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

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  • Kirstie_HKirstie_H Posts: 11,041
    alfox -- coming soon, the world on a plate, with garnish :)

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  • wie_gehtswie_gehts Posts: 30
    You are partially correct but a BMW325 is still a lot more expensive than a Taurus. I think it makes good sense for comparable cars when people cross shop. For example, a Taurus and a Camry. Some people might go for the Taurus because it#s a few grand less, but might pay more in the end. What TCO reveals is that the cost of owning a car is far more than the initial purchase price. On the other hand, the depreciation of a car is already reflected pretty well in leasing. A lot of people do leasing instead of buying, and there indeed it shows that leasing a Kia doesn#t make much sense.
  • alfoxalfox Posts: 716
    I have some suggestions about that garnish...
    ;)
  • Mr_ShiftrightMr_Shiftright Sonoma, CaliforniaPosts: 57,811
    The allure of leasing is that it allows you do own a nicer car than you afford to buy--leasing in a sense permits some people to do what they really should not be doing.

    But sphinx has a point. Many people even buying the Taurus are in hock for it so buying the more expensive car which is really not the more expensive "in the long run" isn't an option for them.

    TCO is a better tool for people shopping two cars of just about equal MSRP, not for encouraging them to buy what they can't afford because 5 years down the road it will be cheaper by $2K.

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  • Karen_SKaren_S Posts: 5,095
    To avoid duplicate discussions and confusion, please continue to post your questions and comments in the N&V discussion.


    New Edmunds.com Tool: TCO


    Thanks!


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  • Karen_SKaren_S Posts: 5,095
    To avoid duplicate discussions and confusion, please continue to post your questions and comments in the N&V discussion.


    New Edmunds.com Tool: TCO


    Thanks!


    KarenS
    Senior Host
    Owners Clubs

    Edmunds Manager UGC Click on my screen name to send a personal message. Need help navigating? Check out Getting Started in Edmunds Forums.
    Need help picking out a make/model, finding inventory, or advice on pricing? Talk to an Edmunds Car Shopping Advisor

  • snaphooksnaphook Posts: 130
    I think you should do away with the financing costs since this value can vary tremendously depending on the buyer and it appears that this is just a function of the purchase price anyway, ie not model specific so not really useful in comparing one car to another.

    However, I like that it shows just how small a percent of the total cost of operating a vehicle is due to fuel costs. And these figures are based upon 15k miles driven anually, which is probably a little higher than average.
  • timadamstimadams Posts: 294
    My first impression was similar to snaphooks. I understand the depreciation, taxes, insurance, fuel, maintenance and repair charges, but I'm not quite sure about finance. Of all the categories, that seems to be the most user-dependent. Some buyers put next to nothing down and can only qualify for high-interest loans, while others pay cash. Paying cash certainly has an opportunity cost, but not near as much as many car loans. And then you add in subsidized loan and lease deals, and it gets real complicated.

    Is finance a constant number based solely on price, or does it vary depending on make and model?
  • habitat1habitat1 Posts: 4,282
    For the fun of it, I thought I'd compare what it's actually cost me to own my 1995 Maxima SE over the past 7 1/2 years & 125k miles vs. what Edmunds predicts for a new Maxima.

    Edmunds predicts:

    $13,428 Depreciation
    $5,269 Financing
    $7,821 Insurance
    $1,871 Taxes and Fees
    $4,604 Fuel
    $1,644 Maintenance
    $558 Repairs

    $35,195 Total
    = $0.46 per mile over 5 years & 75,000 miles

    My Actual:

    $13,700 Depreciation ($20,700 purchase price - $7,000 estimated resale value today)
    $0 Financing (paid cash)
    $5,240 Insurance (multiple car discount)
    $2,050 Taxes & Registration (includes 6% initial sales tax)
    $7,358 Fuel (averaged 23.98 mpg since new)
    $4,688 Maintenance (routine, nothing unusual)
    $1,015 Repairs (including $600+ "Dent Wizard" ding removals)

    $34,051 Total
    = $0.2724 per mile over 125,004 miles, 7 years & 7 months as of 5/1/02

    If I added an "opportunity cost" of 5% per year on the $22k that I paid in cash for the car (i.e. in lieu of financing), that would add $1,100 per year or roughly $8,250 / $0.066 per mile, bringing the total to $0.3384 per mile. But frankly, I was better off putting my cash into the car compared to how poorly my stock portfolio performed in the last few years.

