If you work odd shifts or can't access public transportation, you might have no choice but to own and use your own vehicle. If that's the case, think small.
Remember those numbers you looked at earlier? Driving a small sedan is likely to cost in the neighborhood of It's also a good move for the environment and, since you have to breathe the air too, a good move for your health. Similarly, don't pay for an eight-cylinder engine when four cylinders will work just fine. Unless you're hauling heavy loads on a routine basis, the extra cost of a bigger engine results in more money spent on gasoline.
Whatever you are driving, make a conscious effort to drive it less frequently. Walking or biking to local destinations is good for your health and good for your budget. When you do drive, consolidate your trips. Go to the shopping center, the bank and the dry cleaner all in the same trip instead of making three separate trips.
Regardless of how you get from place to place, pay attention to how much you are spending. This includes ancillary costs, such as car insurance and regular maintenance. By keeping an eye on your expenses, you can keep more money in your pocket. Bureau of Labor Statistics. Accessed July 4, American Automobile Association. Career Advice. Car Insurance. Lifestyle Advice. Auto Loans. Your Privacy Rights. To change or withdraw your consent choices for Investopedia.
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We and our partners process data to: Actively scan device characteristics for identification. I Accept Show Purposes. Your Money. The mini-van enables family trips and makes logistics simpler. Utility is a sliding scale. They might need to full seating of their mini-van on a weekly basis.
Similarly, a carpenter or contractor might need to utility of a pick-up truck for their daily work. But how often does a Jeep Wrangler owner require the utility of trekking across the savannah?
But the frequency of utility of a vehicle is an important consideration. Of course not. How much better is Lebron than that guy? Let me give it a try. At 76 cents a mile, this lines up well with the F analysis from above. Jimmy needs the truck for the utility of towing his camper.
He loves camping and takes ten single-weekend trips per year. But are ten weekends of utility worth owning a truck for? One possible answer: Jimmy could buy the best value car for his day-to-day commuting needs and then rent a truck when he needs to tow his camper. But then Jimmy would need to replace the utility of his truck. How about trips to the hardware store? A truck bed is a nice luxury for hauling lumber. There is a significantly cheaper option that would provide Jimmy with the same exact utility.
When is a used car smarter than a new car? Lots of people have pondered this question—with some good attempts at an answer. Thankfully, used cars are more trustworthy than they used to be. But now we want to see if buying used is a better than buying new. On average, all cars are the same, and their cost of car ownership is the same. This is an important assumption. Why exclude depreciation? Granted, each used car has its own story. How do you put a price on a car not smelling like the dog that used to ride in the back seat?
Used products come with those kinds of questions. This is similar to the earlier utility discussion. So, when is a used car smarter than a new car? Many used cars are priced such that the new vs. The cost of car ownership is the same. The market solves inefficiencies, and prices end up properly balanced. What a great example of Econ ! You pay a regular monthly fee, but never actually own the car. Lease agreements typically have an annual limit on mileage, too.
Once we add those expenses, the leased car costs These are two examples of rules that make leasing more restrictive than owning. From a pure personal finance standpoint, is leasing worthwhile? Probably not. But this brief analysis quantifies the difference for you. Most significantly, in my opinion, leasing lowers your risk of catastrophic maintenance costs e. I get it! This question requires a crystal ball to answer. Thankfully, we have statistics and confidence intervals.
This data is a bit old, for sure. How do you read this chart? But earlier, we assumed a year average lifespan! Engineering has improved, and cars are lasting longer.
We need a vital piece of information: how much further will this car drive before it ultimately dies? So how much further will the car drive? The survivability data helps us find an answer. About half of all year old cars get another three years of life.
Assigning our standard 13, miles per year, we get 40, miles of remaining life. Surely some of that expense is meant to cover things like this 6. That brings the total cost to How much annual maintenance and repair would one have to make for scrapping the car to make sense? At Year 15, our car costs That gives us a margin of 1. We can allocate that margin entirely to maintenance and repairs, bringing the total maintenance and repairs allocation to Buying new is smarter.
In summary, the average year old car will survive for another three years. Time to scrap this article! I hope you walk away with much greater understanding of the cost of car ownership. We covered:. Was this article a Ferrari? Or a Pinto? I think understanding the cost to drive is pretty important. Drop a comment below before you hit the road. Thank you for reading! If you enjoyed this article and want to read more, check out my Archive or Subscribe to get future articles emailed to your inbox.
Great job buddy. I got into a discussion just yesterday with a friend over buying new or used. I broke out the spreadsheets and mathed the whole thing out, extremely surprised to find that my 13 year old car was costing me virtually exactly the same as his new car. Of course I replaced everything on my car two years ago — engine, turbo, ac system, transmission — every part related to the car functioning. So in effect, my 13 year old car is actually a 2. Total cost to rebuild the car was the same price I paid to buy it.
Hey Zane, thanks for reading. Good for you for keeping that spreadsheet. Data always makes decisions easier! I was just talking to a co-worker this AM. And it has cost me just about exactly average…47 cents per mile up to this point at K total miles. Great article. Do you have any details of the true cost of owning an electric vehicle? Much different variables to consider there.
Also, what about folks who finance cars as opposed to leasing them. How does that impact the total cost? Hey Janessa! They also include electric vehicles. And they say electric vehicles are about the same cost as a mid-sized sedan—about average. Second, I was just talking to a co-worker about this yesterday. Hi Janessa — just wanted to let you know that I update the article including a Tesla Model 3…hope that helps you out! I barely hit the tip of the iceberg on a recent post about living below your means; this really goes whole hog on car costs.
Great resource. Yeah, I need to come back and update for electric vehicles…it is going to be useful info for people making a car-buying decision in the next couple years.
It is extremely helpful for everyone! One category that also should be factored in the vehicle purchase process is financing costs. Annie switched to Nationwide. Check if you are overpaying for car insurance. No phone calls. No long forms. Browse More Content. Insurance Resources Is Jerry Legitimate?
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