Cost to Own

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Originally Posted By: JHZR2


Seruously? The car dropped 33% from being new to when he picked up the car with seeminly minimal miles. $6k discount for very few miles. That might be a good deal. But then to put on the equivalent of a design lifetime (100-150k design lifetime to failure for any manufacturer, regardless of perceived quality of manufacture), and only get another $6k? No thanks. Ill take the nearly new car for $12k, and get a long while of trouble and worry free driving out of it before I even have to spend a dime on any substantial PM besides oil and fiters.


It's not that I don't agree with you, it does seem dumb to pay half the original value of a car that's half used up, basically paying more for the worse half of the vehicles life... but...

It doesn't matter what your opinion on it is, the market dictates the value of the 06 Corolla, not you. A Corolla that age is worth a lot closer to 6000 dollars than 3000, that's for sure. And the point is pretty clear, the original spreadsheet is worthless since it compares cars TCO and leaves out a value higher than the standard deviation of it's results. Even a basic guess would have made this a lot more realistic.

But then the point seems to be that fuel economy really doesn't matter from a TCO perspective, which I would agree with fully when you compare similar vehicles... especially these days when all cars need to be competitive for marketing purposes.
 
Originally Posted By: bepperb
It doesn't matter what your opinion on it is, the market dictates the value of the 06 Corolla, not you. A Corolla that age is worth a lot closer to 6000 dollars than 3000, that's for sure. And the point is pretty clear, the original spreadsheet is worthless since it compares cars TCO and leaves out a value higher than the standard deviation of it's results. Even a basic guess would have made this a lot more realistic.


Oh I hear ya, but Im one of the consuming public, so my voice that says that's a ripoff and Id never release my cash on such a "deal" is an equally valid point. If I (as a proxy for many people of the mindset) was swooning over a 130k corolla for such money, the price might go up, ditto if others felt my way. Youre right, its the equilibrium for a value proposition amongst the masses...

But the other side of the story is that if it "retails" for $6k, then the typical consumer trading in their car, would likely only get $3-4k, as the dealer is in the job of making profit, and used cars are vastly more profitable than new cars... All built into that $6k price that the masses believe is "fair".

But I agree. Though I typically agree with the OP that resale value may not make much of a difference depending upon how the car's end of life is played out...
 
Here's a good condition 2006 Corolla MT base model with 126k on it for $8998. Which is a special no haggle price from Carmax.

http://www.carmax.com/enus/view-car/default.html?id=9996620&AVi=0&Rp=R&Q=0ee94ef3-03ce-4e6d-890e-49f3503000a4&Ep=search:results:results page&sY=2006-2006&N=4294963153+285+4294963085&Us=5&zip=44039&No=0

Or a 2006 Corrola S auto with 123k miles for $9998:

http://www.carmax.com/enus/view-car/default.html?id=10035549&AVi=1&Rp=R&Q=0ee94ef3-03ce-4e6d-890e-49f3503000a4&Ep=search:results:results page&sY=2006-2006&N=4294963153+285+4294963085&Us=5&zip=44039&No=0
 
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Carmax? LOL. No haggle just means they build in x% profit and take it or leave it.

Those are exceedingly poor values to me, IMO. I could get a new one for just a few thousand more. Even if it is slightly less outfitted, Its far newer and will still give far longer service

Those "low depreciation" values substantiate even more why those cars are poor values used and it is smarter to buy new, IMO.

No thanks.

Still, its the OP's (or spreadsheet user) determination of if depreciation matters... If he's driving until the wheels fall off, it doesnt. At that point 6 years or 160k miles is just arbitrary. If it lasted longer and he re-ran the same numbers for 8 r 10 years, it would still look the same. Only the acquisition cost is amortized over the miles, not the fuel use.
 
Originally Posted By: JHZR2
Carmax? LOL. No haggle just means they build in x% profit and take it or leave it.


Yes, I was trying to be funny when mentioning they're no haggle pricing. Which is usually even above kbb retail pricing. They use the same terminology when low balling a trade-in. They like to give the impression they're no haggle but they will negotiate. I know someone that was offered $9500 on an Accord trade-in. They were able to negotiate it up to $12k. This was an out right sale with no purchase involved. Of course they listed the Accord for $16,999 iirc.
 
Originally Posted By: JHZR2
Originally Posted By: hypervish
Originally Posted By: JHZR2

And no offense, but from my angle, nobody in their right mind would pay $6k for a car with 130k miles on it, when they could buy a nearly new one for $6k more (per your numbers). If one was to trade in the car, I'd bet they would get half of that (not sure where the $6k comes from). Valuations on used cars can be somewhat arbitrary...


