If you think what you drive defines you as a person, you can stop reading now. I have worked in auto finance for over a decade and have seen many consumers make bad car choices that cost them in the long run. Knowing the true vehicle's cost can save you thousands.
I thought about it when I bought my 1968 Chevrolet Hel Camino for $6500 at the same time I could have bought a 5 year old Kia Rio that still had the balance of it’s 100k warranty, a/c and 40 mpg. Obviously the Kia was a better deal. There are days that I’m covered with grease, or having a mysterious backfire that I curse my decision, but as Vida said in To Wong Foo, “Well Pumpkins, it looks like it comes down to that age-old decision: style or substance?”
We hear, “A less-expensive car can cost you more in the long run than a more-expensive alternative”, the biggest factor is depreciation. So what would happen if we bought a car that didn’t depreciate?
We are going to only cover cars that the resale is negligible and only cover other costs like fuel, interest, insurance, sales tax, maintenance and repairs.
In analyzing ownership cost I made some notable discoveries:
• One of my friends went to the Toyota dealership for his "free" oil change. According to the service desk, a 6 year old minivan with 40k miles needs a Fuel System Flush, Transmission Flush, New Timing Belt and New Water Pump. All for only $1,100. A trusted mechanic is going to be invaluable for controlling automobile expense.
• Most Lexus models have high reliability but relatively high maintenance and repair costs (primarily due to maintenance). The Lexus ES350 racks up an average of $2,300 in maintenance and repair in the first five years, about twice what you'd pay on a Lincoln MKZ. Look at an owner’s manual and find out what routine maintenance is needed for your vehicle.
• Don’t purchase a car to try to save on expense, but if you are replacing a car a more efficient model may save you over a lower priced model.
My cost of ownership:
Purchase price. I don’t want a car payment. I bought both my cars with a combination of available cash and low interest rate credit cards.
Interest although I minimize the interest I pay on a vehicle, new cars often offer below market rates although used cars will not have that advantage.
Maintenance and repair costs make up 4 percent of ownership costs over five years on newer vehicles. My hypothesis is my maintenance will be much higher.
Insurance costs vary depending on many factors, age, address, type of car, credit and/or driving record. I have liability on one of my vehicles and full coverage on the other.
Fuel costs can vary, my Hel Camino is about 12 mpg, my Camaro 20 and the Harley is close to 50. If I am paying $3.50 a gallon for gas, my round trip for work can be $7.18, $4.31 or $1.72 respectively.
Sales tax in Texas is paid on at least 80 percent of the state-determined value, even if you pay less for the vehicle. State sales tax on used cars is 6.25 percent. Neither of my cars have any value per Texas.
Next Car ~ Hel Camino
