While there’s a lot of pride in scoring a deal on the car dealer’s lot, what matters most is the vehicle’s true cost of ownership. In other words: how much it’s going to cost you to maintain that car over time. I tapped Yahoo! Autos contributor Lawrence Ulrich for a tour of vehicles that, despite some of their upfront incentives, will likely end up costing you more than you think.
“People get so hung up on that bottom-line sticker price that they’re not thinking about the long-term ownership cost,” says Ulrich. “What can seem like a sweet deal in the beginning can go sour a few years down the road.”
This time of year, in the middle of the fall season, dealers will be aggressive in trying to steer you toward cars they want off the lot to make room for next year's inventory. Ulrich says the biggest hidden cost for buyers is depreciation and you have to ask why these models are on sale.
“The 2013 [inventory] is already rolling onto the lot,” he says. “When [the dealer] offers you a discount on the 2012 model, you better make sure it’s a big discount and not just a token amount.” Ulrich warns that the thousand-dollar or so discount you’ll be offered won’t begin to account for the difference in resale value between the 2012 and 2013 models many years down the road.
Let’s take, for example, the Chrysler 300. “They’re offering huge discounts on this car,” says Ulrich. “What they’re not telling you is that this car has among the worst resale values in its class.” He suggests a few newer, more competitive models such as the 2013 Honda Accord, Ford Fusion, Hyundai Sonata and Nissan Altima. They’re available at full sticker price, but have much higher resale value. “These cars will hold nearly 60% of their value after three years,” says Ulrich. The Chrysler, on the other hand, he says, will lose almost 60% of its value after three years. If you’re not planning on holding onto the car for a while, you may want to go with the newest model.
Next, don’t be blinded by fuel economy. Ulrich says we shouldn’t assume all small cars get great, or the best mileage. “Marketing tends to get us all focusing on these magic fuel economy numbers. If you’re already getting 35 miles per gallon, moving up to 37 or 38 mpg is really just putting a few pennies back in your pocket.” He adds that fuel economy can be a deciding factor if it provides a huge savings. “A great example is the Ford Fusion hybrid. It gets 47 per gallon in the city or highway. That’s probably 50% better than your average mid-size car, which means half of the cost to fill your tank.”
Also, consider a car’s maintenance cost when taking the plunge. Luxury cars have higher maintenance costs, on average. Ulrich says once the car is out of warranty, routine things like new brakes pads and oil changes are much more expensive than with a mainstream vehicle. Keep in mind that even though insurance rates have more to do with where you live and the kind of driver you are, some models also carry heavier premiums. According to Ulrich, cars that are worth more also cost more to insure, so sporty cars for example, ones with two doors or no back seat, are going to cost you. “A great example is the Scion FRS and its sister car, the new Subaru BRZ. They’re terrific $25,000 sports cars, but you’re definitely going to be paying more money for that pleasure,” says Ulrich.
At the end of they day, let’s not forget, it’s also important that you enjoy your car. Sticker price matters but satisfaction is not to be ignored. Drivability and comfort should also factor into your car-buying decision. Considering design, performance, comfort, safety and other attributes will not just get you a great deal, but ultimately a car you enjoy driving.
As always we want to hear from you. Is there a car that’s been costing you an arm and a leg? Connect with me on Twitter @Farnoosh, using the hashtag #finfit.
Special Courtesy to Enterprise for making this video possible.