    The big flaw I see with the Edmunds estimate is in the area of maintenance. If they think that 5 years and 75,000 miles is only going to cost $1,644, they are SMOKING DOPE. I religiously took my car to the dealer every 7,500 miles for the first 75,000 miles and every 15,000 miles since. Over 75,000 miles, that would work out to (5) "A" services at about $150 each, (3) "B" Services at about $250 each and (2) "C" services at about $350-400 each. Just routine scheduled service would be $2,000 to $2,500 over 5 years. I changed oil every 3,500 to 4,000 miles, so add another $300 for 10 between service oil changes. I guess Edmunds assumes no new tires until 75,001 miles? Add $400 for a 1995 SE, a lot more for a 2002, from what I hear. I can't imagine the total for maintenance over 75k miles not being at or above $3,000, based upon my $4,688 over 125k miles with NO significant unexpected maintenance and a cheaper car on the tire front.

    Maintenance aside, I was glad to see that I beat the $0.46 per mile Edmund's estimate by a significant margin (and I didn't even skimp on premium gas to do so!).
  • snaphooksnaphook Posts: 130
    Edmunds cost per mile would probably be less over 7 years than over 5 (resulting from high first year costs being averaged out) but I'm sure you would still have beaten it due to your savings on finance. What I'm curious about is why the cost of fuel increases each year. Are they projecting increased gas prices or decreased car efficiency or both. If they are factoring in inflation for gas than that is probably a mistake.
  • snaphooksnaphook Posts: 130
    It appears that Edmunds is factoring in 3% inflation for some of the costs. I'm not sure why you would want to do this. When people want to know how much something will cost they want it referenced to today's dollar. If they projected costs over 20 years you might come up with figures that suggested it was cheaper (per mile driven) to operate a BMW 3'er for 5 years than a Honda Accord for 20. In reality I doubt this is the case.
  • wie_gehtswie_gehts Posts: 30
    Good comparison, perhaps wouldn't be "off" so much if you would add the finance charges, since most people don't buy their cars cash, I am also wondering whether Edmunds takes the trade-in value of a car to determine depreciation. Then, of course, you would have to subtract the tax that you won't pay on the trade-in value. Otherwise, take the private-party value, I am not sure which one you took, because you mentioned "resale".
    Otherwise, buying cash certainly is a smart alternatively, unless there are some subsidized rates available, otherwise, you will have a hard time getting your 7-8% interest back AFTER paying 30-35% taxes on your earned interest.
    When I checked the TCO of a 5-series BMW, Edmunds showed almost $12,000 in finance charges, shocking, and the first thing that I am going to subtract ....
  • xkexk8xkexk8 Posts: 9
    and repair costs. Since you have to have the background behind the numbers, it would be nice to have an option to pull that up. They do seem a bit low. I know my tire cost alone would exceed their estimates on maintenance.
  • odd1odd1 Posts: 227
    until it is a calculator is doesn't really help that much. I'd love it if I could plug in my insurance rate, financing, average miles per year, or rebate at the time. It would also help to be able to drop out the maintaince for those of us that have almost everything but tires and brakes covered in the warantee/extended warantee. I'd like to know how the maintaince fees are arrived at. It would be great to see if an extended warantee at $900 is really just a $200 insurance policy, against a major repair, if the average maintaince cost is $700 in the covered time period.
  • alfoxalfox Posts: 716
    as a comparison between vehicles, even if the bottom line dollars aren't 100% accurate for each individual. It would be fun to be able to plug numbers, though.
  • snaphooksnaphook Posts: 130
    I would like to see a condensed version of this information right on the regular pricing pages. Some examples, a depreciation coeficient, ie. the car will be worth ## percent of its value in 4 years. No need to go into location or actual dollars. The same thing with insurance and maintenance. Come up with a baseline, say for example the Honda Accord. Give this an insurance and maintenance cost of 1 and assign other vehicles a cost relative to this. Again, no need for location or actual dollar amounts. These are 3 values that could easily fit on the pricing page and it is really the only useful information that comes out of the TCO page.

    This is based upon the assumption that while resale value, insurance and maintenance costs might not be the same from one place to another the relative cost between models is probably pretty close to the same regardless of location. Afterall, its not like the consumer is choosing between an Accord in Atlanta and a Camry in Chicago.
  • jwyatt2jwyatt2 Posts: 4
    I just ran the TCO for a Trailblazer LTZ vs. an Envoy SLT and the 5 year TCO for the Trailblazer came out to $2,000 more than the Envoy. Upon closer inspection, Edmunds predicts that the Trailblazer maintenance will be higher than the Envoy each of the 5 years for a total of approx. $2,000 in higher maintenance.

    How can this be since the Trailblazer and Envoy are virtually the same vehicle under the skin-powertrain, etc.??? Any ideas?
  • laumannlaumann Posts: 10
    The Trailblazer and Envoy maintenance costs should be the same. An error occurred in the Envoy (non-scheduled) maintenance cost calculation (and only the Envoy) that resulted in this cost being understated. It has since been corrected.
  • laumannlaumann Posts: 10
    The finance rate varies by state but is not make/model-specific. The interest expense is based on the purchase price including typical equipment, plus the destination charge, and the sales tax and initial fees.
  • dtownfbdtownfb Posts: 2,918
    I like your suggestions esp. since insurance rates and average miles per year vary with each person.

