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

Kirstie_HKirstie_H Administrator Posts: 11,145
Which costs more, the $12,000 car or the $15,000 car? Sounds simple, but as we all know, the purchase price isn't all that's involved in the true cost of a vehicle. Check out the article and new tool at Edmunds.com:


True Cost to Own (TCO): Revealing the Hidden Costs of Car Ownership


http://www.edmunds.com/advice/specialreports/articles/59897/article.html


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  • Mr_ShiftrightMr_Shiftright Member Posts: 64,481
    Hi Everyone,


    Edmunds has just launcheda powerful new tool to help people make a wise choice when buying a car.


    This tool, called "True Cost to Own (TCO) is available from the Home Page or the Vehicle Detail Page, and what it does is compare the actual ownerships costs for various models of car over the course of 5 years. So it takes into account not just the MSRP, but also things like maintenance, depreciation and a number of other cost factors that you might not have thought of.


    How can this tool help you?


    Well, for one thing, it could alert you to the fact that two or more cars with the same MSRP and options can, in fact, have quite different operating costs. You know, 10 cents a mile difference between Car A and Car B during the course of the warranty perior is no small change!


    So if anyone has time to check it out, play around with it and post your reaction/review here, please do so!


    Here's an explanation of how it works!


    http://www.edmunds.com/advice/specialreports/articles/59897/article.html


    thanks


    Host

  • Kirstie_HKirstie_H Administrator Posts: 11,145
    Which costs more, the $12,000 car or the $15,000 car? Sounds simple, but as we all know, the purchase price isn't all that's involved in the true cost of a vehicle. Check out the article and new tool at Edmunds.com:


    True Cost to Own (TCO): Revealing the Hidden Costs of Car Ownership


    http://www.edmunds.com/advice/specialreports/articles/59897/article.html


    kirstie_h

    Roving Host

    Edmunds.com

    MODERATOR /ADMINISTRATOR
    Need help navigating? kirstie_h@edmunds.com - or send a private message by clicking on my name.
    Share your vehicle reviews

  • fwatsonfwatson Member Posts: 639
    I just tried the new TCO. I find one major fault with it. The problem is that it uses MSRP as a basis for it's TCO figure.

    That can not work properly, as MSRP is not the figure paid by most new car buyers. In order to come up with a proper conclusion, it would have to allow the user to enter the ACTUAL price to be paid for the car, whether that is below MSRP, or as is sometimes the case, there is a surcharge placed on the car by the dealer in excess of MSRP.

    Without the ability to reflect the actual purchase price, IMO the TCO figure is useless. :)
  • logic1logic1 Member Posts: 2,433
    Can you, or some other Edmunds person, explain more about the Finance function? I ran the L series and saw that its financing amount, and that of the Grand Am, as well, are higher than a similar Accord.

    I bought my L with 0.9% interest. Both the L and the Grand AM were available with 0% interest. The lowest rate that I saw for the Accord is 2.9%.

    With automakers consistently offering discounted borrowing rates, perhaps TCO would work better if the consumer could set the rate available instead of having to rely on some industry rate average.
  • mrdetailermrdetailer Member Posts: 1,118
    I really liked the concept, but surprizingly I found that some of the total costs of ownership changed. When I compared a Mazda, a Taurus came up and listed its cost at approx 31K. When compared with a Nissan Maxima it's cost was 34K why the difference?

    Also an explaination of how repair and maintenence costs would help.
  • bkurilkobkurilko Member Posts: 4
    fwatson...you are mistaken about using MSRP as a basis for TCO. Edmunds used its TMV data to drive the depreciation and thus TCO values. You are right however that using MSRP would be wrong. Why use a blunt instrument (MSRP) when you have a refined instrument (TMV) at your disposal?

    mrdetailer...TCO changes by trim. I am sure that the Taurus that you compared to the Mazda and the Taurus that you compared to the Nissan Maxima were different trims having different TMV values, possibly different engines, etc. and thus the different values.
  • fwatsonfwatson Member Posts: 639
    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. And they have not taken that possibility into account. In the same way, they have not allowed for those $1000 wax and stripe jobs, and "additional dealer profit" that is added to many new models that are highly popular.

