With the price of gasoline fluctuating between costly and downright
expensive the last few years, it’s not surprising that fuel economy is a
primary buying consideration among new-car shoppers in all market
segments. While motorists can indeed salve the sting they’re feeling at
the pump by shopping for a vehicle that gets more miles per gallon, they
might ultimately wind up losing money if they’re ignoring other
long-term operating costs.
“Car shoppers should set their sights on the long-term cost to own a vehicle since its factors such as depreciation, insurance cost and maintenance will significantly drive up the cost of owning a vehicle over time,” says Alec Gutierrez, senior market analyst of automotive insights for Kelley Blue Book. “As an example, both the Volkswagen Passat and Honda Accord can be purchased for approximately $20,000 brand new; however, the Volkswagen Passat has a five-year ownership cost of $38,636, which is nearly $4,000 more than the Accord’s $34,564.”
To help consumers make more cash-sensible car-buying decisions, KBB recently announced its annual Total Cost of Ownership Awards in 22 separate vehicle classes. The kbb.com website tracks new vehicles’ depreciation, fuel costs, insurance costs, financing, repairs, maintenance, and average state sales taxes and registration fees over a five-year ownership period, and even computes a per-mile expenditure for easy comparison. We’re featuring the 22 vehicles cited by KBB for low ownership costs in their respective classes in the accompanying slide show.
In Pictures: Cheapest 2013 Cars To Own.
The least-expensive model-year 2013 car to own according to KBB is the diminutive Scion iQ subcompact with a base price of $16,250. When all long-term ownership costs are considered, it’s projected to cost an average owner a total of $27,011 over a five-year ownership period, which amounts to $0.36/mile. While few would consider the $76,825 Porsche Panamera luxury sedan “cheap,” it nonetheless beats all comers in the high-end luxury segment with a low (relatively speaking) per-mile ownership cost of $1.12/mile.
Remarkably, one car on KBB’s list, the Chevrolet Volt electric vehicle, actually registers a projected five-year ownership cost (at $37,052) that’s slightly less than its retail purchase price ($39,995). According to KBB’s Brenna Robinson, this is largely due to the $7,500 one-time federal tax credit granted to Volt buyers.
Among brands, KBB cites Mazda as offering the lowest overall ownership costs in the industry, with Lexus beating the competition in that regard among luxury automakers. Both brands get high marks for low depreciation, fuel and maintenance and repair costs across their full vehicle lines.
Generally, the more expensive the vehicle, the more important differences in certain ownership costs become over time, simply because there’s more money at stake. “Buyers looking for a compact or subcompact should be primarily interested in fuel costs, as it makes up the bulk of total ownership costs,” Gutierrez explains. “Those looking for a high-end vehicle will want to consider depreciation, insurance, maintenance and repairs as the most critical factors.”
In Pictures: Cheapest 2013 Cars To Own.
Depreciation – the difference between a car’s purchase price and its resale value – is the killer here. As an example, KBB estimates the Mercedes-Benz S-Class can be expected to lose a whopping $62,000 in value over the course of five years. It always pays to choose a model that’s predicted to hold its value better over time, based on economic factors, historical data and plain old supply and demand issues. (This is likewise important for those leasing a vehicle because payments are largely based on its projected value at the end of the contract’s term.) According to industry sources, large cars, luxury cars and minivans typically don’t hold their value as well these days as do compact passenger cars and sporty coupes
A five percent difference in resale value after five years between competing $50,000 cars would represent a $2,500 return at trade-in time, assuming both cars are kept in good condition with average mileage. However, differences in resale values among similarly priced models tend to narrow the longer one keeps a vehicle, and can become negligible if you’re the type of person who literally “runs a car into the ground.”
If you’re financing the cost of a new vehicle be sure to compare loan rates to minimize interest costs. Bank Rate Monitor currently cites a low of 1.49 percent for a 60-month new-car
loan from a credit union in Chicago, with a high of 7.50 percent at a major bank. If you’re borrowing $40,000 toward the purchase price of a car, that’s a difference of $6,138 in interest costs at stake over the life of a five-year loan. Automakers often offer cut-rate or even zero-percent financing on select models (usually the slowest sellers on the lot), though such programs may be available only to borrowers with pristine credit ratings; in general, if you have a blemished credit record you’ll likely pay more to finance a car.
