How much is your car actually costing you? - 28 Sep 2009 14:57
Many South African drivers are under the impression that their biggest car cost is the car payment or monthly installment. While this would be great for un-financed or paid-off cars, it’s not the case. Everyone’s car suffers depreciation, especially cars under 5 years and luxury cars. The cost of owning a vehicle (how much you pay for it and it’s depreciation) combined with the costs of running the vehicle (petrol and maintenance) add up to a price you might not have banked on when taking out your car loan.
A BMW 320d runs at a lower cost than a lower end car such as a Volvo S40 T4. The BMW’s fuel consumption is 18 kilometres to the litre while the petrol-consuming Volvo is 10 kilometres to the litre. This would make the BMW a cheaper option yet the rate of depreciation of the BMW is 20% per annum versus the Volvo’s 10%. Although the distance you travel in your car does have an impact on the depreciation, the depreciation over time is much more making distance depreciation inconsequential. The ownership costs remain the same month to month unlike maintenance costs.
The cost of your car is influence by ownership costs:
Running costs include:
If you’re thinking of buying a new car weigh in all the costs and not just the amount you’ll have to pay back to the bank. It could save you in the long run.
Many South African drivers are under the impression that their biggest car cost is the car payment or monthly installment. While this would be great for un-financed or paid-off cars, it’s not the case. Everyone’s car suffers depreciation, especially cars under 5 years and luxury cars. The cost of owning a vehicle (how much you pay for it and it’s depreciation) combined with the costs of running the vehicle (petrol and maintenance) add up to a price you might not have banked on when taking out your car loan. A BMW 320d runs at a lower cost than a lower end car such as a Volvo S40 T4. The BMW’s fuel consumption is 18 kilometres to the litre while the petrol-consuming Volvo is 10 kilometres to the litre. This would make the BMW a cheaper option yet the rate of depreciation of the BMW is 20% per annum versus the Volvo’s 10%. Although the distance you travel in your car does have an impact on the depreciation, the depreciation over time is much more making distance depreciation inconsequential. The ownership costs remain the same month to month unlike maintenance costs.
The cost of your car is influence by ownership costs:
- depreciation: the value your car loses over time
- finance costs: the interest you pay on your car loan
- opportunity costs: the amount you could have earned if you had done something else with the money instead of paying off a car
- insurance costs
- miscellaneous costs: registering the license, overnight parking etc.
Running costs include:
- fuel
- maintenance: such as services and repairs
- miscellaneous costs: like toll gates, car washes and traffic fines.
If you’re thinking of buying a new car weigh in all the costs and not just the amount you’ll have to pay back to the bank. It could save you in the long run.