a 2008 Chevy Impala LTZ with 40,000 miles and a 2006 Cadillac DTS with 60,000 miles. According to the Edmunds site, the market value of these three vehicles are all very close. However, when applying the TCO figures, the Honda and Impala have a clear advantage over the Cadillac. This chart summarizes my findings. Purchase Price 5 Year Cost to Own Total 2007 Honda EX-L with 60K $12,330 $36,507 $48,837 2008 Impala LTZ with 40K $12,984 $37,710 $50,694 2006 Cadillac DTS with 60K $12,506 $44,483 $56,989 Just so you will know what to expect on the Edmunds site, I have included their Honda TCO stats below: 5 Year Details for 2007 Accord EX-L Year 1 Year 2 Year 3 Year 4 Year 5 5 Yr Total Depreciation $1,652 $1,450 $1,275 $1,130 $1,014 $6,521 Taxes & Fees $1,035 $78 $78 $78 $78 $1,347 Financing $568 $454 $333 $208 $74 $1,637 Fuel $2,620 $2,699 $2,780 $2,863 $2,949 $13,911 Insurance $1,141 $1,181 $1,222 $1,265 $1,309 $6,118 Maintenance $1,511 $588 $643 $839 $1,325 $4,906 Repairs $299 $347 $404 $470 $547 $2,067 True Cost to Own ® $8,826 $6,797 $6,735 $6,853 $7,296 $36,507 Making the Edmunds Numbers Work for You Edmunds has used the following factors in compiling their cost to own numbers: depreciation, taxes and fees, financing, fuel, insurance, maintenance and repairs. These are all legitimate costs of owning a vehicle, but each needs to be scrutinized to fit your buying needs. For example, financing is a non-issue for me because I pay cash for my vehicles . Insurance will vary from vehicle to vehicle, but you might be better served by asking your agent what those costs would be for you. Other Considerations How many years will you own the vehicle? The TCO is a five year projection, so it would (probably) be more applicable if you plan to drive your car more than five years. Do you love it? I realize loving a car is quite subjective, but reality is this: we Americans (especially us guys) tend to first fall in love with a car, then seek ways to justify the expenditure. But this isn’t necessarily a bad thing — if you buy something you love, you will likely take better care of it. Conversely, if you buy a “ho-hum” car in order to save a few hundred dollars, you will probably not care for it as well. Mind you, I am not advocating spending money you don’t have, but factoring in a “love” element may actually save you money . Do you do your own maintenance? Repairs? Maintenance and repairs are two of the factors Edmunds uses for their TCO. If you do your own, those issues become less of a consideration. How many miles do you drive annually? The Edmunds numbers are based on 15,000 miles driven per year. Driving more would justify spending more on a vehicle which gets better gas mileage; conversely, gas mileage is not as much an issue for those who drive very little. How about me? I wish I could give you a glowing report of how using TCO helped me make a wise purchase, but I can’t — I have never considered true cost to own in any of my vehicle purchases. However, I plan to next time, especially if I have narrowed my selection to two or three choices. To quote from Edmunds site: “With TCO, you get a snapshot of the car’s costs over time. You will see the big picture – not just today’s price tag.” Readers: Have you ever used “true cost to own” to help you determine your vehicle selection? How did it go? Meet us in the comments section! Car mirror image from Shutterstock Related Articles: How to Save $5,000 on Your Next Car Purchase Purchasing A Car? Advantages Of Buying Used Cars Should You Sell Your Car or Repair It? How much does it cost to raise a child & 10 ways to cut the cost! Joe Plemon, a retired engineer, financial counselor and blogger, lives in Southern Illinois with Janice, his wife of 40 years. Joe likes online Scrabble, St Louis Cardinal baseball, blues music, power naps, high school football, short term mission trips and Sunday family dinners. You can read more from Joe at Personal Finance by the Book .
What is the True Cost of Purchasing a Vehicle?