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

13

Comments

  • jasmith52jasmith52 Member Posts: 462
    Diesel's get about 30 percent better milage than an equivalent gas engine.

    So if gas sells for $2.40 you could theoretically pay up to $3.12 a gallon for diesel and still break even. That's 72 cents more for the math challenged.

    However, diesels sell for more money than a gasoline engine. I'll ballpark the street price diesel premium at $4000.

    So using those numbers and the previous posters prices of $2.41 gas and $2.79 diesel and 50k miles per year. Also assume a compact car like a VW Jetta TDI versus a regular Jetta.

    50k miles @ 45 mpg (diesel) ==> $3100 per year in diesel
    50k miles @ 35 mpg (gas engine) ==> $3443 per year gas

    so you save about $343 a year driving the diesel however you paid a $4k premium for the diesel.

    So it would take you 11.6 years to break even on your diesel purchase. If you include interest carrying costs of the extra $4k for the diesel engine then if may take 20 years to break even.

    If you don't like my assumptions on mileage/diesel engine/fuel costs feel free to use your own and re-run them.

    The effect though will be that it's really hard to make a case for a diesel car based on saving dollars.

    For what it's worth Hybrid cars have similar economics as diesels in that the economics just don't make sense (or should I say cents).
  • zodiac2004zodiac2004 Member Posts: 458
    Ho Hum.. It's late, so I'll just point out the holes in your reasoning.

    45 mpg easy in a TDI
    35 mpg darn near impossible in the gas version.

    On a yearly average, diesel costs a little less than regular unleaded, this past year notwithstanding.

    The premium isn't 4000, for the Jettas anyway.

    Bottom line - if you drive 50k a year, a TDI is one of the best cars you can buy - and the gas Jetta one of the worst.
  • audia8qaudia8q Member Posts: 3,138
    A better example would be using 12K-15K miles per year which covers the huge majority of buyers. Like jasmith has mentioned, many folks won't save any money at all and in many cases it will end up costing more.....now if your reasoning is to be 'green' at any cost then the debate is very different.

    According to the vw website the jetta tdi auto gets...35/42mpg with a blazing 100hp. I wonder What a gasoline engine with 100hp would get for MPG??
  • zodiac2004zodiac2004 Member Posts: 458
    According to the vw website the jetta tdi auto gets...35/42mpg with a blazing 100hp. I wonder What a gasoline engine with 100hp would get for MPG??

    You forgot >175 lbs-ft of torque (at ~1800 rpm, no less).

    You put in a 100 HP engine without that kind of torque in a 3200 lb car, it wouldn't even make it out of the dealer's parking lot.
  • valleyvalley Member Posts: 12
    I'm new here and loved the concept of "cost per mile". But I feel that the current configuration of the TCO tool is more valuable as a reference tool than as a purchase aid. And I'm sure many who visit Edmund.com would die to have more purchase aids as the site has already provided.

    A main function of purchase tool is to compare different vehicles. Here, the TOC tool is extremely easy to compare among vehicles in the same category. It seems that difference in depreciation cost (market stat) is the most significant, followed by that in fuel cost (EPA rating). Reliability stat is reflected in repair costs. The rest are of much lesser significance.

    Now, my questions are:

    1. Why 15K miles per year when many insurance co's take an average of 8K miles, and I've read American average about 10K miles? This would significantly affect differences in fuel costs. It would be better to make a calculator to allow users to enter their estimated annual mileage.

    2. Why not make a calculator to allow users to enter their perspective "EPP" - estimated purchase price? Unlike the TMV calculated by Edmund.com, which is a national or state-wide average over a fairly long period of time, EPP would reflect opportunity costs associated with the user's local market and timing.

    The two calculator suggested here really won't cost much, and they won't skew any other factors that make TCO tool truly valuable. (The annual mileage input can further affect repair cost; and maintenance to a lesser extent.)