I'd buy a 06' Corolla with only 130k for $6k.

Look around Craigslist, 6k is a pretty good price if it's in good condition.

I know at least 20 different people off the top of my head that would buy a car for that price with low miles* such as that.

*- low miles for a Toyota


Well good for you, but we will have to disagree. 130k can be low mileage for ANY car, it doesnt mean that standard wear and tear items (which go bad regardless of the vehicle's perceived quality of manufacture), other PM and such things can be avoided. 130k can also be HIGH mileage for any car, and there are plenty of garbage corollas out there with fewer miles and needing a lot of work. Regardless, and even for a well-kept and trouble free example, you get to buy a vehicle right in the onset of when a lot of that stuff needs to be done, for a fairly meager discount.

Seruously? The car dropped 33% from being new to when he picked up the car with seeminly minimal miles. $6k discount for very few miles. That might be a good deal. But then to put on the equivalent of a design lifetime (100-150k design lifetime to failure for any manufacturer, regardless of perceived quality of manufacture), and only get another $6k? No thanks. Ill take the nearly new car for $12k, and get a long while of trouble and worry free driving out of it before I even have to spend a dime on any substantial PM besides oil and fiters.


Yep - the Corolla was a very good deal. We did quite well on that car, when MSRP was $18,000. Just like you said you would, I took the worry-free nearly new car...my wife, the former banker is a formidable negotiator...your luck may vary in getting a similarly good deal.

So here's the point: depreciation matters.

What you pay for the car, and what it's worth when you're done are the real numbers...not MSRP and "$0.00"

Look, you're not going to pay MSRP (I didn't on this one...and I didn't when we helped my MIL buy a car two months ago) for a car with 0 miles on it, you're going to negotiate, because the price matters...and negotiated price is where you begin the calculation.

Further, a car with 130K on it isn't dead. Mine's in excellent condition. You've seen how clean the engine is in a previous thread, paint's just as good, no rust in VA, and it's got 4 new tires on it. I used the KBB private party value for age and miles and got a figure of $5,960...so, I rounded up forty bucks to make the math simple...I could have used trade-in (less) or dealer retail (more) but private party was in the middle.

The OP made the statement that he would drive it until "dead" and then stated that he was using 160K miles and 6 years for his calculations.

Sorry, not one BITOGer here would consider a well-maintained car "dead" at 6 years old...would they? JHZR2, you've got a few cars with greater than 160K on them...and they're older than 6 years, right? So why buy the boundary condition of "6 years/160K = dead" that goes into the math? It's not true, so the math becomes inaccurate, and the comparison becomes less useful.

If there was a $2,000 rebate going on, wouldn't that sway the numbers? Similarly, a few thousand $$ on the back end sways the numbers too...
 
Check the size of the car tires when considering maintenance costs. I dealt with hundreds of people who went into a boiling fit of rage when they discovered their car required high performance tires that are very costly, and don't last as long as the ordinary tires.

I knew my car had 18 inch tires before I bought it because I wanted maximum cornering. I also knew those tires were going to cost way more than tires found on a car with no performance package.
 
Originally Posted By: Astro14
The OP made the statement that he would drive it until "dead" and then stated that he was using 160K miles and 6 years for his calculations.

Sorry, not one BITOGer here would consider a well-maintained car "dead" at 6 years old...would they? JHZR2, you've got a few cars with greater than 160K on them...and they're older than 6 years, right? So why buy the boundary condition of "6 years/160K = dead" that goes into the math? It's not true, so the math becomes inaccurate, and the comparison becomes less useful.



Yes, absolutely, 160k isnt necessarily a lot of miles, though some vehicles can be nearly gone at that mileage or earlier too... We've all seen them.

But point is that depeciation still doesnt matter if the vehicle will truly be used until dead. Remember that fuel costs are constantly recurring while acquisition cost is amortized per mile/year.

So for the OP to arbitratily end the calculation at 160k / 6 years, means only that the acquisition cost is amortized over that mileage and distance. So long as we assume it is dead and of marginal value at the "actual" end (accident, really lasts much longer and higher mileage, etc.) the vignette of 6 years still shows how the recurring fuel cost effects cost to own over that time period. Keeping longer and more miles just makes the acquisition cost per mile go lower and lower, and be less important.

Regardless, depreciation is only important if one wrecks the car and is fighting with insurance, or tries to sell the car before its dead. Since the assumption is that the car will be dead (we dont know circumstances, OP may donate the car, give it to a kid, etc., so it may be a $0 end game for real), we can still extract a meaningful result out of this.

