The Cost Of Owning Motor Vehicles


Welcome! You Are Here arrow3 Articles/Auto Cars/The Cost Of Owning Motor Vehicles.

The Cost Of Owning Motor Vehicles



Cost of Owning and Operating Automobiles, Vans, and Trucks
Introduction
Vehicles Used in this Study
Types of Costs
Adjustment of Costs to Other Vehicles and Localities
Applications for Study Data
Opportunities for Cost Saving

Tables



1 Vehicle and Estimating Bases
2 Sub compact 1991 Model Automobiles
3 Compact 1991 Model Automobiles
4 Intermediate 1991 Model Automobiles
5 Full-sized 1991 Model Automobiles
6 Compact 1991 Model Pickups
7 Full-sized 1991 Model Pickups
8 1991 Model Mini vans
9 Full-sized 1991 Model Vans
10 Cost Per Thousand Dollars For Various Financing Plans
11 Gasoline Cost Per Mile At Various Gasoline Prices
Worksheet to Convert Costs to a Specific Vehicle and
Locality

COST OF OWNING & OPERATING
AUTOMOBILES, VANS & LIGHT TRUCKS — 1991



Introduction

The cost of owning and operating a motor vehicle is of
major significance, as Americans experience increasing demands
on their incomes. It costs about $14,000 to purchase a 1991
intermediate-sized model year car. If it is driven 128,500
miles by one owner over a period of 12 years, the total cost to
the owner will be about $42,700. During that time it will cost
about $16,300 for depreciation and finance charges, $9,050 to
insure the vehicle, $7,800 (including taxes) for some 6,500
gallons of gasoline, $200 for oil, $5,350 for maintenance and
repair work, $1,250 for fires, $1,650 for parking and tolls,
and, for Maryland drivers, $1,100 for license, registration,
and vehicle excise tax. The pie chart below illustrates a
breakdown of total costs over twelve years for the 1991
intermediate-sized model year car. Tax revenues for gasoline
and oil are used primarily for improvements to roads on which
the vehicle is driven and account for less than five percent of
the total costs. The average annual cost of $3,560 represents
about 12.3 percent of a household’s 1991 disposable income.

This report updates The Cost of Owning and Operating
Automobiles and Vans — 1984. It traces selected vehicles in
personal use and their costs through a 12-year lifetime of
128,500 miles using 1991 data. The user is cautioned against
making direct comparisons between the costs reported in this
and previous issues. The study methodology has been modified
(details below). As with earlier reports, costs are based on
operation to typical vehicles in the Baltimore, Maryland,
suburbs. A worksheet for developing costs for the first year of
a vehicle’s life in other localities is provided at the back of
this report. Although a vehicle will usually pass through three
or more owners during its life, the cost resulting from
transfer of ownership are not included in this report.

The average annual cost of $3,560 represent about 12.3 percent
of a household’s 1991 disposable income.

Methodology For the Study: The basic methodology for this
study was modified somewhat from the used in the 1984 study.
For the 1991 study, vehicle lifetime mileage was increased from
120,000 to 128,500. The five vehicle classes used for the 1984
study have been retained, and three additional classes have
been added: compact pickup trucks, full-sized pickup trucks,
and mini vans. The average age of an automobile (7.8 years) is
higher now than it has been at any time in the post-World War
II period. The average annual mileage per vehicle is
approximately 10,700, with travel decreasing as the age of the
vehicle increases. As in the 1984 study, the cost of the home
garage or a parking facility was omitted. In a suburban
setting, parking facilities range from curb parking to paved
drive ways to carports to fully-enclosed garages, with an
equally wide range in costs. In suburban areas, garage costs
are not usually a factor in automobile purchase or use
decisions. Only costs to the vehicle owner are addressed. The
costs of vehicle emissions and other external costs of vehicle
use are not considered.

Vehicles Used in this Study


Description: The vehicle classes, repair and maintenance
operations, replacement items, insurance, fuel and oil
consumption, taxes, and other costs included in the study and
the values of the factors used to compute these costs are given
in Table 1, Vehicle and Estimating Bases. In the current study,
between two and seven vehicles were selected to represent each
vehicle class.

For this study, 29 domestic and imported vehicles were
chosen to represent eight vehicle classes: sub compacts,
compacts, intermediates, and full-sized automobiles; compact
and full-sized pickups; and mini vans and full-sized vans. The
selected vehicles represent the most popular nameplates in
their class. For each class, the selected nameplates account
for at least 47 percent of 1990 sales (using the Automotive
News assignment of vehicles to classes). The vehicles selected
are intended to be typical of new vehicles in each size
category, but, because of changing technology, they are
probably not representative of older vehicles in their
respective size classes.