    Let me explain the second calculator (input box, really) further. The concept of opportunity cost is like the following. In the category of vehicle I'm considering buying, one manufacturer is offering deep discount on a certain model (for whatever reason) in my region yet others in my region stick to their MSRP - or a less competitive discount. The TMV cannot possibly reflect such local and temporal market condition. In other words, my decision window is significantly shorter than TMV's stats window. Let's say TCO of a Toyota model beats a comparable Ford model by $3,000 using TMV as base, but Ford is offering $4,000 discount below TMV. Which model carries a lower TCO for me, who need to make a decision today, in this town, not over a period of six months across the state?

    Another possible calculator (input box): financing cost. Nowadays, different manufacturers can roll out different financing incentives for a certain period of time. And this difference is not taken into account in TCO tool. So the buyer would have to figure out if a 0% financing incentive is worth $0.05 per mile fuel cost over 5 years. Such a calculation would be fairly straight forward if user data are allowed in TCO tool.

    And what if I usually keep a vehicle for 3 years rather than 5 years?

    The point is, temporal and local market fluctuations do not favour averaging methods used in TMV and TCO when used as a purchase tool. Additionally, certain personal usage patterns (annual mileage, total ownership period) can also affect TCO comparison.

    My 3 cents.
  • iamacatiamacat Member Posts: 13
    :confuse: I found what I think is a big discrepancy in the TCO on the 2007 Honda Fit and Sport Fit. Edmunds TCO shows $111 difference in insurance costs between the two trim levels in the first year of ownership for my zip code. In fact, our insurance company charges $650 more a year for the Sport Fit than they do for the regular trim. That's a mighty big difference IMHO. Makes me wonder about the other numbers...
  • kyfdxkyfdx Moderator Posts: 234,734
    It makes me wonder more about your insurance company...

    $650 more to cover alloy wheels and some body trim? It is the same exact car as far as engine/transmission... Those are the variables that insurance companies usually worry about.

    regards,
    kyfdx
    Not the host here

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  • iamacatiamacat Member Posts: 13
    I know, I was surprised also! The better tires on the Sport model would make it safer as well. Apparently people who drive cars with "sport" in the name drive, well, sportily and this makes for unhappy insurance adjusters... ;)
  • mikefm58mikefm58 Member Posts: 2,882
    Good point. I was also amazed at my ins. co. when they gave me quotes for the exact same car, only difference, one was a 4 dr sedan and the other was a 2 dr coupe. The coupe was about $220 more a year.
  • roundtriproundtrip Member Posts: 105
    One more reason for me to be glad that I changed my mind from the coupe to the sedan. I only had to pay $46 more for my '06 Civic LX MT full coverage insurance (changed over from a 2001 Chevy Lumina.) Of course, I've never had to collect on anything yet. If that ever happens, I'm sure it will skyrocket.
  • punkr77punkr77 Member Posts: 183
    Since my wife and I have been looking at perhaps getting a Fit anyway, I got quotes for the Fit and Fit Sport from my current insurance company. The difference? $12 per year. I'd have the insurer run those quotes again.

    What surprised me was how small the difference was in premiums between the 3 cars we're looking at: Fit Sport, Civic Si, or Element SC. The Si was the most expensive (which I expected), but only about $30/year over the Element and $80/year over the fit.
  • jfknottjfknott Member Posts: 13
    Another good resource that has been around for years is Intellichoice's Complete Car Cost Guide. The book takes into account the most common expenses incurred when purchasing and maintianing a vehicle. Additionally it breaks the expense of ownership down to the cents per mile driven for each vehicle.
    Is it the end all to researching which vehcile is the best value? No. However it is an excellent resource when combined with other material.

    JFKnott
    Author of: From Zero to Hero, How to Master the Art of Selling Cars
  • tidestertidester Member Posts: 10,059
    Hey, Jeff, congrats on the new book! It looks like a good one. We do ask that you not make a habit including the link in your "by line," however, since it would be regarded as solicitation.

    I invite you to visit our Stories from the Sales Frontlines discussion which you should find interesting and I'm sure you would have some tales to share that other members would love to read!

    tidester, host
    SUVs and Smart Shopper
  • jfknottjfknott Member Posts: 13
    Sorry about that I am just in the habit of using it as a signature for all of my emails and posts. Is it Ok to use if it doesn't link?
  • tidestertidester Member Posts: 10,059
    Is it Ok to use if it doesn't link?

