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Real Cost of Car Ownership
13 09 05  24  30
-------- Surprise: Gas cost is still low, in comparisson.
Most of us have been hit hard by the rising gas prices. For the
first time in my life I have filled up my car with more than $30 (9.741
Gallons, at $3.119/gal, for total of $30.38 on September 09, 2005 in
Marlborough, MA). My car performs at roughly 25 miles per gallon,
so that means I am spending almost 13 cents a mile on gas only.
Sounds impressive that every time you run a mile you pay 13
cents? Not so when you compare it to the cost you incur in other
things.
When you take into consideration the cost of the vehicle itself (miles
slowly destroy vehicle value), depreciation (getting old and wear and
tear), financing, taxes, fees, insurance, maintenance, repairs, and
others, you end up paying around half a dollar for every mile you run.
Owning a car is a necessary evil in most places in this country, as we
have large distances between the places we commonly visit, and public
transportation is not a convenient option to most of us. But it
is costing us a lot of money. According to the Bureau of Labor Statistics, Americans spend 19.3%
of their income in transportation. That amount is almost the
amount they spend on housing and a lot more than they spend in
necessities like clothing and food! The IRS even recognizes the driving you do in a business at 48.5 cents --
and don't expect the IRS to be doing a favor to anyone, it surely is
more for the average person. (The number was updated on September
9th, 2005).
How could it be so high? You can easily spend $550 a month on
your Toyota Corolla (a lot more on your Cadillac Escalade). It is simple, you have to take into account many factors including:
- Purchase cost, taxes, fees, and financing
charges. The dealer tells you: you can drive out with a car
for $200 a month, but that is just the beginning.
- Gas - $100 a month is not unreasonable these days!
- Scheduled Maintenance - Starts at $30 but some of it reaching $600 for some cars (at the 60,000 milestone). $50 a month?
- UnScheduled Maintenance - Normally worn tires, batteries,
brakes, hoses are usually not covered by the manufacturer's warranty as
they are expected to wear and tear. You have to pay them out of
pocket. New tires for me are around $400 and brake service
averages around $300 (a lot more if discs are replaced, less if it is
only pads). $50 a month?
- Insurance - It is around $1,000 a year for me. Lets say it is $100 a month.
- Taxes and Registration Fees - The government always find ways to get their share. Lets say it is $2 a month.
- Parking, Tolls - Everyone gets a few cents. $50 a month?
- Accidents - Deductibles exist. Sometimes the
insurance just doesn't cover it because it is lower than the agreed
deductible. And even if it covers it you have an out of pocket
expense of around $500. It doesn't happen every year. To
some people it doesn't happen at all. But chances are every few
years someone will bend you a fender. $10 a month?
Some Interesting Calculations (Using Edmunds TCO and cheaper trim in MA):
- 2005 Mazda Miata - 0.51 cents/mi - If I bought a recent
version of my 1996 Mazda Miata today it would set me back half a dollar
every time I moved a mile (the 1996 car I have now is really old now,
and it has depreciated so much it doesn't cost that much).
- 2003 Protege (my wife's car) - 38 to 41 cents/mi - If
bought today would cost 38 cents a mile to run on a 5 year plan.
She is a smart girl. Although the calculation assumes she buys it
for little less than $10,000 (used), she bought it for $11,000 new at
the end of 2003. It doesn't changes the plan too much. A
new 2005 Mazda 3 would have a cost of ownership of 0.41 per mile (a
bigger engine).
- 2005 Honda Prius - 43 cents/mi. (tax considerations not taken in yet).
- 2005 Toyota Corolla - 37 cents/mi.
- 2005 Honda Accord - 39 cents/mi.
- 2005 Ford Explorer - 61 cents/mi.
- 2005 Nissan Pathfinder - 0.57 cents/mi.
Things you can Try to Do to Reduce the Cost of Owning a Car:
- Drive less - less wear and tear, less gas spent.
- Plan your trips - Plan all of your errands to minimize mileage (you will be maximizing time for other activities in the process).
- Carpool - Try to go to work or to recreational activities
using the least amount possible of cars. And the smallest car
that will do the job.
- Use public transportation - Even if the subway costs $2, it is less than the mileage and parking.
- Telecommute - Ask your boss to let you work from home one day a week.
- Compensatory Time - Work longer hours, and don't go every
day to work. (I used to work for Raytheon, where this is
encouraged: work 9 days, 80 hours, and take one Friday off every
couple of weeks).
- Maintain Your Car - Not only it will be more fuel efficient, but the depreciation effect will be reduced.
- Buy a Moderate Car - Don't rush into getting rid of what
you have, but if you have to replace a car, buy a gas saving moderately
priced car with slow depreciation.
Real Car Cost Calculators and Related Articles:
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