The average age of an automobile (7.8 years) is higher now
than it has been at any time in the post-World War II period.

The vehicles were equipped as described in Table 1. All
have gasoline engines. The optional equipment selected is that
which the automotive industry reports to be typical for each
vehicle size group. For example, data show that about 92
percent of intermediates have air conditioning. The purchase
price of each vehicle was calculated using dealer cost plus
freight plus an estimate of dealer mark up. The mark up depends
on many factors–the size of the dealership, the dealer’s
inventory situation, the time of year, and the ability of the
buyer to negotiate. For most vehicles, the mark up is roughly
half the difference between sticker price and dealer cost.

Vehicle Life: Many things, such as individual driving
habits, climate, garage facilities, type and condition of road,
type of use, and sometimes luck, can affect the service life
and operating costs of a vehicle. Most private passenger
vehicles are now staying on the road for at least 12 years; and
the average vehicle accumulates 128,500 miles in these 12
years. The same distribution of these miles over time–12,900
miles the first year, decreasing to 8,200 miles travelled in the
12th year–has been used for all eight vehicle classes. (Annual
mileage actually does vary somewhat by vehicle class, but the
data on how it varies is weak and using different annual
mileage would reduce the comparability of results across
vehicle classes.) The complete mileage distribution is shown in
Tables 2 through 9.

The decreasing mileage distribution is consistent with the
average annual miles driven by age of vehicles; but, in normal
circumstances, an individual’s need for transportation is
relatively stable from year to year. It is unlikely that an
only car would be driven successively fewer miles each year.
What is more likely is that, as a vehicle ages, it becomes a
second or third family vehicle or its ownership is transferred
to a household that uses it less.

The average vehicle is sold or traded two or more times
during its life, often through new or used car dealers. This is
often prompted by the need for or anticipation of repairs.
Dealers serve as quality control judges of the used vehicle
trade. They wholesale those vehicles that require very
expensive or time-consuming work and make the repairs on the
remainder prior to resale. Battery and tire replacements, brake
linings, radiator repairs, body work, and numerous other
replacements and repairs are included in the used vehicle
reconditioning programs of many dealers. The additional work
done under dealer warranty does not impose direct out-of-pocket
expenditures on the vehicle owner, but these costs are
submerged in each vehicle’s purchase price. For the purpose of
this report, no effort has been made to separate them.

Types of Costs


Some owners may think of costs only in terms of outlays
for fuel, oil, tires and tolls. A more careful examination
shows that some costs occur whether or not the vehicle is
driven, while others are directly related to the amount of
travel. The travel-related group is generally referred to as
operating costs, and the other group as ownership costs.
Analysts often differ on the costs that should be included in
each category. The following defines the terms as they relate
to this study.

Ownership Costs: Ownership costs include depreciation,
finance charges, insurance, registration and titling fees, and
any taxes applied to these items. No matter how little a
vehicle is driven, the majority of the cost of each of these
items is incurred.

1. Depreciation is the loss of value of the vehicle during
its lifetime due to passage of time, its mechanical and
physical condition, and the number of miles it is driven.

National vehicle dealer groups issue vehicle value books
for different regions of the country, usually on a quarterly
basis. These values are determined by a survey of vehicle
selling prices by make and model year in each geographic area.
The values are based on normal travel, so lower or higher
odometer readings will be reflected as higher or lower
remaining vehicle values, respectively. The depreciation costs
in this report represent the projected decline in real value
over time, obtained from such reports and adjusted to exclude
the effect of inflation and the difference between prices
charged by dealers and those obtainable by individuals when
they sell their vehicle.

Depreciation is the single greatest cost of owning and
operating most passenger vehicles; however, the cost of
insurance, gas and maintenance are also significant. In the
majority of cases, the age of the vehicle is the most important
factor in determining resale or trade-in value. Other
influences are mileage, brand popularity, body style, size,
colour, and the state of the used-vehicle market.

Typically, between 25 and 45 percent of all depreciation
occurs in the first year of ownership. Much of this occurs as
soon as the vehicle is purchased (an individual cannot get as
much for a car as a dealer can), and there is additional
depreciation when the next year’s models become available.
Purchasers of used vehicles also will encounter significant
depreciation during their first year of ownership. The tables
represent the case in which a vehicle is owned by the same
family for all twelve years, so the extra depreciation that
occurs in the first year of ownership of a used vehicle is not
shown. For new cars, the percentage of depreciation occurring
in the first year is highest for compact pickups and sub compact
automobiles and lowest for mini vans.

