We've all seen the ads in the newspaper or in commercials that say you can get a new car with zero money down and only $299 per month. Quick math tells you that even after taxes and destination, you're only paying about $4,400 the first year to own a brand new car. A recent study by consulting firm Runzheimer International shows that a new car will cost you considerably more in overall operating costs. At 15,000 miles per year, the cost of insurance, gasoline, fees, depreciation, and maintenance can drive the overall cost near $20,000 per year.
The 2008 Cadillac STS was tops in this year's test, costing buyers $19,537. The Lexus LS460 was close behind at $19,372. Big vehicles cost quite a bit also, with Ford's E-350 XL SuperDuty tallying a $16,543 bill followed by the Chevy Tahoe LS 4x4 at $15,789. There were some relatively low cost vehicles as well, with the first year costs of a Toyota Corolla CE coming in lowest in the test at $7,933 and a Ford Ranger XL pickup that hits $9,929. If these numbers seem high, it's because the highest liability in a new car balance sheet is depreciation, and new cars can lose thousands the day they're driven off the lot. Every mile on the odometer brings the resale value lower, and if your new car carried lots of incentives or it's a rental car favorite, its residual plummets even further.
[Source: The Car Connection]
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Reader Comments (Page 1 of 2)
cowboy bob @ Dec 8th 2007 10:06AM
Yeaaa! Poor people like me win! I can't afford all those new cars, and have to drive junk. Look at all the money I'm saving!!
VP @ Dec 8th 2007 10:10AM
Exactly my feelings this morning. Atleast this way i can feel good about driving a 91 maxima instead of an 08 CTS.
RDL @ Dec 8th 2007 1:00PM
+1
I find current new car prices insane.
When will people learn that a car is *not* an investment, but a continuous expense?
Please, people, research used cars. Almost all of them depreciate so fast, you can get a really good deal on a 1, 2 or 3 year old model.
Used cars FTW!
Derek @ Dec 8th 2007 10:21AM
Wait 10 years and that 2008 CTS is going to become more economical to own than a 2018 Corolla...
Wait, scratch that... Everybody go out and buy your new cars! I need someone to take that depreciation hit for me...
BLS @ Dec 8th 2007 10:22AM
If there are incentives on your car wouldn't that offset the depreciation. I hate that depreciation is calculated off of the retail price. When Priuses were selling well above sticker they weren't depreciating, but obviously they aren't worth more than the price paid less any tax incentives.
I bought my care for ~10,000 new it stickered for ~16,000. Obviously, if I would have turned around and sold it for 9,000. I would have lost 1,000. But supposedly it depreciated 7,000?????
grant bender @ Dec 8th 2007 10:37AM
I'm sure I've lost less than $7K on my prius which I've owned for 18 months. Purchase price was $23K + $1500 tax, federal rebate = $2k, state rebate = $600.. net = 21,900.
Cost of insurance = about $1300
Cost of fuel = about $1300
Misc. = $200
Blue book for private party is about $19,500.
Cost for 18 months of ownership is $4.2k, 17 cents/mile.
EnviroBob @ Dec 8th 2007 10:48AM
You are correct. It's funny reading posts from people who use re-sale value as a percentage of MSRP as the best / sole basis to evaluate cost of ownership. There are frequent post about how an Impala is worth $3000 less than a Camry after several years, but these morons don't take into account that the original transaction price was $3000 less than the Camry to begin with. This is why Edmunds shows the true cost to own is less for an Impala than a Camry.
I hope the fools who can't understand this concept aren't finance majors.
GT @ Dec 8th 2007 10:34AM
If you can afford it, get a new car. Life's too short to wait years to drive a car lol
David Vis @ Dec 8th 2007 11:39AM
This article hits the nail on the head! It is rare that we consider the total cost of car ownership. You get a great deal at the dealer's, but then you get soaked by insurance costs. And then there's the maintenance and running costs. It all ads up, and clearly some cars are better than others in this respect.