    Until the person using this program is allowed to enter the purchase figures they have gotten from dealers, the TCO can not reflect the actual overall cost of buying and owning the vehicles.

    That $8000 may disappear in depreciation in the first year or so. But at the same time that $8000 in depreciation can not be a part of ownership cost because it has been completely offset by the $8000 reduction in the initial purchase price.

    I assumed they were using MSRP, because both of the cars I checked had purchase prices virtually identical to MSRP.
  • majorthomechomajorthomecho Member Posts: 1,331
    Unlike another site that claims to show the total cost of ownership, Edmunds took into account the longer warranty of Hyundai and Kia. This other site didn't.
  • artwisartwis Member Posts: 66
    Just checked the vehicle I just bought.
    #1 the price was completely wrong. The $2500 rebate was left out so the price was way too high.
    #2 financing cost. Many don't finance so that is not a operating cost. Those that do finance have a wide range of interest costs.
    #3 $494 for regular maintenance for the first year on a new vehicle. Not where I live.
    #4 Insurance cost listed is quite a bit higher than I pay for very high level complete coverage.

    These are just the first things I saw. I won't see anymore cause it's a waste of time.

    Too many guesstimates and not enough fact. Should have spent the time on the pricing site, it needs some work!!!
  • laumannlaumann Member Posts: 10
    Because OEM incentive (including special APR) and rebate programs are limited-time offers and frequently vary regionally, the finance rates employed in the TCO tool reflect state-by-state interest rates currently being charged by banks and direct automotive lenders to silver credit tier borrowers. A more detailed explanation of the financing method and assumptions as well as explanations of the other six cost categories methods and assumptions can be viewed by clicking on any of the words - e.g., depreciation.

    In the future, the TCO tool may be even more dynamic and could include the capability to enter more individual-consumer-specific information.
  • laumannlaumann Member Posts: 10
    Explanations of the methods and assumptions used in each of the cost categories can be viewed by clicking on the word - e.g., Maintenance or Repair.
  • bkurilkobkurilko Member Posts: 4
    fwatson...TMV stands for True Market Value and reflects the market transaction price. The number used in TCO is the TMV for the "typically equipped vehicle." Your car may (and probably does) have more or less options than the typically equipped car. There are no "mop and glow" adds in there. I know Edmunds plans to give users the ability to customize the vehicle configuration to more accurately establish the TCO for the user's SPECIFIC car in a future iteration. This goes for each of the TCO categories such as insurance, etc.

    The key is to view at how cars compare in terms of costs per mile.
  • fwatsonfwatson Member Posts: 639
    Upon further examination, starting with True Market Value, I find even greater discrepencies in the figures.

    Breaking down the TCO shows in my situation, that due to the greatly reduced price I paid, they show more than $800 too much in sales tax and fees. In addition, I have no financing charge (paid cash). That accounts for another $6500 over the 5 years to be subtracted. That is not even remotely offset by any interest or dividends I could get on that money in today's market. My insurance runs about one half of what they are showing, which makes a further $2500 mistake over the 5 years.

    I will drive the car only one third the mileage they use, which will not only lower maintenance costs, but cut my fuel bill accordingly, or about $1500.

    I will accept their depreciation and repair figures. All in all, instead of the close to $40000 they show as my TCO, mine will be about $29000. That is a very large difference, and I have given them the advantage by using conservative figures for the differences.