    We prefer that you don't. Other members will still see it as soliciting and it will get in the way of meaningful dialog.

    tidester, host
    SUVs and Smart Shopper
  • fw360fw360 Member Posts: 1
    Hi,

    I think the "cost of ownership" starts with the initial price of the car. I am ready to buy a new car and I am a bit confused by some of the charges that is in the pricing that a sales has sent me.

    It shows the normal price items: vehicle base model, options, destination charge. But then it has some strange items: TDA, Dealer Holdback, Wholesale Financial Reserve.

    Can you or someone educate me on what are they?

    Thanks.
  • tidestertidester Member Posts: 10,059
    Here's a start:

    TDA is the Toyota Dealer Advertising fee which the dealer has to pay to a dealer advertising group.

    Read all about Dealer holdback here: here.

    Wholesale financial reserve used to be called the "floorplan fee" which is a fee the dealer pays to the manufacturer supposedly to cover the cost of keeping a car in the showroom but for which the dealer gets reimbursed when the car is sold.

    tidester, host
    SUVs and Smart Shopper
  • mikefm58mikefm58 Member Posts: 2,882
    Dealer holdback: Additional revenue paid to the dealer from the manufacturer if certain sales incentives are met. So why is the dealer adding this item as a cost to you? I don't have a clue.

    My advice, run, not walk, away from this dealer.
  • tidestertidester Member Posts: 10,059
    if certain sales incentives are met.

    I don't think holdback has anything to do with incentives. It helps the dealer with cash flow, increasing profit and minimizing commissions to salespeople - see the link I provided in my previous message.

    tidester, host
    SUVs and Smart Shopper
  • british_roverbritish_rover Member Posts: 8,502
    Sometimes holdback is tied into meeting certain objectives or CSI scores. It all depends on the brand.
  • tidestertidester Member Posts: 10,059
    Thanks, BR, but do you mean that without meeting those objectives or CSI scores there is no holdback?

    tidester, host
    SUVs and Smart Shopper
  • british_roverbritish_rover Member Posts: 8,502
    Depends on the Brand it would more likely be reduced not eliminated. Most of the euro brands that don't have holdback in the same way that the domestics and Japaneses brands do but the do have incentive money that is directly tied to CSI, volume and various audits.

    Perform poorly on any one and the financial consequences can be dire.
  • isellhondasisellhondas Member Posts: 20,342
    You are so wrong and I am so tired of trying to explain what holdback is and how it works.

    It is NOT bottom line profit!

    People who are obsessed with holdback should also think about the trememdous OVERHEAD that dealers pay every month just to keep the doors open!
  • mikefm58mikefm58 Member Posts: 2,882
    No need to scold me, I "think" you replied to the wrong msg. Where in my post did I say anything about it being bottom line profit?
  • isellhondasisellhondas Member Posts: 20,342
    That wasn't my intension. I guess I get sick of "some" people acting like holdback somehow belongs to them.
  • mikefm58mikefm58 Member Posts: 2,882
    Yeah I agree, I did some work here in Florida when the hurricanes were bad in 2004 running a tree service business. Some people think charging $50 an hour for labor when a business has 2-3 workers at a time on the job is outrageous.
  • dave8697dave8697 Member Posts: 1,498
    I was checking the cost to buy a G5. A Pro-Honda person wrote that TCO is high for the G5 in her quest to uplift the Civic as an alternative. Curious, I tallied the depreciation, the maintenance, and the repair costs from TCO for 5 years. For the G5, I plotted the depreciation from the TMV price. Then I subrtacted the maintenance and repair from the depreciation curve. The result for the G5? The net value of the car was ZERO in less than 5.5 years. This takes away any shred of truth for me for that part of the TCO data. I wonder if you would lose a Honda Civic in 5.5 years also, or is this opinion (not data) just strongly biased against American engineers and American led assemblers output?

