Let a former car professional who has retailed thousands of cars and ran some of the largest car dealerships in the United States help you understand the difference between price of a vehicle and cost of the same vehicle. You will be surprised at the difference. Cost is most definitely more important than price and should be used when choosing a vehicle. Buying a vehicle we are focused on getting the best deal but we should also be looking at what the best cost is. Cost is the entire monies associated with ownership over the life of the vehicle ownership. It is normally never even considered when choosing a model and that can lead to thousands of wasted dollars.
What is cost of ownership and how is it determined
Here is a typical cost on a 2014 Honda Civic Sedan Ex Automatic
Cost per year: 1 st 2 nd 3 rd 4 th 5 thTotal
Depreciation $3,401 $1,751 $1,541 $1,365 $1,226 $9,284
Taxes & Fees $1,597 $340 $303 $266 $231 $2,737
Financing $744 $591 $433 $267 $96 $2,131
Fuel $1,597 $1,645 $1,694 $1,745 $1,797 $8,478
Insurance $2,904 $3,006 $3,111 $3,220 $3,332 $15,573
Maintenance $172 $684 $373 $1,261 $1,220 $3,710
Repairs $0 $0 $107 $259 $378 $744
Certain things to take into consideration in the above example:
- an estimate of insurance that is based on the median premium in Nevada for single over 25
- uses a national gas price figured at 50/50 highway and local driving at 15,000 miles per year.
- Taxes and fees assumes a 8% tax rate and DMV fees for registration in Nevada
- financing is with 10% down using a national finance rate of a person with above average credit at a term of 60 months
Figures don’t lie
- So, what does this all mean. Well the price of this civic is $22,000 and the cost to drive it over 5 years is $33,373 for a total of $55,373 plus the $2,000 down payment for a whopping total of $57,373.
- Now the vehicle has depreciated $9,284 so the car has a value of $22,000 minus $9,284 totals $12,716, which is a median price you should realize if you sell it based on normal wear and tear and good condition with no more than 75,000 miles on it.
- Subtracting the S12,716 from the total cost of 5 year ownership of $57,373 leaves us a net cost of $44,657 divided by 60 months of usage, that civic cost you $744.28 per month or $24.08 per day. Lot of money to drive something getting you from A to B.
Now we will all have different numbers plus or minus a few bucks based on our driving habits, fuel expenses, finance rates, and insurance costs. But you starting to get the picture. Choosing the wrong car can cost you a fortune. Next article I will show you the wrong car to purchase even though the price looks attractive.
Subscribe to Tom Reddy articles – -make sure you click the subscribe button in the yellow box, you can unsubscribe at any time through any sent email and your email address will not be shared with anyone.
More content from this contributor:
The Homeless and What You Can Do
Have Aliens Already Visited Earth?
NetFlix Vs. Amazon Prime, Who is Winning the Streaming War?