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Depends on what you want to do with it.
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Posted by Ari [Email] (#2847) [Profile/Gallery] (more from Ari) on Fri, 11 Jan 2008 06:47:13 Share Post by Email
In Reply to: Cost of ownership? Formula?, Railhead [Profile/Gallery] , Wed, 9 Jan 2008 17:53:22
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If you're looking to cost things out for business/tax reasons, John's quote of the IRS figure is a good one. Or you can record all of your costs, take the business part of it, and use that as a deduction.

That number is based on some average, and usually with newer cars, so depreciation is a big part. As they say, YM(WILL)V.

If you're trying to compare two cars for cost of ownership, you can come up with any set of formulae. And just about any of it is a crapshoot.

If your car is a garage queen, your cost per mile will be lousy. Not many miles. And garage queens still take maintenance, and they still depreciate. Don't use much gas. Cars will lots of miles will have a lower cost per mile, but they will require more maintenance, and use more gas.

And, of course, if you have a garage queen, you're not going anywhere. So if you still want to go places, you either have to figure the cost of alternate transportation, or walk, or depend on the kindness of strangers.

In general, a good used car with low miles is a lot cheaper to run than a new car. No depreciation hit, lower acquisition cost, lower insurance, and lower taxes/registration, if they are based on value where you live. If it's out of warranty, you take on repair costs, but if you bought the car new, that was inevitable anyway.

And all cars, new or used, have maintenance costs. Yes, so folks will offer free oil changes. Whoopee. Maintenance costs are tires, coolant flushes, brake flushes, brake pads, etc. I differentiate between Maintenance and Repairs. Maintenance is, well, maintenance. What the car needs to avoid trouble. Repairs are unexpected incidents. Cars are more likley to require repairs later in life, but that's all luck. Someone can drive a Jaguar (poor rating) for 100K miles and have no failures, and someone else could drive a (highly rated) Toyota and replace parts left and right. Based on probabilities, you'll have fewer repairs with the Toyota.

But unless you're going to delve into risk-weighted calculations, it's madness. And again, that only works if you have a fleet of cars. You'll have fewer.

What do you want to do with the information? Compare two cars? Figure your budget for a car? What do you need a car to do?

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