    One question: What warranty do you have that your maintenance is covered? I consider maintenance as oil change, tire rotation, transmission fluid change, coolant change, etc. I know cars such as MB, BMW and Lexus do include maintenance in their basic warranty but the other 90% of the cars on the road don't.
  • laumannlaumann Posts: 10
    Using a Michigan ZIP code (don't know your location but Michigan also has the same sales tax rate), the five-year TCO for a 2002 Maxima SE is:

    Depreciation: $14,652 ($26,596 purchase price - $11,944 resale)
    Financing: $6,068
    Insurance: $6,075
    axes & Fees: $2,246
    Fuel: $4,650
    Maintenance: $3,821
    Repairs: $623
    Total TCO: $38,153
    Cost per mile: $0.51

    Note that the Maintenance cost is significantly higher than the amount shown when TCO was introduced a month ago. The initial lower amount resulted from the application of an incorrect engine size within our database.

    Our assumption is tire replacement in the 5th year. The cost of a set of tires is included in the $1,553 Maintenance cost for that year.
  • gm_litogationgm_litogation Posts: 168
    I think the TCO tool is a good idea, yet it was executed quite poorly by Edmunds. They should've allowed you to enter in your purchase price, yearly mileage, insurance rate, and interest rates into their calculation. Their estimated results are just a basic average of their hypothesis, they really don't give us any true to life results.

    I don't know why they didn't include this, it seems to be fairly simple to do. I've seen the same kind of thing done with mortgage and retirement calculators all over the web.

    Oh well my suggestion is to do your own TCO, by my estimates my TCO for my car is $33,560 over 5 years, far below Edmunds' estimate of $46,033. All I did was put in the corrected finance and insurance information along with the correct amount I paid for the vehicle. I kept their depreciation results, but I had to throw out their repair estimate because my warranty will still be valid after 5 years.

    On their comparison chart my car goes from the most expensive, to the least expensive by a large margin. I'm not even taking into consideration that I was able to take my $5k down payment and put it into a 6.7% interest CD over the next 5 years. That alone will make me an additional $2200 by itself. Also I didn't take into consideration gas mileage which is exceptionally good, and that I only drive 10,000 miles a year. Those things would easily take the TCO down another $3,000.

    Funny how the most expensive in the chart becomes the least expensive when the correct numbers are applied.
  • laumannlaumann Posts: 10
    A 3% per year price increase is reflected in the fuel costs. Future fuel prices are, of course, impossible to accurately forecast. The 3% represents a best guess. Since it applies to all of the vehicles in the TCO tool, however, vehicle-to-vehicle comparisons are valid.
  • laumannlaumann Posts: 10
    Depreciation is the difference between the purchase price (including typical equipment & destination charge) and resale (of a clean vehicle driven 15,000 miles/year) to a private party.
  • snaphooksnaphook Posts: 130
    I agree that for comparison's sake it doesn't really matter what inflation value you use or if you even factor for inflation. The point I was trying to make is that it creates the impression that it is not a good idea to keep your car for an extended period of time. Some people might look at the projected costs each year and conclude that it makes financial sense to get a new car prematurely. For example, the Honda Accord EX V6 has a TCO of 31,800 over 5 years. This averages out to 6,300/year. I suspect that by the 7th year this average will have bottomed out and started to rise. The conclusion could be made that this is the ideal length of time to keep a car from a financial standpoint. That is definitely not the case. So, since as you stated we are using these figures for comparison's sake why not leave inflation out of the equation.
  • scape2scape2 Posts: 4,124
    the TMV price and the TCO resale prices so different? shouldn't they be the same?
    I have a 2001 vehicle that shows Trade in of 19,398, Private party of 20,759 and a dealer retail of 23,448. Why in your TCO does the resale/depreciation show different? by thousands of dollars????
  • laumannlaumann Posts: 10
    With similar equipment & mileage & in clean condition, one-year-old essentially same vehicles should have similar Used TMV and one-year TCO private party prices. Please advise the make/model/style of your 2001MY vehicle, and we will research the prices and post our findings.
  • scape2scape2 Posts: 4,124
    2001 Ford Escape XLT v6 AWD in black. I have stepbars, leather, privacy glass, 6CD Mach stero, console, roof rack, wheels.
    When looking under the projected resale under TCO it does not match the TMV Edmunds posts for this vehicle.
    Another thing Edmunds has posted incorrectly is the ground clearance for the Escape is 7.8" and they list the 235 tire. This is incorrect. Ground clearance is 8.5" with the 235 16" rim/tire and 7.8" with the 225.15" tire.
  • Mr_ShiftrightMr_Shiftright Sonoma, CaliforniaPosts: 57,811

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  • Kirstie_HKirstie_H Posts: 11,041

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