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True Cost to Own (TCO) - Hidden Costs of Car Ownership

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Comments

  • majorthomechomajorthomecho Posts: 1,331
    Is there any way to select the cars you compare or are you limited to seeing the cars that Edmunds think are in the same class. I was interested in seeing how the Leganza in CDX trim compares to an Accord and a Camry, but Edmunds seems to think people will want to compare the Leganza with a Civic.
  • andre1969andre1969 Posts: 23,040
    ...if they could let you enter your own variables, such as miles per year, insurance, interest rate, etc, to get a truer feel of what the cost would be for yourself.
  • pikapp22pikapp22 Posts: 3
    How long until we can see a ranking as a percentage of initial price realitive to TCO? I'd be interested in seeing which vehicles are the best value over 5 years.
  • There is so much disinformation on these boards that it drives me crazy. First, dealer ad fees are NOT a legitimate add to TMV as artwis noted in message #11 above. I called Edmunds and talked to them and verified that TMV includes those (already accounted for). TMV is the average market clearing price...period.

    Secondly, there is absolutely no way that fwatson got an $8,000 reduction from TMV when he bought the vehicle. Completely impossible based on known dealer margins. The average manufacturer has between a 10% and 13% margin between invoice and MSRP. TMV usually sits somewhere in the middle. $8,000 under market price is impossible unless the dealer cut the gross on the new car and completely stole the trade. This simply amounts to an accounting adjustment on the dealer's books. In essence, you only think you bought the car for $8,000 under TMV.

    TCO is based on TMV. Your TCO thinking is completely off base...I don't know where to begin....so I wont. I like TCO.
  • fwatsonfwatson Posts: 639
    Quote rshablotnicks: "Secondly, there is absolutely no way that fwatson got an $8,000 reduction from TMV when he bought the vehicle."

    -----------------------------------------

    Now you are the one driving people crazy. Try reading the posts and comprehending them before flying off the handle.

    -------------------------------------------

    Quote fwatson: "I will have to check to see what you mean by TMV. But my point is that I paid $8000 less than THE PURCHASE FIGURE they give for the car I just bought."

    ----------------------------------------

    I, fwatson, DID NOT SAY that I got $8000 off TMV. I said I got $8000 off the "Purchase Price" given by Edmunds, and that is an absolute fact. The MSRP of my car was in excess of $29600, and the Purchase Price they give is in excess of $29000. I paid $21680 for it, and I paid cash with No trade. So the price I paid is exactly what I said.

    Before calling people liars, get yor own act straight.
  • Mr_ShiftrightMr_Shiftright Sonoma, CaliforniaPosts: 57,853
    I think you'll see continuing refinements of the TCO based upon all of your suggestions.

    There seems to be a call on most of the boards for a feature whereby users can plug in variables rather than use all of Edmunds numbers.

    Technically, I don't know how feasible that is, whether it creates a numbers-crunching demand that is not feasible.

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  • Mr_ShiftrightMr_Shiftright Sonoma, CaliforniaPosts: 57,853
    I don't think he called you a liar or implied that watson. I think (at least this is how I interpreted it) that he was saying that He thought that you might have mistaken the dealer's quote as the TMV, that's all. He said "your thinking is off base". This does not imply intention to deceive IMO.

    Of course, he could have been a bit more diplomatic, I will grant you that.

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  • sphinx99sphinx99 Posts: 776
    Ok, here's what I would love to see. Maybe this is something the TCO can evolve into.

    I'd like to enter my zip code, a few basic insurance-related parameters (age, years driving, # of accidents over the last x years), have a checkbox on whether to include depreciation in the TCO calculations or not, specify a TCO dollar range for ownership over y years, and be given a list of every possible car I can afford - sports cars, sedans, convertibles, trucks, etc. Essentially, I want to know the Opportunity Cost of my purchase and ownership of a certain car. What else could I have gotten with the money that will be spent on the car that I got? I think that would be slick; nobody else has it.
  • Our host is right. I certainly didn't intend to offend, only clarify the facts. fwatson had placed several posts whereby he claimed that TCO was wildly off because it is based on a purchase price substantially above what he paid, in this case $8,000. His 1991 Mazda Millenia sold throughout the USA at around invoice all day long (this was TMV). This was a car long in the tooth and heavily incentivized. It is important to note that TCO benchmarks the depreciation cost at TMV. Therefore, the depreciation numbers in TCO are just fine. Furthermore, the finance charge is an accurate cost even though fwatson paid cash for his vehicle as in his particular case it represents the opportunity cost of using the cash to buy his car (a depreciating asset) when he could have invested the money and gained interest at market rates. I could go on.