The main take away from this exercise is that the recurring fuel cost for the vehicle is $x and that can be compared. Maybe not everyones' cup of tea if they like to trade cars and whatnot, but if we assume that the OP is correct and that the vehicle will have $0 value at the end, then we can compare the end cost to own this way. Others may need to adapt. OP has offered the spreadsheet as a starting point for others. Anyone can adjust as they wish/if they wish to make it more rigorous based upon their specific circumstances.

I tend to follow the OP's premise that my vehicles arend disposed of until they hold mass (scrapmetal) and marginal parts value. Using that basis, estimating terminal value is a function of vehicle mass as much as any other paramter...
 
I have run an S-10 up to 270,000, a 2001 GTP up to 270,000, a 1998 Bonneville up to 280,000. A few turbo Dodges up to 200,000.

Maybe I misunderstood him, I don't think mileage or age was his gripe. Car will run for lots of years. 6000 bucks for an 8 model year old car Corolla with 130,000 miles and an unknown maintenance history? Seems like a lot to me too. Personal opinion? Yes. Do others on the planet agree? You bet. Still some other don't. That is why there is an _ _ _ for every seat
smile.gif
 
Mike - I think you're missing my point. I am talking about my Corolla. No unknowns. Full service records since new. Perfect shape. Valve train pics here:

http://www.bobistheoilguy.com/forums/ubbthreads.php/topics/2633230/Warning:_Valve_train_pics_afte#Post2633230

I was using the Corolla as an example to illustrate my disagreement with the OP's point on a car having no value beyond 6 years/160,000 as well as the variation in depreciation depending on purchase price and a future point.

We can quibble over the value of my Corolla (it's not for sale), but I think we can agree that it has a greater than zero value.

If we amortize the entire MSRP (not negotiated price, which would be more accurate) over the relatively short life of 6 years, or 160,000 miles, then the component cost/mile of the vehicle purchase will be dis-proportionally represented. The cost/mile of vehicle purchase will be larger than if done over, say 200,000 miles, or, say, 10 years.

That distorts the result by having a higher cost/mile for vehicle purchase when compared with the fuel cost/mile, so the result will be different...fuel will count less when the car buying is counted more...

The end results are illustrative, but not accurate.
 
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Roger that. No doubt your car has value. I think I was originally discussing what an 8 year old Corolla with 130,000 was worth.
 
Astro, you are missing mine and JHZR2's point.

We agree a vehicle is not dead at 160k but we intend to use the vehicle until it is literally worthless. AKA not driveable, crush worthy, etc. The mileage i picked holds no real significance other than being a number. Maybe if it would please you I'll assume a $300 scrap value, does that help?

I don't care what a car may be worth after x number of miles.
 
And to add since you made an edit...

I never said my numbers should be gospel. They start the picture but the picture still needs finishing.
 
racer - I will accept that you're going to buy new and drive until dead...whenever that happens to be...the value at that point will be zero, then. So, let's start with the "cost to buy".

Look at the MSRP. Is that the right number? Can you negotiate more with a domestic vs. import? That changes the number that you're using for the cost/mile. E.G. I buy a Corolla for MSRP. I get $2,000 off of a Dodge Dart. The Dart's cost/mile goes down by (2,000/160,000) 1.25 cents...not a lot...but equal to the difference between a few cars on your spreadsheet. Get a good deal as I did, and save $4,000 off MSRP, then the cost/mile goes down by 2.5 cents, which, is greater than the difference between several of the cars. In other words, the deal matters more than the MPG difference in most of the cars on your spreadsheet. This effect would be more pronounced if we used depreciation vs. going to zero, but I've accepted that part of your premise.

Next, look at the difference in the importance of MPG if we change the anticipated life of the car. Let's make it simple, shall we? Double the life of the cars to 320,000 miles. Then, take a look at any one of the cars. In the new cost/mile calculation, fuel counts twice as much as it did (you had to buy twice as much), while buying price counts half of what it did because it's amortized over twice the life. E.G. the Dodge Dart Aero 1.4T/6M, $19,990, 41MPG 28MPG So, the $2,730.43 cost/year is now multiplied by 12, and new fuel is $32,765.12. Add in the cost of the car ($19,990), and the new total is $52,755.12, which yields a new cost of $0.1648 - the fuel counted much more in this example than in the 6 year example...so the total cost was more sensitive to fuel over the longer run. By varying the weighting of the factors used, you've conducted a sensitivity analysis, which will tell you which parameter is most influential in the final result.

Further, if the Dart costs $1,000/year to ensure, and one of the competing cars cost $600/year (not as sporty, whatever) then there is a delta of $4,800 over the new span of ownership...which equates to another 1.5 cents/mile cost difference between the cars, which, again, is at least equal to the difference between several of your considered cars.