    How can the G5 have almost $4000 of repairs and maintenance in just the 4th and 5th years of ownership while still under the 5 year, 100000 mile powertrain warranty and the lifetime or 100000 mile rust thru warranty, and just coming off the (dlr makes everything perfect at the end of the)3 yr bumper to bumper warranty?

    So someone paying the sales tax down on a loaded G5 ending up with a 5 year payment of $383 a month must plan on $145 a month additional for repairs and maintenance all thru yrs 4 and 5? Then what? The powertrain warranty ends and the thing starts to really fall apart?

    I budget $150-200 a year in maint and repairs for each of my '96, '98, '98, '99 GM and Ford cars and much less for my '01 Chev. That includes tires and oil. I always spend less.
  • mikefm58mikefm58 Member Posts: 2,882
    How can the G5 have almost $4000 of repairs and maintenance in just the 4th and 5th years of ownership while still under the 5 year, 100000 mile powertrain warranty and the lifetime or 100000 mile rust thru warranty, and just coming off the (dlr makes everything perfect at the end of the)3 yr bumper to bumper warranty?

    I would really question that item. But I could see tires, brakes, a battery, and maybe one unexpected repair running a grand or more, but that's about it.
  • british_roverbritish_rover Member Posts: 8,502
    Well the 5 year 100,000 mile warranty is a recent addition maybe the formula has not been modified to account for that yet.
  • dave8697dave8697 Member Posts: 1,498
    why not? 2007 is the first year of this car and the 100k warranty started with the 2007 models across the entire GM line, starting a full year ago.

    Pontiac hasn't run the first TV commercial for the G5 yet and it already has it's 5th year repair bill average calculated.
  • british_roverbritish_rover Member Posts: 8,502
    Well the G5 is just the Cobalt with a different badge and the Cobalt, at least drivetrain wise, isn't any different from the last year caviler. As far as I remember from working on cobalts that even though the platform is new the engines from the Caviler were carry over.
  • asafonovasafonov Member Posts: 401
    I budget $150-200 a year in maint and repairs for each of my '96, '98, '98, '99 GM and Ford cars and much less for my '01 Chev. That includes tires and oil. I always spend less.

    You may be right in your critique of the TCO on the G5, but if you spent less than $150-200 a year on cars that are from 5 to 12 years old, you have been very lucky. $150 covers what, 4 oil changes and a couple of rotations, and nothing else (trans drain, radiator flush, new wipers, new tires, new battery) - and nothing that ever breaks.
  • dave8697dave8697 Member Posts: 1,498
    G5 Engines are not carryover from Cavalier. The drivetrain is not the same as the last year Cavalier. The car weighs 360 lbs more and has 8 more HP from the base engine. The displacement is still 2.2 L but the engine was redesigned. The 173 HP supercharged optional engine was not available on the 2005 Cavalier either.
    Still, with no customers having had to repair a Cobalt yet, the G5 repair is based on non existing data. All cobalts are still under the 3 year bumper to bumper warranty.
  • dave8697dave8697 Member Posts: 1,498
    Spreading 50k mi / yr across 6 vehicles, some get driven 22k and some 4k, with the avg. of 5 lesser driven ones being about 6k/yr. The 22k/yr car is running a tiny bit over $222 a year due to 60 series tires it needs. Some of the others have needed nothing but oil changes in 2 years. Tire rotations are free and Oil changes are done by me. My original, 20 yr old trans fluid in my '87 Astro is still doing fine so why mess with it? I wouldn't expect myself to be taking a 40k mile, 3-4 yr old G5 to the Dealer and say "Here's $1375, give this thing a checkup even though it runs perfect" And then say "Here's another $900, fix something covered under warranty but charge me anyway". That is what Edmunds TCO shows for G5.
  • asafonovasafonov Member Posts: 401
    As I wrote, I have no issue with your analysis of the (faulty) TCO estimate on the G5. That said, your vehicular situation (several older vehicles with mileage spread between them, DIY oil changes) is not very common.

    My original, 20 yr old trans fluid in my '87 Astro is still doing fine so why mess with it?