    I don't mean to be brash; I only wish to state the facts accurately. I can't help myself, I'm a lawyer.

    One other note, why would someone pay cash for a car, a depreciating asset, in the first place? Makes no sense. There is an old saying that wealthy people understand, "use your cash to buy assets (something that generates cash flow); finance liabilities." The idea is to use the cash flow generated from your assets to make the payments on your liabilities. Just a thought.
  • fwatsonfwatson Posts: 639
    Quote rshablotnicks: "One other note, why would someone pay cash for a car, a depreciating asset, in the first place? Makes no sense. There is an old saying that wealthy people understand, "use your cash to buy assets (something that generates cash flow); finance liabilities." The idea is to use the cash flow generated from your assets to make the payments on your liabilities. Just a thought."

    ------------------------------------------

    Oh yes, I can certainly see how paying 2.9% to 6.9% interest is a much better deal than paying cash when I could invest it in the market, which is where it came from and lose money in today's market, or make a whopping 1.0% on it in in a money market or savings account. You probably think I am also stupid for paying cash for my last two houses. I have not had a mortgage for 22 years and by your theory have lost money. By my figures I have saved a couple of hundred thousand.

    No thanks, I'll do it my way. And one of my rules in never give it to a lawyer. I have saved a fortune with that one. I also managed to retire debt free an 59 using my poor knowledge on money.
  • fwatsonfwatson Posts: 639
    To clarify the point. In order to have taken advantage of 0% financing, I would have had to give up the $4000 factory to dealer incentive. That $4000 gives me an instant 17.4% return on my $23000 cash. It also would have raised the price of the car to OTD of about $27280, due to increased taxes on the additional $4000.

    Is my madness getting any clearer?
  • artwisartwis Posts: 66
    Well what I said was that in the LAST version of Edmunds pricing they DID say that the national ad fee was legitmate and that they couldn't put it in because it varies so much around the country. As far as the TCO or TMV being accurate, I just bought a new truck last week (second 2002 vehicle purchased this year) and the TMV was over $2500 higher than what I paid. That was even higher than the over $2000 that TMV was high on the car I bought. TMV prices don't seem to be very current. I didn't even check TMV on the truck before I bought it (checked afrterwards) but went by Yahoo car site figures as they are much more accurate at this time! This is probably my last post on this subject. I think it (TCO) will just confuse many people and will just go away from non-use on it's own! The figures are VERY misleading!!!!!
  • xkexk8xkexk8 Posts: 9
    5 year cost came in just about at the purchase price. I thought that was interesting.
  • bkurilkobkurilko Posts: 4
    artwis,

    I am an Edmunds employee and currently work on TMV. I check our Town Hall on occasion, noticed your remarks, and found them interesting. We go to great lengths to make TMV as accurate as possible down to getting direct data feeds from thousands of dealers throughout the country (directly from their computer systems so that there is no chance for any funny business). As of this month, our TMV values are more refined down to the state levels (more precise from the 5 national regions we have used to date). I am curious as to what vehicle you got for $2,500 below TMV. Also interested to know if the $2,500 difference can be explained by a cash back offer. We love this kind of feedback to continually make the product better.

    Just a note...we don't include consumer cash back offers as a reduction in the TMV price (unlike factory to dealer incentives) as our research shows that cash back doesn't materially change the purchase price. The consumer generally uses the cash back as a down payment against the purchase price or in fewer cases, puts the cash back in their pocket.

    For our benefit, I would appreciate hearing more about your recent purchase.
  • tntitantntitan Posts: 306
    Sure is a lot of anxiety in all of these posts. I personally found TMV useful in purchasing my last 2 vehicles. I was never naive enough to believe that the TMV shown for my particular model would be 100% accurate but on a comparison basis it gave me just a little bit more info on what to expect from dealers.

    I feel the same way about the TCO. I also pay cash for my vehicles - but it was fairly easy to deduct the financing costs from the ACTUAL costs of the different vehicles I had negotiated pricing on for comparison purposes. It was fairly easy to prorate depreciation costs based upon adjusted data. I do a lot of my own routine maintenance but I still find the info useful in comparing costs. If you drive 30,000 instead of 15,000 miles you double the cost of the gasoline. Come on people - it is not a cookie cutter. Whatever - it can work if you take the time to compare apples and apples.

