Finding the Best New Car Value: The Total Costs of Car Ownership
The sticker on the window of that car you have your eye on doesn’t reflect its true price.
You’ll have to look deeper to see the hidden costs of car ownership. But in the long run, you may end up saving thousands of dollars by finding the best new car value for you.
To find the best new car value, experts suggest calculating the expenses of buying and owning a car over five years. Here’s a breakdown:
Purchase price
What it costs to buy the vehicle, plus taxes, title and related fees, less rebates, refunds and purchase incentives.
Fuel
Fuel is the second highest cost of vehicle ownership – about 26% over five years. Estimate your annual mileage (15,000 is average in the U.S.) and divide by the EPA’s mile-per-gallon ratings for the car you’re thinking about buying. Be sure to average the highway and city estimates, and multiply by the cost of a gallon of fuel ($3 a gallon, $3.50 for premium).
Or visit fueleconomy.gov, select your vehicle type, plug in the relevant numbers, and the site will do the rest.
Insurance
It’s easier than ever to factor the cost of auto insurance premiums into your car-buying decision. Simply access online car insurance quotes or get a personal car insurance quote from your insurance agent. (Remember to multiply the annual premium by five years.)
Maintenance and repairs
Add up scheduled and unscheduled maintenance, plus non-warranty repairs. Online sources like edmunds.com can help with estimates based on industry data about the car make you’re interested in.
License, registration and fees
Don’t forget things like auto registration and licensing costs. You should keep in mind that some local governments require vehicle or emissions inspection fees.
Interest
If you’re financing your vehicle with a new car loan or used car loan, include the cost of borrowing money. What may seem like a modest price difference in cars can really add up in interest charges over the term of your loan.
Depreciation
Age, wear and market conditions determine the vehicle’s depreciation, or loss in value. The average model depreciates about 65% over five years. To estimate, subtract the resale value of a similar model after five years from your original purchase price. Many auto-related websites offer depreciation calculators. Also, check local dealerships and newspaper ads to gauge resale value trends.
Accounting for 46% of the total cost of car ownership, depreciation is an important factor in your decision.