    Good point. Transmission oil does not degrade as the coolant does, but I still do drains - not power flushes! - to renew it as per manufacturer manual.
  • dave8697dave8697 Member Posts: 1,498
    I compared the Edmunds TCO data for both cars.
    Fallacy no 1: The Honda is $2200 more to buy and is worth $2500 more after 5 years yet costs $348 less over the 5 years to insure. How could the insurance companies not charge as much per insured dollar of car value, making the Honda higher cost to insure?
    Fallacy no 2: dividing fuel cost by today's local $2.93 price and dividing 75k mi by the gallons, the avg TCO assumed mileage is 33 mpg for an automatic Civic Coupe and 28 for an automatic G5 Coupe. This 5 mpg difference accounts for 60% of the 5 year TCO difference advantage of the Honda. I currently get 28 mpg average in my '96 Riviera that outweighs G5 by 600 lbs, has 161k miles on it and 225-16-60 tires and a 20 gallon tank. G5 can't beat the Riv with a 4 cyl, narrow tires, and a 13 gal tank? Yet Honda can use a 220 lb lower weight and 400 cc smaller engine advantage over G5 to get 5 mpg more average?
    Fallacy no 3: A 3 year old Civic Coupe with 15k mi left on the powertrain warranty and nothing left on the B to B warranty is resellable for $10,822 while a ONE year old G5 with 85k left on the powertrain warranty and only 15k total mi on it is only resellable for $85 more than the 3 year old Civic? What do you get, a k mi of warranty for each dollar more with the G5? So 'I can have one sixth of the warranty for an $85 savings buying the 3 year old Civic' has people jumping? This fallacy accounts for over 50% of the TCO advantage of the Civic.
    Fallacy no 4: In year 5, when only the G5 is still under warranty, the G5 maint and repair expenses are $29 per month more than those of the Civic, which is out of warranty and needs a new rubber timing belt (and water pump while your in there), typically to the tune of $7-800?

    Summary: Unlike Civic, G5 has a usable back seat and so much more equipment for the price. $15920 will get you ABS, Traction Control, auto trans, 148 HP, 152 ft-lbs T, power surfoof, 7 spkr Pioneer cd, power mirrors, power locks, remote keyless, power windows, DIC with ext. temp, A/C, radio on steer wheel controls, 16" rims, cruise control, tilt, cargo net, and a few more things. Most of this list is not found on a $15920 Civic. The 2991 curb weight is closer to the '04 Accord and not the '04 Sunfire, so don't pass it off as a Sunfire rebadge with all the early '90's baggage that implies for reliability.
  • british_roverbritish_rover Member Posts: 8,502
    The Civic is a a very desirable used car with a proven track record of reliability and performance.

    The G5 has no track record as it is a "New" Model for Pontiac. Pontiac also has all of the typical GM baggage to overcome. Honda does not have any of those problems.

    I liked my old Pontiac and it was a good car but there is a huge perception problem that all the GM brands have to over come. That perception problem was completely justified for all the junk cars they made over the years. They are better now but I don't think they are necessarily equal to Honda in every way.

    Also as for your first fallacy insurance companies use a lot more then dollar value to figure out their rates. The programs they use to figure out insurance rates take in hundreds of different variables.
  • bobstbobst Member Posts: 1,776
    Those are good points, Rover.

    In the 1980's, Honda was producing very good cars but people bought GM cars because they were loyal to that manufacturer.

    Now GM and Ford may be making great cars, but many of us have developed loyalty to the Japanese cars and that is what we intend to keep buying. The American manufacturers have lost a whole generation of car buyers.
  • blueiedgodblueiedgod Member Posts: 2,798
    Fallacy no 4: In year 5, when only the G5 is still under warranty, the G5 maint and repair expenses are $29 per month more than those of the Civic, which is out of warranty and needs a new rubber timing belt (and water pump while your in there), typically to the tune of $7-800?

    So would Fallacy over original Fallacy 4 be Fallacy 4² ?