    Can't resist the paying cash vs. financing comments. WOW. Very few people can afford a home without a mortgage and there are certainly tax advantages to mortgage interest as well, but paying interest on anything else is IMHO an extravagance that rarely benefits anyone. Anyone that says they CAN'T AFFORD a vehicle without paying interest - I say they are only purchasing a vehicle beyond their means. However, many people can afford and choose to finance vehicles. They may be able to afford the interest but it likely is not helping them financially and almost certainly is not helping them to save money or accumulate wealth for retirement or other long range goal.

    As a side note to RSHABLOTNICKS : By definition all assets are depreciable whether they generate cash flow or not.
    Although I also hold little regard for lawyers I realize that just as many feel the same way about by profession - CPA. No offense intended to anyone but this was the most entertaining message board I had read to date.
  • fwatsonfwatson Posts: 639
    Quote: "this was the most entertaining message board I had read to date."

    ==========================================

    It has been quite entertaining.

    And to clarify one point you made, Standard deduction has always been larger than any benefit I could have gotten by deducting mortgage interest. So in my case, mortgage interest would have been money down the toilet.

    While I realize the TCO figures can be modified, and I have done just that to get the information I have posted, I can do that just as easily without even bothering with the TCO app. And that is my point.

    My complaint with TCO is not in whether you pay cash or finance. Those figures would be the same on all cars with the same OTD price. It is that TMV, while it may be a fair average figure is not a good starting point, because virtually nobody pays that price. Almost every individual's purchase price will be different, which throws the TCO off as a comparitive figure. That is of course unless you are one of the few who actually pay TMV.
  • I love a good debate.

    tntitan wrote, "By definition all assets are depreciable whether they generate cash flow or not."

    This is absolutely correct using the "accounting" definition of assets. I had this same discussion with my CPA early on. However, what I am referring to is a mind set. I will argue that the house I live in is a huge liability whereas the 21 rental properties that I own are assets. I separate them in my mind based on their ability to either "eat" my cash or "feed me" cash. When I run my personal balance sheet, I always place cars, boats, RVs, etc. into the liability column. Yes, by accounting standards (and those used by banks to evaluate one's credit worthiness), these are classically considered assets.

    Tell the auto manufacturers that their idle plants are assets and watch them squirm. Someone has to feed them whether they produce anything or not.
  • allaboutmeallaboutme Posts: 1
    is the total cost of ownership covering the cost to purchase.. or is that big number next to truemarket value the additional cost to own entirely?

    tmv 10g to purchase. tco is 20g. does that mean 30g's over those five years or does the 20g cover everything?
  • xkexk8xkexk8 Posts: 9
    that would be 20g total
  • tntitantntitan Posts: 306
    Touche! I see your point regarding rental properties that GENERATE CASH FLOW. Now that is what I am talking about! I have no problem with incurring debt (interest) to generate a positive cash flow but paying interest on a vehicle will almost never generate any positive cash flow. Pay cash for the car and borrow to get a positive cash flow.

    Back to the topic. TCO may be a crude attempt for true ownership comparative costs but it at least is making an attempt to educate the masses as to all of the hidden costs of vehicle ownership that many never consider prior to driving off the lot. I am sure that Edmunds will tweak the process make it better as time passes.
  • llaumannllaumann Posts: 5
    The TCO over a five-year period for an A4 1.8T Quattro manual is estimated to be $35,747 in the 60601 (Chicago) ZIP code area. This amount is the total for depreciation @ $15,207, finance @ $5603, insurance @ $4151, taxes & fees @ $2881, fuel @ $5009, scheduled & unscheduled maintenance @ $2092, and repairs @ $804. The $15,207 for depreciation is the difference between the purchase price (excluding taxes) of $27,723 and the estimated resale value of $12,516 if sold to a private party. So your estimated expense is the $27,723 purchase price minus the $12,516 resale value after five years plus the five-year cost for interest, insurance, taxes & fees, fuel, maintenance and repairs of $20,540.
  • llaumannllaumann Posts: 5
    Thanks for the suggestion. We will look into providing a list of the least costly vehicles to own over five years by vehicle class.
  • llaumannllaumann Posts: 5
    Thanks for your suggestion. We will look into showing a vehicle's five-year TCO against the average TCO of other vehicles in its class.

