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When buying vehicle, look at how much it will cost to own

You've driven a hard bargain and gotten a good price on the vehicle you just bought, but do you know for sure that those upfront savings won't be eroded by the cost of owning the vehicle?

Obviously, if a car costs more to maintain or guzzles more gas than a similar make and model with a slightly higher sales price, your initial savings may be devoured by these subsequent costs. Costs of ownership for similar class vehicles can vary by thousands of dollars, yet consumers often overlook the lifetime costs of owning and operating a vehicle as they search for a good deal on the initial purchase.

"How do you get a handle on that?" asks James Bragg, a consumer advocate and author of The Car Buyer's and Leaser's Negotiating Bible, pointing out the many factors that affect how economical a vehicle is to own and operate.

You have to consider more than fuel or repairs, Bragg says.

"The biggest cost of owning a car is the difference between what you pay for it when it's new and what you get for it when you sell. Some cars drop like a rock while others hold their value really well."

When looking at how economical a vehicle is to own and operate, many consumers do tend to look at out-of-pocket operating costs like fuel and repairs rather than fixed costs like depreciation, says Joe Wiesenfelder, an automotive expert at Cars.com.

" Buyers should always consider the cost of ownership, but the fixed costs should be the main concern, he says. It's not unusual for a vehicle to depreciate $10,000 in three years, yet it would be unusual for you to have operating costs close to that, especially during the warranty period."

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Calculating ownership
There are resources that can help. Intellichoice.com puts out two CD-ROMs, "The Complete Car Cost Guide" and "The Complete Small Truck Cost Guide," that provide cost-of-ownership information for each model year. They show the five-year costs of depreciation, financing, insurance, state fees, fuel, maintenance and repairs. The total of these costs is compared to the average total costs of ownership of vehicles in its class.

The cost of repairs listed in these reports can be taken as an indicator of a vehicle's reliability or dependability. However, some very reliable cars may cost more to repair at each visit because their parts cost more than other cars in its class, Butler points out. That's why you might want to take a look at the J.D. Power and Associates Vehicle Dependability Study each model year.

There's a bit of a correlation between depreciation and reliability, Bragg says. Cars that don't need much in the way of repairs tend to hold their value better than cars that aren't so reliable. Yet some of those very reliable, value-holding vehicles may cost more to insure because they may also be among the most-stolen vehicles, he adds.

No one suggests that a consumer can plug these factors into a matrix to come up with an absolute answer. In the end, weighing the importance of these costs depends on personal circumstances and preferences. For instance, Bragg says that safety is his first consideration, and safety is a factor whose value each individual must determine. It won't show up in anybody's list of ownership costs.

Even when considering measurable costs, "you're going to have to determine which is going to be more of a factor for your wallet," Wiesenfelder says. "If you do a lot of driving, you're going to want to look at fuel-economy costs, but for most people that is not the biggest cost. It's things like insurance: If you have a vehicle that's on the most-stolen list, then insurance could be a huge differential."

There are plenty of resources online to help. Here are some good ones:

  • Edmunds.com has a display of the True Cost to Own, which is information on the additional costs involved, not only in a vehicle purchase but also in the ownership. For instance, there is always fuel, maintenance and repair costs awaiting the car buyer.

  • Cars.com presents top 10 lists of residual values from Automotive Lease Guide, most frequent theft claims from the Highway Loss Data Institute, and its own 10-best and 10-worst vehicles for fuel economy. In addition, it presents J.D. Power and Associates' Dependability Study going from most reliable to least reliable.

  • Intellichoice.com publishes its "Best Overall Values of the Year" list in six vehicle classes: cars over $24,000, cars under $24,000, SUVs over $30,000, SUVs under $30,000, trucks over $27,000, and trucks under $27,000. For instance, the site picks the 2004 Toyota Avalon XLS four-door sedan as the best overall value in cars over $24,000. The cost of ownership is figured on a five-year basis, and the approximate costs of depreciation, financing, insurance, state fees, fuel, maintenance and repairs are listed. The total of these costs is compared with the average of the total costs for other similar vehicles. In the case of the Toyota Avalon XLS, the five-year cost of ownership would be $33,074. The average for similar vehicles would be $37,093. So the Toyota would offer a savings of $4,019 over five years.

  • You can also search Intellichoice.com for the costs of ownership of specific vehicles and how those costs compare with the average costs of other vehicles in its class. The site also allows you to make side-by-side comparisons.

Do your research well, and you'll know whether that manufacturer's rebate is a good deal or just an invitation to pour money down the drain after you take delivery.

-- Updated: Jan. 20, 2005

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