    Civic has not had the timing belt since the 2002 Civic Si. It has a timing chain.
  • msacksmsacks Member Posts: 5
    In response to your message, if that is the case, the buyer can add or subtract the actual figure paid by most new car buyers from the TCO calculated price.
  • wisemoneywisemoney Member Posts: 42
    The best car to buy in order to keep TCO down is a Honda Fit.
  • msacksmsacks Member Posts: 5
    I think that these $299 /mo lease ads you see are a scam.
    It can't cost less than $600/mo realistically for an A4.
  • msacksmsacks Member Posts: 5
    I agree with you here. I was considering purchasing this care just so I didn't have to carry a car-note. But there is something to be said for a little bit of luxury.

    The fit is the modern Honda CRX. There is something to be said for the pleasure of driving.
  • kyfdxkyfdx Moderator Posts: 234,734
    Most of the $299/mo. advertised deals require a substantial upfront payment... amortized over the length of the lease, most of those deals average out to $450/mo.+ tax.. for a relatively low mileage allowance..

    So, maybe not $600/mo., but much closer to $500, in reality, than $299

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  • speculative1speculative1 Member Posts: 3
    TCO needs to also take things into account like what tires come on the vehicle. If you live in the snowbelt for example and you buy a new Civic Si, you'll need to purchase a good set of snow tires for $400-$500. On my last car, it cost me $100 per year to swap out all seasons vs. snows twice a year. So, over the course of 5 years that is ~$1,000 in additional costs.

    Also, you could factor in things like gas tank size since a small gas tank makes you fill up more frequently. Might seem nit-picky but we just took a trip to Reno where gas prices varied by nearly one dollar in a span of 100 miles. We saved $15-$20 one one tank because we were able to choose where we filled up since we had a large tank.

    Overall I do think that TCO is very useful even if it just points out some hidden costs that one might not think about everyday. For example, my Subaru required nearly $1,500 worth of scheduled tune-ups before 100k, while my new Toyota requires $0 worth of scheduled tune-ups before 100k (tune-ups, not oil changes). That is quite a difference, and now I will always take these factors into account when purchasing.
  • geoffm3geoffm3 Member Posts: 1
    On Edmunds' TCO page, it lists the Pontiac Vibe in the over $40k wagon segment. Now, I know GM sometimes has a reputation for lacking quality, but I think this is a mistake. How can a sub $20k car fit in there? :)
  • Kirstie_HKirstie_H Administrator Posts: 11,142
    Hm... that does seem off. You can bring it to the attention of the TCO team by using the "help" link at the top of this page (itty bitty, on the right) since they don't read these discussions.

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  • VicVic2008VicVic2008 Member Posts: 1
    hi, all,

    i live in colorado and bought a 2007 used car from a small dealership six months ago. the vehicle was sold to me 'as it is'.

    a few days ago i ran into an accident and have had the car worked in body shop. the shop told me that the car was in heavy accident (tell from the condition of interior parts) before i bought it, which i was not informed of by the dealer. I thought i could not argue about it cuz i bought 'as it is'. then i was told that some of the parts were not fixed properly after last accident and might impose some safety issue; and the dealership was not supposed to sell this vehicle to me, or at least should have informed me of that condition.

    if the message i received is correct, i might considering to get back to the dealer.

    i wonder if anyone has experience of such issue...shed some light on it?
    i m totally dummy with the legal system..

    appreciate in advance.
  • dtownfbdtownfb Member Posts: 2,918
    If you bought it "as is", not sure if you have a case against the dealer. I guess you can try to contact the dealer but not unless he deliberately misled you or lied to you about the condition of the car, I don't see you getting very far. Also remember that the dealer may not have been aware of the prior accident.

    Before you contact the dealer, you may want to pull a Carfax report to see if the accident shows up.

    Good luck.
  • oregonboyoregonboy Member Posts: 1,650
    I seem to recall something about implied contracts and "fitness for intended purpose". I would think that if the vehicle was unsafe to drive, the buyer would have legal recourse unless it was sold "as is for parts".

    You might try to work something out with the seller. If they give no satisfaction, small claims court or the District Attorney's Office would seem a likely next step.

    Remember, this legal advice is worth exactly what you paid for it. ;)
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