Dad @ Dec 8th 2007 12:04PM
If they had only been "honest" enough to do the math for the second and thrid year of ownership.
John @ Dec 8th 2007 12:20PM
Porsche Boxster, 40k miles, 40% of the retail price. Anyone? I'd love to get a $30,000 discount. Depreciation on that car is almost $1/mile, not to mention service.
Paul J. @ Dec 8th 2007 12:39PM
Well... Seeing how gorgeous that STS is in that picture makes me wish I had 20k to burn a year.
iOrange @ Dec 8th 2007 2:30PM
Do your research, buy a nice 2 year old car with low miles.. My car sticked for 21,000, in 04.. I bought it in 06 for 11,200, with 22k miles.. The original owner paid the depreciation for me.. I got a brand new car with a little bit of wear and tear.. And who has to know I didn't buy it new?
phewop118 @ Dec 8th 2007 2:36PM
The only reason that the STS costs that much to own is depreciation. Cadilliac overprices it by so much (an STS can cost $10k more than fully loaded competition), so the value of the car ends up dropping fast. That makes the STS a great car to buy used. In fact, 06 fully loaded models can be had for a little over $30k, when they stickered new at almost $70k, letting you pay around 1/2 the sticker price. This is a typical GM depriciation percentage, except, the car loses more value overall cause it costs more. On the other hand, STS's (and most other GM's) are great for 2nd buyers, as they cost so little to maintain and insurance rates are lower cause you bought it used.
Ken @ Dec 8th 2007 3:18PM
For me, to buy a car, I would have to assume that I would buy it, pay it off after a few years, and at the end of the day, not get ANYTHING for it when I sold it eventually.
I bought a used car for $xxxx, and that was just the price of entry, I expect to never see a dime of what I paid for it. The car has been paid off for years, and I count all that money as gone.
However, if I do eventually sell it, any money I did get would just be a bonus.
richardtoh @ Dec 8th 2007 3:45PM
I bet very few car buyers think about TCO when they make their purchase. Horse power ratings and cool features tend to influence their decision more than anything else, as frequently seen on auto advertisements.
As long as the ownership costs is within their budget, most people would not bother in spending the time to compute the true numbers. Just like everything else in life, people don't pay attention until it starts to pinch.
Fosterdad @ Dec 8th 2007 3:56PM
I bought my last car new and got a pretty good deal so I won't complain, but I think it's the last time I'll buy new again. I see so many great deals on 1 & 2-year-old cars that have less than 20K miles on them. Hell, they're not even broken in and they cost about 2/3 or less the price of new. There's no reason to buy new when cars can easily last 150K miles if you just take care of them. My brother recently bought an '06 PT Cruiser. Now I don't like Cruisers but my brother does and it had about 16K miles on it and cost $10,500. It was a steal, even if it is a Cruiser. If he gets only 100K miles on it he's still way ahead of the game.
RicardoHead @ Dec 8th 2007 6:16PM
Another thing, whether you buy new or nearly new, is to drive it till it drops. Don't give into that stupid temptation to keep up with the Jones's and have the newest toy on the block. The pride you'll feel is very fleeting - maybe 3 weeks tops - and will likely cost you an easy $15k or more each time when added up. If you give into that temptation 7 times in your life, that'll be over $100k (before investment income) to impress people who don't care about you. If you invest it, that could be $300k in your pocket to add to retirement.
Screw it - there is a lot more you can do with that kind of money than feed a buttraping industry.
Richard Warren @ Dec 9th 2007 7:03AM
If you never trade none are that expensive.
Buy it new, keep it up, when it finally gives up, guess what? A pretty inexpensive ride.
Better yet, buy it new sell it yourself and save on the depreciation.
Also of not how much the highly vaunted glorified Lexus/Toyota cost to drive.
Dave @ Dec 9th 2007 11:43AM
The CTS is $19,000 to own/operate.
The Corolla is $8000 to own/operate.
Makes the CTS seem like a bargain.