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True Cost to Own (TCO) - Hidden Costs of Car Ownership

160 messages,  Last post on Dec 31, 2009 at 12:08 AM

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Messages Page 1 of 16

#2 of 160 by kirstie_h HOST

May 02, 2002 (1:07 pm)

Which costs more, the $12,000 car or the $15,000 car? Sounds simple, but as we all know, the purchase price isn't all that's involved in the true cost of a vehicle. Check out the article and new tool at Edmunds.com:

True Cost to Own (TCO): Revealing the Hidden Costs of Car Ownership

http://www.edmunds.com/advice/specialreports/articles/59897/article.html

kirstie_h
Roving Host
Edmunds.com

#3 of 160 A Discrepancy by fwatson

May 02, 2002 (1:32 pm)

I just tried the new TCO. I find one major fault with it. The problem is that it uses MSRP as a basis for it's TCO figure.
 
That can not work properly, as MSRP is not the figure paid by most new car buyers. In order to come up with a proper conclusion, it would have to allow the user to enter the ACTUAL price to be paid for the car, whether that is below MSRP, or as is sometimes the case, there is a surcharge placed on the car by the dealer in excess of MSRP.
 
Without the ability to reflect the actual purchase price, IMO the TCO figure is useless.

#4 of 160 good idea but no explainations. by mrdetailer

May 02, 2002 (3:00 pm)

I really liked the concept, but surprizingly I found that some of the total costs of ownership changed. When I compared a Mazda, a Taurus came up and listed its cost at approx 31K. When compared with a Nissan Maxima it's cost was 34K why the difference?
 
Also an explaination of how repair and maintenence costs would help.

#5 of 160 A Discrepancy by bkurilko

May 02, 2002 (4:25 pm)

fwatson...you are mistaken about using MSRP as a basis for TCO. Edmunds used its TMV data to drive the depreciation and thus TCO values. You are right however that using MSRP would be wrong. Why use a blunt instrument (MSRP) when you have a refined instrument (TMV) at your disposal?
 
mrdetailer...TCO changes by trim. I am sure that the Taurus that you compared to the Mazda and the Taurus that you compared to the Nissan Maxima were different trims having different TMV values, possibly different engines, etc. and thus the different values.

#6 of 160 bkurilko by fwatson

May 02, 2002 (4:39 pm)

I will have to check to see what you mean by TMV. But my point is that I paid $8000 less than the purchase figure they give for the car I just bought. And they have not taken that possibility into account. In the same way, they have not allowed for those $1000 wax and stripe jobs, and "additional dealer profit" that is added to many new models that are highly popular.
 
Until the person using this program is allowed to enter the purchase figures they have gotten from dealers, the TCO can not reflect the actual overall cost of buying and owning the vehicles.
 
That $8000 may disappear in depreciation in the first year or so. But at the same time that $8000 in depreciation can not be a part of ownership cost because it has been completely offset by the $8000 reduction in the initial purchase price.
 
I assumed they were using MSRP, because both of the cars I checked had purchase prices virtually identical to MSRP.

#7 of 160 llaumann by laumann

May 02, 2002 (5:26 pm)

Explanations of the methods and assumptions used in each of the cost categories can be viewed by clicking on the word - e.g., Maintenance or Repair.

#8 of 160 by bkurilko

May 02, 2002 (5:48 pm)

fwatson...TMV stands for True Market Value and reflects the market transaction price. The number used in TCO is the TMV for the "typically equipped vehicle." Your car may (and probably does) have more or less options than the typically equipped car. There are no "mop and glow" adds in there. I know Edmunds plans to give users the ability to customize the vehicle configuration to more accurately establish the TCO for the user's SPECIFIC car in a future iteration. This goes for each of the TCO categories such as insurance, etc.
 
The key is to view at how cars compare in terms of costs per mile.

#9 of 160 TMV by fwatson

May 02, 2002 (5:55 pm)

Upon further examination, starting with True Market Value, I find even greater discrepencies in the figures.
 
Breaking down the TCO shows in my situation, that due to the greatly reduced price I paid, they show more than $800 too much in sales tax and fees. In addition, I have no financing charge (paid cash). That accounts for another $6500 over the 5 years to be subtracted. That is not even remotely offset by any interest or dividends I could get on that money in today's market. My insurance runs about one half of what they are showing, which makes a further $2500 mistake over the 5 years.
 
I will drive the car only one third the mileage they use, which will not only lower maintenance costs, but cut my fuel bill accordingly, or about $1500.
 
I will accept their depreciation and repair figures. All in all, instead of the close to $40000 they show as my TCO, mine will be about $29000. That is a very large difference, and I have given them the advantage by using conservative figures for the differences.
 
As a very rough estimating tool to compare cars, there may be some value to TCO. As an accurate indication of ACTUAL TCO, in my case it is totally useless.

#10 of 160 #8 fwatson. by artwis

May 02, 2002 (6:53 pm)

I agree with your post. By not using actual price the TCO is off immediately. Then throw in the other factors and there is a LARGE difference. If for example I compare two vehicles and one has no rebate and the other has a $3000 rebate which is ignored that is a $600 per year difference between vehicle #1 and vehicle #2 figured over a 5 year period. Add in all the other "assuptions" and you will end up being WAY off the mark as you did. To make the TCO accurate it would have to allow the user to put in their own figures but then you could do all this yourself and get a accurate tco estimate on your own without this site.
As far as using TMV for the price. I have found that TMV is not even close in many instances. It doesn't consider ad fees or rebates etc.
TCO site is not a bad idea but it's a long way from being very usefull. Inaccurate info is worse than no info at all!!

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