    As a very rough estimating tool to compare cars, there may be some value to TCO. As an accurate indication of ACTUAL TCO, in my case it is totally useless.
  • rubicon52rubicon52 Member Posts: 191
    This is how the Department of Defense has started to look at the systems it purchases - in terms of total ownership cost. The gov't has realized that acquisition cost (purchase cost) is only a small portion of the total ownership cost that includes maintenance, spares, repairs, etc. Good to see Edmunds applying this concept to car ownership
  • artwisartwis Member Posts: 66
    I agree with your post. By not using actual price the TCO is off immediately. Then throw in the other factors and there is a LARGE difference. If for example I compare two vehicles and one has no rebate and the other has a $3000 rebate which is ignored that is a $600 per year difference between vehicle #1 and vehicle #2 figured over a 5 year period. Add in all the other "assuptions" and you will end up being WAY off the mark as you did. To make the TCO accurate it would have to allow the user to put in their own figures but then you could do all this yourself and get a accurate tco estimate on your own without this site.
    As far as using TMV for the price. I have found that TMV is not even close in many instances. It doesn't consider ad fees or rebates etc.
    TCO site is not a bad idea but it's a long way from being very usefull. Inaccurate info is worse than no info at all!!
  • bkurilkobkurilko Member Posts: 4
    I agree that to make TCO precise and perfectly accurate it would have to allow the user to put in their own figures...and I expect that Edmunds will do just that in a future iteration. I don't think that it was meant to be exact for every individual's circumstance. As a mass market product, I believe that it is probably meant to serve the typical case...average credit, average insurance cost for people who buy that particular car, average fuel cost based on national average miles driven, average amount financed, etc. Clearly, you guys aren't "average" based on what you are describing.

    I see that the key use for this initial version is to allow comparisons between vehicles. In this way they can be used as a tie-breaker when deciding between vehicles for purchase. In addition, I think it is great for the layman to understand what buying a particular car will do to his/her monthly budget.

    By the way, Edmunds explains on its site that the TMV price includes the incentive amount in the number (less consumer rebates).
  • artwisartwis Member Posts: 66
    you mean the manufacturers ad fee it is not included in the TMV but is explained below the TMV section (at least it was in the last version of TMV). There is lots who don't understand this is a legitimate addition to TMV.
    My main point is if 2 vehicles have say a $20,000 TMV but one has a rebate of $2000-$3000 dollars then one costs $20,000 and the other actually costs $17,000-$18,000. If this is not figured into the TCO then it is not a "fair" comparison!
    It seems that a program that would let the user put in their numbers and then calculate the TCO for them would give a fair comparison. Until that happens it has the potential to not give a fair comparison at all!! You have to compare apples to apples and that starts with the true purchase price.
    I hope some find it useful but am afraid some will take the information as gospel when it really is not accurate in a lot of cases.
  • im_brentwoodim_brentwood Member Posts: 4,883
    That a lot of this is based on depreciation.

    I post mainly in Smart Shopper, and I have posted before that people often fail to look closely enough at the resale value of certain cars.

    I.E. A Hyundai Sonata depreciates as much (Or more) in actual dollars over 5 years as a Mercedes CLK!

    Bill
  • fwatsonfwatson Member Posts: 639
    Quote: "I Think That a lot of this is based on depreciation."

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

    I would say it is primarily based on depreciation, with maintenance, repair etc thrown in. Since the cost of service is far lower on most cars than a Merc or BMW, there would be a huge offset for those. And you can almost buy the Hyundai for the cost of required services on a BMW. Not that I would. :)

    My initial point is that the $8000 reduction I got on my new car offsets the entire first years depreciation, which negates that part of the TCO, rendering it useless.
  • marcbmarcb Member Posts: 152
    how about..

    edmunds making a list of the top ten cheapest cars to own much like the top ten fuel mizers we have? that way, lazy cheapo's like me can take a quick peek in my preferred segment and know where to start.
  • Mr_ShiftrightMr_Shiftright Member Posts: 64,481
    Anybody done a trial run? Whaddya' think?
  • Mr_ShiftrightMr_Shiftright Member Posts: 64,481
    But it is still a useful comparison tool, I mean, even before you start your negotiations. In other words, if you found out through TCO that Car A depreciates a lot faster than car B, you also have found out that you can bargain on Car A a lot easier, right?
  • Kirstie_HKirstie_H Administrator Posts: 11,145
    logic1, try the finance, warranty, and insurance forum.

