Let’s explore the total cost of ownership of a vehicle. Understanding the expense of buying a car can be a freeing feeling. It gives you confidence in your decisions. There are many ways to calculate your total cost of ownership, and there is not a one size fits all calculation. You must tailor it to your needs and lifestyle. There are a few major categories to consider, however.
Cost of Ownership Categories
The main areas you need to consider are:
• Fuel – what does it cost you to fill up the vehicle’s gas tank? Or what does it cost you in electricity to charge your vehicle? And how many times do you need to fill up the gas tank or charge it each month? To fully understand this, you need to understand approximately how many miles you drive. If you a first-time car buyer, you may have no idea how many miles you drive. In that case, you can calculate how many miles it takes you to get to and from work each day then factor in how often you drive for activities outside of work. If you have owned cars in the past, you can look at how long you owned your last car, the start mileage, and ending mileage to find a relative average.
• Maintenance – what does it cost to do the routine maintenance on your vehicle? Often, the prices of these maintenance items go up over the years you will own your car. It is important to factor in increasing costs over time.
• Insurance – what does it cost to insure your vehicle of choice?
• Repairs – what are common repair costs for your vehicle?
• Financing – if you are financing your vehicle, you should factor in the interest rate.
• State fees – items like tax, license, and registration.
• Depreciation – vehicles are depreciating assets. Calculate the difference between what you paid and what it is worth. This is a volatile number as it changes with the market. At the time of your purchase decision, you can get a relative idea by looking at what the same Make/Model is selling for online in a 5-year older model year.
After considering these areas in your cost of ownership calculation, add it to the price of the vehicle that you are looking to purchase and compare different cars. Sometimes, the lowest cost of ownership vehicle might not be the right one for your lifestyle – and that is OK! But knowing your cost of ownership feels good.
How can we help you with cost of ownership?
If you have not already heard, we offer a product called Car Doc. It is a maintenance and membership program designed to give you peace of mind in your driving experience and save you money over the lifetime of the car. First and foremost, you lock in maintenance costs AT A DISCOUNT at your time of purchase. This means that all the cost of your routine maintenance is included in your monthly payment. Sure makes that calculation easier! Also, we provide you with a free Carfax report any time you want it, so you can understand your depreciation over time. And finally, we give you $500 off your next vehicle if you purchase again from us, making that depreciation less. Shop our inventory online here.