When buying a car, the sticker price tells only part of its financial story. A recent ABCNews.com article about luxury cars noted that at first glance the price of an Infinity EX 35 seems comparable to that of a Mercedes GLK. The average sticker price of each one is a little south of $34,000. However, when comparing the total cost to own each vehicle over five years, the infinity comes in at about $3,000 less. The total cost to own factors in the cost of insurance, maintenance, fuel, and other expenses.
Of course, this way of thinking about a vehicle’s true cost doesn’t just apply to luxury rides. Edmunds.com offers a free online calculator where you can estimate the true cost to own for new cars or used cars going back to the 2005 model year. Looking to buy a 2010 vehicle? Edmunds has crunched the numbers to show you which vehicle in each style and price segment it estimates will cost you the least over the next five years.
An even more radical way to keep your household’s vehicle costs down is to reconsider how many vehicles your family really needs. We went from two vehicles to one a couple of years ago. It took a little getting used to, but the savings on insurance, maintenance, and other costs have made the adjustment easier and easier. I recently did some cash flow coaching with two families and in both cases suggested switching from two vehicles to one. One family has already made the change; the other is in the process of selling their second car.
And of course, keep your vehicles as long as they’re safe to drive. By putting a relatively small amount of money into savings each month that’s earmarked for your next car, you’ll be able to buy your cars with cash. And believe me, having lived with car payments and without car payments, living without car payments is better.
How have you kept your vehicle expenses down?
Great points, Amy. I love that point about not over-buying since you don’t have a car to carry all that stuff home. It reminds me of research I saw showing that when you compare two people with similar shopping intentions where one uses a handheld basket and the other uses a cart, the one with the basket ends up buying a lot less stuff.
I sold my car 6 years ago and have been using a car-sharing program for those times when a car is necessary. Guess what happened? I don’t need a car very much, and not having a car has prevented me from the ease of over-buying when there’s a car available to haul it all home. This equals greater savings and financial freedom.