When shopping for a car, you should look for the lowest price for the best quality. Right? Well, sort of … in the back of your mind, you realize that, all other things being equal, the car which gets better gas mileage is worth more than the one which doesn’t. But how much more?
And what other factors should you consider? Depreciation rates? Cost of insurance? How about maintenance and repairs? If all of this is giving you a headache, don’t despair. Edmunds.com has done much of the work for you, by calculating the true cost for owning any new or used car five years.
I appreciate the work Edmunds has put into their “True Cost to Own” (TCO) projections, but I advise caution about simply taking all of their numbers at face value. You will need to use discernment because some of these numbers will apply to your circumstances and some won’t.
Let’s give it a try by comparing a 2007 Honda Accord EX-L with 60,000 miles, a 2008 Chevy Impala LTZ with 40,000 miles and a 2006 Cadillac DTS with 60,000 miles. According to the Edmunds site, the market value of these three vehicles are all very close. However, when applying the TCO figures, the Honda and Impala have a clear advantage over the Cadillac.
This chart summarizes my findings.
| Purchase Price | 5 Year Cost to Own | Total | |
| 2007 Honda EX-L with 60K | $12,330 | $36,507 | $48,837 |
| 2008 Impala LTZ with 40K | $12,984 | $37,710 | $50,694 |
| 2006 Cadillac DTS with 60K | $12,506 | $44,483 | $56,989 |
Just so you will know what to expect on the Edmunds site, I have included their Honda TCO stats below:
5 Year Details for 2007 Accord EX-L
|
|
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
5 Yr Total |
|
| Depreciation | $1,652 | $1,450 | $1,275 | $1,130 | $1,014 | $6,521 | |
| Taxes & Fees | $1,035 | $78 | $78 | $78 | $78 | $1,347 | |
| Financing | $568 | $454 | $333 | $208 | $74 | $1,637 | |
| Fuel | $2,620 | $2,699 | $2,780 | $2,863 | $2,949 | $13,911 | |
| Insurance | $1,141 | $1,181 | $1,222 | $1,265 | $1,309 | $6,118 | |
| Maintenance | $1,511 | $588 | $643 | $839 | $1,325 | $4,906 | |
| Repairs | $299 | $347 | $404 | $470 | $547 | $2,067 | |
| True Cost to Own ® | $8,826 | $6,797 | $6,735 | $6,853 | $7,296 | $36,507 | |
Making the Edmunds Numbers Work for You
Edmunds has used the following factors in compiling their cost to own numbers: depreciation, taxes and fees, financing, fuel, insurance, maintenance and repairs. These are all legitimate costs of owning a vehicle, but each needs to be scrutinized to fit your buying needs.
For example, financing is a non-issue for me because I pay cash for my vehicles. Insurance will vary from vehicle to vehicle, but you might be better served by asking your agent what those costs would be for you.
Other Considerations
How many years will you own the vehicle?
The TCO is a five year projection, so it would (probably) be more applicable if you plan to drive your car more than five years.
Do you love it?
I realize loving a car is quite subjective, but reality is this: we Americans (especially us guys) tend to first fall in love with a car, then seek ways to justify the expenditure. But this isn’t necessarily a bad thing — if you buy something you love, you will likely take better care of it. Conversely, if you buy a “ho-hum” car in order to save a few hundred dollars, you will probably not care for it as well. Mind you, I am not advocating spending money you don’t have, but factoring in a “love” element may actually save you money.
Do you do your own maintenance? Repairs?
Maintenance and repairs are two of the factors Edmunds uses for their TCO. If you do your own, those issues become less of a consideration.
How many miles do you drive annually?
The Edmunds numbers are based on 15,000 miles driven per year. Driving more would justify spending more on a vehicle which gets better gas mileage; conversely, gas mileage is not as much an issue for those who drive very little.
How about me?
I wish I could give you a glowing report of how using TCO helped me make a wise purchase, but I can’t — I have never considered true cost to own in any of my vehicle purchases. However, I plan to next time, especially if I have narrowed my selection to two or three choices.
To quote from Edmunds site: “With TCO, you get a snapshot of the car’s costs over time. You will see the big picture – not just today’s price tag.”
Readers: Have you ever used “true cost to own” to help you determine your vehicle selection? How did it go? Meet us in the comments section!
{ 12 comments… read them below or add one }
I drive a 1995 Accord that I picked up for $3,500 five years ago. I’ve put over 60,000 miles on it. My TCO is much lower than any of these cars that are under ten years old. And like any good Honda it just keeps running.
Josh,
I like how you think…buy used (especially a Honda) and drive the wheels off of it.
you think that you could give a listed TCO for you 95 accord please?
We were able to dramatically increase the gas mileage of our truck by making some adjustments to the oil and air intake. Don’t ask me the details- that’s my husband’s department. I was pleasantly surprised though as I had assumed that it would be a complete gas guzzler and it really doesn’t do much worse than our car! We also do almost all of our own repairs and all of our own maintenance and are able to save a lot of money that way! And when I say we, I do in fact mean him.
Sounds like, when it comes to saving on cars, your hubby is very valuable. I wish I knew more about how he increased your gas mileage on the truck…I have heard of gas saving devices before, but I always assumed they were scams.
He puts a lot of research into our vehicles and he himself was very surprised about the dramatic increase in gas mileage. He hasn’t used any gas saving devices on our truck but general maintenance can go a long ways. After doing some research he switched the weight of oil we were using. He also changed all of the fluids in the vehicle. We sell Amsoil and use all of their products in our vehicles- he is very pleased with their performance. Sorry I can’t tell you more- I am not very knowledgeable about vehicles.
I have a 1997 Honda Civic HX – yes, 15 years old and still going! Has about 165K on it. I’m the originally owner. Best car I ever bought!
Our other car is a 2002 Honda CRV – about 135K on it. We bought it used in 2007 and we are the 2nd owner. Now it is 10 years old and still going too! We only buy used and for cash – no car payments and low insurance plus, low license plate renewals.
Good article!
Buying a great car, taking good care of it, and driving it forever is a great plan! Doing so also gives you time to save cash for that next purchase. I do the very same thing.
I think the best way you go if you like to buy a newer car is to first purchase a car that you can pay off in short order and then make payments to a car account as though you were making car payments. When that account gets to the amount you need for the car you want, purchase it outright and that right there will save you a great deal of interest. Also , you have far more price bargaining power when you have cash to pay for the car. Then just repeat the process. Takes discipline but it really worth it.
Great plan, Brad. My wife and I always pay cash for our cars. Yes, we can do better negotiating, but a hidden advantage is that we are also much more selective…meaning that once we have saved that cash, we are VERY careful about how we spend it.
Wow! It’s expensive when you lay it all out, isn’t it? Thanks for sharing these truths — we included your post in today’s roundup at our blog!
Thanks Linsey!
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