You’ll also need to consider the cost of auto insurance, which can vary significantly from model to model and carrier to carrier. While premiums are largely based on a person’s driving record, age, gender, credit rating, address and miles driven, some cars are inherently cheaper to insure than others based on their claims histories and repair costs. As a rule, expensive cars are costlier to insure than cheaper ones, with high-performance sports cars carrying much higher premiums than family-minded models. According to a recent survey conducted for Insure.com, the Ford Edge crossover SUV was ranked the cheapest model to insure at a $1,128 average annual premium for a representative driver, while the Mercedes-Benz CL600 luxury coupe topped the list at a budget-busting $3,257.
Always consult with an insurance agent to gather price quotes for various models as part of the car-shopping process, ask about applicable discounts and compare rates from several companies to garner the lowest rates.
In Pictures: Cheapest 2013 Cars To Own.
And, yes, choosing a more fuel-efficient car can indeed be a significant cost-saving measure. For example, with national average gas prices currently hovering around $3.50 a gallon according to the AAA Daily Fuel Gauge Report, the annual estimated cost difference between a vehicle that gets a combined 25-mpg city/highway and one that’s rated at 30 mpg would be around $750 (based on 15,000 miles/year). That’s about $3,750 up for grabs over five years, with even bigger money on the table if fuel costs creep back upward.
Maintenance and out-of-warranty repair costs likewise differ from one make and model to another, based on the manufacturer’s service schedule and the cost of parts. Buying a car that comes with free maintenance or a longer warranty can be a big money saver, particularly if you’re in the market for a costly-to-keep luxury model.
We’ll further advise buyers to avoid negating any long-term savings by paying too much for a new vehicle in the first place. While a Ferrari or Lamborghini dealer may not see the need to haggle, and a few in-demand models might actually command price premiums if they’re in particularly short supply, an astute buyer can pay less – sometimes by a substantial amount – than what’s quoted on the window sticker. Many cars can be driven off the lot for at or near the so-called invoice price, which is a slight percentage above the dealer’s actual cost for a given model. What’s more, choosing a vehicle for which the manufacturer is offering a cash rebate will further reduce a buyer’s costs.
“Car shoppers should set their sights on the long-term cost to own a vehicle since its factors such as depreciation, insurance cost and maintenance will significantly drive up the cost of owning a vehicle over time,” says Alec Gutierrez, senior market analyst of automotive insights for Kelley Blue Book. “As an example, both the Volkswagen Passat and Honda Accord can be purchased for approximately $20,000 brand new; however, the Volkswagen Passat has a five-year ownership cost of $38,636, which is nearly $4,000 more than the Accord’s $34,564.”
To help consumers make more cash-sensible car-buying decisions, KBB recently announced its annual Total Cost of Ownership Awards in 22 separate vehicle classes. The kbb.com website tracks new vehicles’ depreciation, fuel costs, insurance costs, financing, repairs, maintenance, and average state sales taxes and registration fees over a five-year ownership period, and even computes a per-mile expenditure for easy comparison. We’re featuring the 22 vehicles cited by KBB for low ownership costs in their respective classes in the accompanying slide show.
In Pictures: Cheapest 2013 Cars To Own.
The least-expensive model-year 2013 car to own according to KBB is the diminutive Scion iQ subcompact with a base price of $16,250. When all long-term ownership costs are considered, it’s projected to cost an average owner a total of $27,011 over a five-year ownership period, which amounts to $0.36/mile. While few would consider the $76,825 Porsche Panamera luxury sedan “cheap,” it nonetheless beats all comers in the high-end luxury segment with a low (relatively speaking) per-mile ownership cost of $1.12/mile.
Remarkably, one car on KBB’s list, the Chevrolet Volt electric vehicle, actually registers a projected five-year ownership cost (at $37,052) that’s slightly less than its retail purchase price ($39,995). According to KBB’s Brenna Robinson, this is largely due to the $7,500 one-time federal tax credit granted to Volt buyers.