Finally, the ability to calculate to the penny really has little to do with the estimation of cost. Precision is not accuracy.

I am trying to help you finish the picture. You're right, it's a start, and it's attractively presented in the detail of costs/miles/cars...but it's incomplete...and it needs a couple of key parameters tweaked to render a more accurate, and useful, result.
 
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I can work with that. I understand there are more costs to ownership, but I think the simple relation of purchase price/eco-options to true economical impact of those options is interesting. That was the point of this exercise.

I had always wondered what was the actual benefit when a company promotes the bejebus out of their high MPG car, but you need to buy a higher trimline to get that MPG. Sadly gone are the days of picking a car, then picking a drivetrain to go in it.

I'd be interested in the low trimline with the eco-engine, but that doesn't exist.

While incomplete as a true cost of ownership, I do think it paints an interesting picture that vehicles in the same size class, when optioned similarly, have comparable operating costs. Then as you mention, the special maintenance (special tires, etc) and the insurance may even close that gap some to where some vehicles actually cost the same even though there is a >10% fuel economy difference.

Then add in the immeasurable... excitement. I'd pay a little more for a car that I'd actually enjoy driving vs saving a couple hundred a year and driving a dead boring car. Which is why I'd pick a manual trans over an auto, even though in a few instances, the auto returned a higher fuel economy number. Currently I drive an Impala. I've had it for 2 years now, and it is so boring to drive, I'm quite sick of it. But I don't have a choice in that matter since it's a corporate vehicle. When I drive my Neon it's like I'm driving a sports car rowing through the gears and taking turns.

Being the numbers freak that I am, this spreadsheet will certainly grow when it comes time to purchase a new car so that if it comes down to 2 or 3 cars that I really like, I'll fall back to the numbers and pick based on that.
 
Indeed! I thought I said it, but perhaps it was in another thread: cost isn't everything.

If the cost to own (and I've gone on enough about what I think comprises cost to own) on two cars is close, you should definitely go with the car that you like.

You're contemplating owning this next car for quite a while...if you don't like it, don't enjoy driving it, you've done yourself a disservice...one that will last for several years. There is a forum member who bought 3 new cars in a year...while he argued that he got a good deal on each one, the thought of losing the transaction cost and depreciation (with two trade-ins) made me cringe...

Now, for the expansion of your estimates, I think you would be well-served to program in a different set of boundary conditions: gasoline price, life of car (in both years/miles), other costs (like insurance), and incentives/bargains on various cars.

Like spotting the first hit, it's time to dial in the elevation and windage...
 
Originally Posted By: racer12306
In my opinion, it's quite disappointing that there are not more gas vehicles over 40MPG and that diesels are so expensive. According to this chart, there is no economical reason to buy a current diesel.


I did the same analysis about 1 month ago (read older posts in this forum), and came to the same conclusion: Diesels and hybrids have a high premium (~25,000 dollars) and therefore it makes more sense to buy a cheaper $13 to 17,000 car that gets 38 or higher mpg. You'll save more money over the life of the car.

You can also take the ~10,000 saved and invest it for additional savings
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There are " more" 40+ mpg cars:

Civic HF 42
Ford fiesta 3 cylinder 45
Mitsubishi mirage 44
Cruze Eco 42
Low cost sub-20k hybrids:
Prius c and Honda insight
Also used cars below $10,000 (civic hybrid G1, Prius G1 or G2)
 
Originally Posted By: Astro14
Your calculations are specious.

Cars don't go to zero value in 6 years. Some get close, others don't. The rate of depreciation varies across models and brands, so purchase price is over-weighted, and unevenly applied, in your arithmetic.

You don't include the cost to insure. Again, that varies across models and brands, so it's not calculated correctly.

Finally, maintenance varies across types of cars. That's not accounted for.

You've simply looked at MPG, your commute distance and calculated fuel cost based on current price, then added price. Your real cost will be quite different from that number.

I would recommend that you price out insurance for each of these cars, based on your use and add that in. Next, subtract the average remaining value for each of these cars when they're 6 years old. Some, like the Civic or Corolla, will be worth several thousand dollars more than a GM or Ford that was purchased for the same price. Finally, re-run your numbers based on different fuel prices, e.g. $4.00/gallon, so that you can compare the range of costs at different future fuel prices, to understand your exposure should prices rise (or fall) again.

Finally, while important, cost isn't everything...


Kind of harsh, there Astro, but you are right. The cost of depreciation is huge. Its real even though its not an out of pocket cost. For me, its more than the cost of gasoline for the past two years.
 
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