    Great suggestion, marcb. Sounds like a lot of data analysis, but we'll pass on the suggestion.

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  • logic1logic1 Member Posts: 2,433
    I did. I like it except for the finance portion.

    With the major auto manufacturers all offering discounted finance rates, some as low as 0%, having a static finance function is not helpful for qualified would be buyers.

    Apparently there is some thought to installing an adjustable finance function as the software improves.

    Otherwise it is a good tool. It helps would be buyers think clearly about all the expenses that having a car brings.
  • tiredofmanualtiredofmanual Member Posts: 338
    I looked at the Audi A4 1.8T Quattro manual. It says the purchase price is about $30000 (sounds about right) and the TCO is about $36000. The resale is listed at about $12500. How do these numbers fit together? Financing this car for 5 years will cost more than $6000. So is this saying that if you sell the car for $12500 at the end of 5 years, your total cost of ownership is $36000? Meaning that you spent $48500 for an asset that is worth $12500 at the end? This makes sense, but I must have missed the section where it explained this.
  • alfoxalfox Member Posts: 708
    Each year the Gov (I think) publishes the average price of cars purchased in the U.S. How about calculating the national average TCO? When a user goes to Edmunds "New Cars" and selects a type of car, and gets the screen with a list of all of the vehicles of that type, you could show a TCO index for each car that indicates the cost of ownership of that car against the national average?

    Or some other meaningful form of TCO indexing...
  • alfoxalfox Member Posts: 708
    TCO is based on the cost of 7 variables, based on your zip code: Depreciation, Finance costs, Insurance, Taxes and Fees, Fuel, Maintenance and Repairs. Those costs are calculated for each of 5 years, and added together. The numbers are shown in a table on the TCO page for each car. Links next to each item gives a (very) short explanation of how they arrive at the costs.

    Actually this is kind of slick - I like it. Of course, there is no way for me to check the numbers, so I just have to assume that even if they are off the wall, they are equally as off the wall for every make, and therefore comparable.
  • fwatsonfwatson Member Posts: 639
    I believe if a person fits all the catagories, ie finances the car, does not bargain the car down etc, they might be able to come up with some basis for comparison. But in my case, there are so many errors in the assumptions made, as to render the results useless.

    As to giving a person an idea of which car you might be able to bargain down, you may have a point. But that did not appear to me to be the intention of the program. I guess time will tell if it is useful to some people as a rough starting point.
  • tiredofmanualtiredofmanual Member Posts: 338
    I caught that and it seems reasonable, but the number that Edmunds throws out is throwing me off. It is claiming that the "true cost" of owning an A4 is $36000, yet when you drive away from the dealer you've already dropped $30000. $6000 wont pay for 5 years of gas, insurance, maintenance, repairs, etc. This is what I'm trying to figure out. My assumption is that if you sell the car after 5 years for the price listed then Edmunds is saying that the net cost to you was $36000. I just want some confirmation.
  • alfoxalfox Member Posts: 708
    "My assumption is that if you sell the car after 5 years for the price listed then Edmunds is saying that the net cost to you was $36000."

    That's the way it reads to me, including Depreciation, Finance costs, Insurance, Taxes and Fees, Fuel, Maintenance and Repairs for all 5 years.
  • majorthomechomajorthomecho Member 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 Member Posts: 25,652
    ...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 Member 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.
  • rshablotnicksrshablotnicks Member Posts: 7
    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 Member 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 Member Posts: 64,481
    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.
  • Mr_ShiftrightMr_Shiftright Member Posts: 64,481
    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.
  • sphinx99sphinx99 Member 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.
  • rshablotnicksrshablotnicks Member Posts: 7
    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 Member 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 Member 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 Member 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 Member Posts: 9
    5 year cost came in just about at the purchase price. I thought that was interesting.
  • bkurilkobkurilko Member 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 Member 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 Member 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.
  • rshablotnicksrshablotnicks Member Posts: 7
    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 Member 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 Member Posts: 9
    that would be 20g total
  • tntitantntitan Member 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.
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