Among brands, KBB cites Mazda as offering the lowest overall ownership costs in the industry, with Lexus beating the competition in that regard among luxury automakers. Both brands get high marks for low depreciation, fuel and maintenance and repair costs across their full vehicle lines.
Generally, the more expensive the vehicle, the more important differences in certain ownership costs become over time, simply because there’s more money at stake. “Buyers looking for a compact or subcompact should be primarily interested in fuel costs, as it makes up the bulk of total ownership costs,” Gutierrez explains. “Those looking for a high-end vehicle will want to consider depreciation, insurance, maintenance and repairs as the most critical factors.”
In Pictures: Cheapest 2013 Cars To Own.
Depreciation – the difference between a car’s purchase price and its resale value – is the killer here. As an example, KBB estimates the Mercedes-Benz S-Class can be expected to lose a whopping $62,000 in value over the course of five years. It always pays to choose a model that’s predicted to hold its value better over time, based on economic factors, historical data and plain old supply and demand issues. (This is likewise important for those leasing a vehicle because payments are largely based on its projected value at the end of the contract’s term.) According to industry sources, large cars, luxury cars and minivans typically don’t hold their value as well these days as do compact passenger cars and sporty coupes
A five percent difference in resale value after five years between competing $50,000 cars would represent a $2,500 return at trade-in time, assuming both cars are kept in good condition with average mileage. However, differences in resale values among similarly priced models tend to narrow the longer one keeps a vehicle, and can become negligible if you’re the type of person who literally “runs a car into the ground.”
If you’re financing the cost of a new vehicle be sure to compare loan rates to minimize interest costs. Bank Rate Monitor currently cites a low of 1.49 percent for a 60-month new-car
loan from a credit union in Chicago, with a high of 7.50 percent at a major bank. If you’re borrowing $40,000 toward the purchase price of a car, that’s a difference of $6,138 in interest costs at stake over the life of a five-year loan. Automakers often offer cut-rate or even zero-percent financing on select models (usually the slowest sellers on the lot), though such programs may be available only to borrowers with pristine credit ratings; in general, if you have a blemished credit record you’ll likely pay more to finance a car.
You’ll also need to consider the cost of auto insurance, which can vary significantly from model to model and carrier to carrier. While premiums are largely based on a person’s driving record, age, gender, credit rating, address and miles driven, some cars are inherently cheaper to insure than others based on their claims histories and repair costs. As a rule, expensive cars are costlier to insure than cheaper ones, with high-performance sports cars carrying much higher premiums than family-minded models. According to a recent survey conducted for Insure.com, the Ford Edge crossover SUV was ranked the cheapest model to insure at a $1,128 average annual premium for a representative driver, while the Mercedes-Benz CL600 luxury coupe topped the list at a budget-busting $3,257.
Always consult with an insurance agent to gather price quotes for various models as part of the car-shopping process, ask about applicable discounts and compare rates from several companies to garner the lowest rates.
In Pictures: Cheapest 2013 Cars To Own.
And, yes, choosing a more fuel-efficient car can indeed be a significant cost-saving measure. For example, with national average gas prices currently hovering around $3.50 a gallon according to the AAA Daily Fuel Gauge Report, the annual estimated cost difference between a vehicle that gets a combined 25-mpg city/highway and one that’s rated at 30 mpg would be around $750 (based on 15,000 miles/year). That’s about $3,750 up for grabs over five years, with even bigger money on the table if fuel costs creep back upward.
Maintenance and out-of-warranty repair costs likewise differ from one make and model to another, based on the manufacturer’s service schedule and the cost of parts. Buying a car that comes with free maintenance or a longer warranty can be a big money saver, particularly if you’re in the market for a costly-to-keep luxury model.
We’ll further advise buyers to avoid negating any long-term savings by paying too much for a new vehicle in the first place. While a Ferrari or Lamborghini dealer may not see the need to haggle, and a few in-demand models might actually command price premiums if they’re in particularly short supply, an astute buyer can pay less – sometimes by a substantial amount – than what’s quoted on the window sticker. Many cars can be driven off the lot for at or near the so-called invoice price, which is a slight percentage above the dealer’s actual cost for a given model. What’s more, choosing a vehicle for which the manufacturer is offering a cash rebate will further reduce a buyer’s costs.
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