How to Calculate a Car’s Cost of Ownership
It’s easy to compare and contrast the ticket prices of a car. When you consider long-term ownership costs, however, the numbers become less clear. Which is more expensive over time, a Prius or an Avalon? What kind of gas mileage can you expect from a Camry? How much do Tacomas really depreciate?
Know Your Model
Instead of calculating costs based on brand, look for information that pertains to your model specifically. For example, don’t search for “Toyota cost of ownership.” Search for “2014 RAV4 cost of ownership.”
Look Into Fuel Costs
Fuel will account for almost a quarter of your ownership costs. If you’re driving an SUV, this number will climb even higher. Don’t be afraid to spend a little more upfront to save on mileage in the long run.
Understand the Lingo
If you don’t know what depreciation is, it’s time to do some research. According to Consumer Reports, the average car depreciates more than 60 percent over a five-year period.
Don’t Forget Interest
If you’ve taken out a loan to purchase your vehicle, you can expect interest to make up 5-15 percent of your total ownership costs. The exact figure will depend on your bank, of course, but even a small amount should be dutifully included in your ownership calculations.
Plan for Maintenance
Even finely tuned vehicles can run into hiccups on the road. Always include a little wiggle room in your budget for unexpected defects or repairs. You might also want to include a few dollars for things like polish, rims and car alarms.
Talk to Your Insurance Agent
Car insurance rates can vary wildly depending on the make, model and safety rating of your vehicle. You can also lower your premiums if you buy a hybrid or eco-friendly car. Call your local insurance agent to learn more.
These are just a few things to keep in mind when calculating your car’s total cost of ownership. Again, it’s important to think long-term when buying a vehicle. Sometimes, it’s worth a few extra dollars upfront when you know that you’ll save thousands over the next decade.