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New Car Guide
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Sunday, 19 October 2008 08:07 |
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There is an old adage which goes something like this: "The cheap man always pays more in the long run."
 Consumer Reports analyzed the cost of ownership across the 300 models in their database.
Consumer Reports magazine recently reached a similar conclusion when it announced the results of a study that compared the cost of ownership of more than 300 cars.
Consumer Reports noted that a car with a cheaper sticker price can often cost consumers more in the long run when compared to a higher-priced alternative.
The report, which appeared in Consumer Reports' Annual April Auto Issue, was based on a comparison of the 300 models in the Consumer Reports database. In short, the report concluded that a car's sticker price is one of many factors that should be taken into account when trying to decide between two cars in the same class.
For example, at about $17,500, a Mitsubishi Lancer is priced $5,000 less than a Mini Cooper. But when factoring in the total costs of ownership for each vehicle, the Lancer could cost drivers about $3,000 more to own over the first five years, according to the study.
And the purchase price of a Toyota Highlander is about $3,000 more than a V6 Ford Explorer -- but the Explorer's total cost of ownership is an extra $6,500 over those five years.
The study took into account such factors as depreciation, fuel costs, interest paid on the car loan, insurance, maintenance, repair costs and sales tax. Online subscribers to www.ConsumerReports.org can compare the costs for one, three, five and eight years of ownership.
"We think this information is valuable for consumers who have shopped around, and settled on a couple of different cars they like, and then have to decide on one or the other," noted Cliff Weathers, Consumer Reports' deputy editor, autos. "We're giving this information to the consumer to use as a tool to help them make that decision, a tie-breaker, if you will.
"If they're trying to decide between a Pontiac Solstice and Mazda Miata, for example, they can go to our Web site and find out which one will cost less to own over that five-year period. And in this particular case, the answer would be the Miata -- which was one of the least expensive cars to own of all the cars evaluated in our survey."
Depreciation was factored into the estimates based on the assumption that the vehicle will eventually be traded in when buyers make their next car purchase.
"Depreciation is the factor that accounts for the highest cost of ownership," Weathers explained. "Depreciation accounts for 48 percent of the cost of ownership over the first five years."
Different models depreciate faster, and more significantly, than others. In order to calculate depreciation for this owner-cost comparison, Consumer Reports started with the price that a typically-equipped model generally sells for. If a particular model often sells at a largely-discounted price that was also factored in.
Consumer Reports then deducted the wholesale trade-in value of the car at the end of the period, based on data from their Used Car Price Service, Weathers explained. In those cases when Consumer Reports didn't have depreciation data for a new model, it used estimates based on comparable vehicles.
The Fuel Factor
The second-biggest factor in cost-of-ownership, after depreciation, is fuel costs, which account for 21 percent of the total ownership costs. "Fuel economy can really make a big difference," Weathers said. "If you have a car that gets 25 miles per gallon, and another car that gets 19 miles per gallon, that's a potential difference of thousands of dollars over five years, if you're driving 12,000 miles a year."
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