Save Thousands Car Buying by Researching Cost of Ownership

cost of ownership

If you are like most Americans, you have started shopping online more and more.

But online shopping isn’t just limited to food deliveries, grocery shopping, or clothing. About 36% of all cars purchased in the U.S. are purchased online, and a whopping 86% of car shoppers start their search online.

About 15 years ago, before vehicle shopping was as available as it is today, I was looking to purchase a car. We needed another vehicle, so we went looking for a car and I was extremely impressed with, the Cadillac CTS-V Coupe.

It was fast, sleek, and fuel-efficient. But I couldn’t afford a new one, so I was looking at two or three-year-old vehicles so that I could fit it into my budget.

In the process of looking at the cars on the lot, the salesman unwittingly talked me out of buying a car completely! He tried to talk me out of the Cadillac and into a Taurus by telling me about the cost of ownership.

Like most people, the first thing I looked at was price. How much car can I afford and what features are included?

Ofcourse, how much you can afford definitely factors into the decision, but the salesman got me thinking — what about the cost of ownership?

Comparing vehicle costs

For example, let’s say you can afford and want a 2020 Cadillac Escalade. Along with the perceived prestige of owning one, there are other factors that should be taken into account.

There are times when paying for high quality is worth it. A good, quality car will last, making your cost of ownership fall over time. But that isn’t always the case.

Something that costs more isn’t always better made. The base model Cadillac Escalade has an MSRP of $76,000, according to vehicle comparison site Edmunds.com.

The Escalade is a good car with loads of room for the kids or cargo. It gets 17 miles per gallon, which isn’t bad for a full-sized SUV, and it has some genuinely nice features.

But, what about the 2020 Chevy Tahoe?  At just under $47,000 MSRP it is a little under half the price with similar features, cargo space, and fuel mileage.

Yet the manufacturer’s suggested retail price isn’t the only difference. Even though the Tahoe isn’t as prestigious as the Escalade, the cost to the owner is an estimated $62,176 on average over a five-year period, reports car comparison site KBB.com.

In comparison, the cost of owning the Escalade is a whopping $95,542 over those same five year period. Based on just the price of the car you would spend enough owning to purchase another car outright.

2020 Best Retained Value by Vehicle

Source: KBB.com

The cost of ownership numbers includes the depreciation of the vehicle. For the Escalade, a little over half of the cost of ownership is lost through depreciation at $57,500.

The Tahoe, at half of the cost of the Escalade, loses just $31,500 in depreciation. Also included in the cost of ownership are out of pocket expenses that include fuel, insurance, financing, state fees, maintenance, and repairs.

If you live in a state with sales tax, you will spend 39% more just in taxes. Of all these expenses, only maintenance is about the same for both cars, which makes sense since each vehicle is manufactured by basically the same company. The Tahoe is also the lowest cost to own amongst full-size SUVs.

This isn’t an advertisement for the Tahoe, but rather just a side-by-side comparison example. You can do this for the Ford Explorer versus the Lincoln Navigator. You can do this for any make, model, and size of the car.

In fact, Edmunds.com has an online calculator that allows you to head-to-head compare any car you want. It’s based on a common set of assumptions, which are:

  • Ownership expenses are estimated for a five-year period
  • You will drive 15,000 miles per year
  • You are financing the vehicle using traditional financing, not lease financing
  • You have an above-average credit rating for the purpose of determining your finance rate
  • You are making a 10% down payment on the vehicle at purchase
  • Your loan term is 60 months

Next time you car shop, consider taking the savings from the lower cost of ownership and put it toward investments. You might just earn back some of that 50% depreciation.

Potential Options Payoff in Post-Covid China Rebound

The Chinese economy is starting to show signs that it is rebounding better than other economies around the world. China was the first country that had to battle the COVID-19

Retirement Income Tip: Buy High-Yielding Dividend Stocks

Imagine a scenario where you can make money while you sleep. Sounds too good to be true, right? Enter high-yielding dividend stocks. Now, there are lots of stocks in the

Beat the S&P 500 with These Specific Stocks

Today I'm going to briefly discuss a major error that most stock market participants make on a regular basis and ways in which you can substantially increase your stock returns.

Iaccino: Dollar Down, Stocks Higher, Plus PayPal Meets Bitcoin

A renewal of federal stimulus on top of monetary stimulus after the election is likely to support the stock market, says Bob Iaccino, editor of the Stock Think Tank. The

investor or pay off debt

Invest or Pay Off Debt? In a Pandemic, I’m a Stock Buyer

If you were to tell someone that you were putting any extra cash you had into the market instead of paying off debt, they might think you have lost your

bitcoin mass adoption

Bitcoin Mass Adoption Can’t Be Far Off — That Means Surging Demand

When you look at past technological developments — from the 19th century industrial revolution through the introduction of the telephone, personal computers, Internet, and smartphones — there is a typical

stocks overvalued

Is the Stock Market Overvalued? Not By This Measure

You many have heard the term “TINA” mentioned in various financial and investment commentaries in recent months. This is an acronym for “There is No Alternative.” It is built around a

clx options

Options Play: Take Advantage of Bearish Sentiment On Clorox (CLX)

We are in the middle of a global pandemic and one of the best weapons against the virus is cleaning surfaces with bleach. If we were to ask 100 people

This Predicts Bitcoin Price — and It’s Uncannily Accurate

Many investment advisors are beginning to recommend some exposure to Bitcoin (BTC) and some alternative (alt) coins, such as Ethereum (ETH). But the biggest hurdle for many analysts is how

retail spending

Retail Spending Shoots Higher, Suggesting Stocks Will Follow

Data released today by the U.S. Department of Commerce indicate that sales at U.S. retail stores rose sharply during September. Specifically, that data indicate that U.S. retail stores rose during

technical analysis

Getting Started with Technical Analysis and Options Trading

You will likely hear about technical analysis during your trading experience. Technical analysis is a discipline that uses stock prices to determine signals on when to trade. Many people swear

ignore vix

Ignore the VIX. These Indicators Matter More.

As you probably know stock prices in general moved in a volatile sideways range over approximately the past five weeks and, looking forward, I expect stocks to continue to trade