The True Cost of Vehicle Ownership
It can be difficult to ascertain the true cost of vehicle ownership. In many instances, a pricier vehicle will usually be the more reliable one. Knowing when you should drop a few more bucks on that car can be difficult to do. Naturally, it’s simple to determine which vehicles cost more to purchase – just look at the sticker price. The real question is how much will regular maintenance cost you in the long run (oil changes, repairs, insurance and depreciation)?
Looks can be deceiving, too. A quick glance at some popular models is telling of this:
•The Mazda6 costs $1,900 less than the Toyota Camry, but the Mazda costs $2,000 more to maintain over time.
•A Toyota Highlander SUV will cost $5,000 less to maintain over five years than the more affordable Dodge Journey, which costs about $1,600 less on the sticker price.
Similar Models Have Different Costs
With so many similarly priced models that offer comparable features and amenities, you would think the real cost of vehicle ownership would stack up. In fact, this not the case at all.
•During the first five years you own a median car, it costs about $9,000 to own—the same amount it costs to own a larger SUV like a Nissan Murano or even a flashy Lexus ES. By contrast, the Mini Cooper cost about $5,800 per year to own, and the Toyota Rav4 costs about $7,800 per year to own.
•If you keep your car longer than five years, and shoot for eight or nine, the cost of ownership actually decreases. This average cost is only $7,800 per year, on average, due mainly to accrued equity, the car being paid off (after five years) and lower depreciation.
•Topping the list of least expensive cars that you can own is the Honda Fit, which only costs $5,300 per year and is priced very competitively in its market.
•Hybrid vehicles can save you some cash, if they are not luxury vehicles or large SUVs.
•Full-sized SUVs cost the most to own, usually averaging about $13,000 per year, with pickup trucks coming in at a close second.
•While tempting to buy a Hyundai, you lose more in the end due to the poor resale value, and they cost about the same to own as the Honda Fit.
•Lexus’ popular ES350 will run you about $2,300 per year in maintenance, on average, which is about twice the cost of a car like the Buick LaCrosse.
•Of course, the biggest cost of owning a car is the cost of depreciation. This totals over 48% of the vehicle’s cost to own over just five years. Most cars depreciate roughly 65% over five years.
Cost of Fuel
You will have to accommodate for the cost of fuel as well. This will vary depending on the car and engine you have, with trucks and SUVs being the costliest to own and Hybrids being the least costly. A Jeep Liberty, for example, will cost about $8,000 in fuel over just five years, whereas a RAV4 will only run you about $2,500 because it gets better gas mileage (when averaging gas prices at about $2 per gallon nationwide).
If you financed your car, you will also have to factor in interest fees. The average car loan accounts for approximately 11% of the cost of ownership. If you have a five-year loan with 15% down and an interest rate of 6%, your interest fees account for this 11% figure. This can vary depending upon your loan terms and down payment.
Since insurance premiums are determined by many underlying factors, including your driving record and credit history, it is tough to give actual numbers. Sports car will run about twice the premium as standard family sedans. A Subaru Impreza WRX STi can cost triple the price to insure as compared to a Mini Cooper S, because one is classified as sports car and the other is not. All told, insurance factors in to be about 10% of the cost of vehicle ownership.
Preventative Maintenance & Repairs
Maintenance and repairs cost a lot less than you think and only factor in at about 4% of the cost of vehicle ownership on new cars. High end SUVs like the Porsche Cayenne will set you back $4,000 over five years, whereas comparable SUVs like the Toyota Land Cruiser will only set you back about $2,000.
Don’t forget about sales tax, either. This will vary from state to state. On average sales tax factors in to cost you about 5% of the vehicle ownership.
Costs Decrease in Time
Naturally, the longer you own the car, the less it will cost you to own it. The average person retains their car for five to eight years. During the first year, depreciation will cost you 60%, which is shocking but true. The longer you own the car, the more it balances out.
By the time you reach year six, seven and eight, they combine to cost what the entire first year did, telling of how time helps you get caught up. Luxury cars like a BMW X3 cost just $279 per year over the first five years, namely due to the included maintenance period. But after that, you will spend about $1,100 per year in maintenance.
All in all, the true cost of vehicle ownership can be a confusing equation to compute. If you find yourself in the market for a new or used car, make sure you conduct ample research on the cost of owning that car before you sign on the dotted line. You may find that it’s more feasible to get a different make and model, so you are not hit with a surprise maintenance bill later on that you can’t afford.