    The amounts shown are not off-the-wall. Really. They were rigorously developed and tested. E.g., the taxes & fees reflect contact with DMV's in each of the 50 states and the District of Columbia in order to understand and apply each jurisdiction's tax & fee rules relative to each of the nearly 1800 2002 model-year styles included in the TCO tool. Similarly, the maintenance costs reflect the parts & localized labor rate costs for the performance of factory-recommended scheduled maintenance operations at the prescribed mileage or calendar intervals, and the parts & localized labor cost of unscheduled maintenance such as tire, battery, headlamps, brakes, timing belt, etc at the approximate replacement intervals.
  • llaumannllaumann Posts: 5
    The ability for users to enter vehicles of their choice for TCO comparisons is planned. This capability is now available in Edmunds' comparator tool for price, specifications, etc.
  • llaumannllaumann Posts: 5
    The ability to enter very individual-consumer-specific information is planned as a future TCO enhancement. Because of the entirely variable nature of this functionality, a great deal of complex data schema development and expanded server capacity would be required.
  • earlgrey_44earlgrey_44 Posts: 21
    Here's some text about the toyota solara and the chry sebring, when compared in edmund's "comparable model" search: Solara: "expensive" Sebring: "a great value"

    What happens when you run the TCO on these cars? The Solara is a couple of thousand less.

    Maybe Edmund's review writers should do a little homework with this tool...
  • hjr2hjr2 Posts: 105
    as shown, elantra was only about 500 behind focus for resale and $800 behind(a manual ) protege(add automatic, and it'd fetch about $1000 more than Elantra Auto).

    Oh well. Sale price is $12,799(as stated, $14,599 or so?). So sales,etc, could effect the outcome. At least the stories I have read seem true. Elantras are now about Avg resale value.
  • wie_gehtswie_gehts Posts: 30
    Indeed, a very interesting feature and it reveals two things: Often, the cheap cars are more expensive in the long run, because of their depreciation. And second, it shows you HOW MUCH owning a car actually costs. It is amazing how much of their hard earned money is spent just to be seen in that nice car that you spend less than an hour in every day. I know plenty of people who have a great car, but look into their home, and they have not much.
    As example, let's compare a Ford Taurus and a VW Passat, the Taurus costs 20k new, the Passat 25k. Most people will buy the Taurus because its 5 grand less, right? Wrong, after 5 years, the Taurus cost you 37k to own, the Passat only 35k. So you can drive a 5k more expensive car for 2k less ... interesting, isn't it. I am sure many of the cheap cars (Koreans, Americans) that are only bought because they cost a few grand less inititally, are actually more expensive in the long run. And even then, the tool at Edmunds isn't correct with everything, for example, why does it show maintenance costs of almost $800 for the first two years, when the Passat is offered with 2 years free maintenance??? What else am I supposed to pay if I have a new car under warranty and free maintenance. Maybe the air fresheners are so expensive ... hmmmm.
    Another flaw, in my opinion, the taxes are calculated on the total price of the car. However, they should only be calculated on the depreciation because I won't pay taxes on the remainder when I trade the car in. Otherwise, it needs to be spread out on the years AFTER the first 5. Overall, the whole TCO shows too high values, insurance as well as finance costs are on the high end.
  • alfoxalfox Posts: 716
    Thanks for the feedback - great job so far. I think the ability to enter variables will be a great enhancement, since the set scenarios don't look much like my usage.

    Another really interesting view would be a buy/lease comparison where some of the regional subsidized lease options could be included, compared to 3, 4 and 5-year loans. I suspect the cost to own a, say, BMW 325i might be lower over 3 years than a similarly equipped Passat when the lease incentives are included.
  • sphinx99sphinx99 Posts: 776
    I've heard a lot of people here talking about how a more expensive car can be cheaper to own than a less expensive car, but I sense such comments come from people who can own the more expensive cars and therefore will choose them. I know a lot of people who certainly might get a lot more enjoyment out of a 325i than a Ford Taurus, but they're not going to qualify for a loan for the 325i. If they do, it's going to be at an obscene interest rate. And maybe they'll be parking it in a place where it'll draw attention and be damaged? I just moved, but in my old apartment complex a car even slightly nicer than a Ford Taurus was a serious target for having windows shattered or being keyed. This isn't reflected in the TCO either.

    For most people, a more expensive car is part of a more expensive lifestyle, and the decision to get the better car is usually tied to decisions to get better sofas, move to a bigger house in a nicer neighborhood and the like. I don't think the TCO tool could ever take into account these sorts of factors, nevertheless they are an important consideration in the minds of many buyers. Even if the $35k car is cheaper due to less depreciation, not everyone can afford the corresponding move, furniture shopping, and pampering that is part of a lifestyle that the $35k car would fit seamlessly into.
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