Depreciation rates drop sharply in the second year (to
7-10 percent of the purchase price) and much more gradually
after that. Since vehicles generally are driven less as they
age, depreciation cost declines more slowly when it is
expressed on a per-mile basis than as an annual cost. For a
$13,715 intermediate-sized car, depreciation in the first year
is about $4,350. or 33.7 cents per mile; while in the second
year it is about $1,270, or 10.1 cents per mile, and in the
12th year it is $430, or 5.3 cents per mile. If the car is kept
for 12 years, overall depreciation averages 10.7 cents per
mile.

2. Finance Charges are based on a typical interest rate of
10.5 percent, a 4-year financing term and a 25 percent down
payment. However, since a number of options are available,
methods are provided so that readers can approximate their own
costs with relative ease. Most vehicle buyers either pay
interest on money they borrow to buy their vehicles, or they
forego interest they would have earned if they elect to use
savings or other investments to pay for the vehicles outright.

Lending institutions and vehicle dealerships have various
financing plans available. Institutions may differ as to the
portion of the vehicle cost they are willing to finance, the
rate of interest charged, the length of the loan term. These
conditions may depend upon whether the vehicle is new or old.
Dealers are sometimes willing to provide financing at below
market interest rates, but recipients of such subsidised loans
actually pay for them by foregoing a cash payment from the
dealer or otherwise paying a higher purchase price for their
vehicle.

A more careful examination shows that some costs occur
whether or not the vehicle is driven (ownership costs), while
others are directly related to the amount of travel (operating
costs).

Interest charged should be considered in the cost of
owning a vehicle. The lender will provide the total interest
charges, which may be divided by the accumulated miles of
travel for the length of the loan. For a 4-year loan, total
interest charges would be divided by 49,700 miles. The
computation will give the cost-per-mile figure that should be
added to each of the 4-year totals shown in the tables.

The computation of interest lost on savings is more
difficult. The cash payment for the purchase of a vehicle, the
type of savings plan, the current rate of interest, and the
period of time for monthly deposits to equal the cash payment,
will vary greatly among purchasers. Savings institutions will
provide the amount of interest that could be earned by the
deposit of an amount equal to the cash payment for the selected
period of time and the amount of interest that can be earned if
equal monthly amounts are paid into the savings account for the
same period. The difference between these two interest amounts
is the interest lost by paying cash for the purchase of a
vehicle.

Alternative methods of financing a new vehicle purchase
can make important cost difference; and merits of different
plans should be weighed carefully before a particular plan is
selected.

If $12.000 is needed to purchase a vehicle and four years
(48 months) is selected as the period of time needed to save
this amount, the monthly payment into savings would be $250
($12,000 divided by 48). The difference in interest earned by
these payments and the interest earned on $12,000 on deposit
for four years is the interest lost by paying cash. At five
percent interest compounded quarterly, $12,000 on deposit for
four years would earn $2,638 in interest. This would be lost if
the money were withdrawn from savings to pay cash for a car. To
replace the $12,000 in savings over four years, the purchaser
would have to deposit $250 at the end of each month. These
deposits would earn $1,248 in interest. The difference between
these two interest amounts ($2,638 – $1,248 = $1,390) would be
the interest cost of paying for the automobile purchase from
savings.

Alternative methods of financing a new vehicle purchase
can make important cost differences; and merits of different
plans should be weighed carefully before a particular plan is
selected. Table 10 shows the cost per thousand dollars for
financing a vehicle purchase through a loan and financing
through a savings withdrawal at various interest rates.

3. Insurance Costs are determined by vehicle type, the
amount and type of coverage selected, the purpose for which the
vehicle is used, the operator’s driving record, and the
location in which it is garaged. Insurance rates may also be
affected by unusually high or low annual mileage driven.

Automobiles are continuously exposed to the possibility of
damage, whether on the highway or parked. The large number of
vehicles on the roads and streets and in parking lots make each
vehicle susceptible to accident involvement. The cost of
repairing even minor damage has continued to increase and is
reflected in the insurance rates. For comparable coverage, the
insurance rates used for automobiles in this study average
about 50 percent more than they did in 1984 (though the rates
for full-sized vans are almost unchanged).

The insurance coverage in this study for all vehicles
except full-sized vans includes $20,000/$40,000 bodily injury,
$10,000 property damage, $2,500 personal injury protection, and
$20,000/$40,000/$10,000 uninsured motorist coverage. This
coverage is the minimum required by law in the State of
Maryland and according to State officials is the most common
coverage purchased. For full-sized vans, the insurance coverage
includes $300,000 single limit liability, $2,500 personal
injury protection, and $50,000 uninsured motorist coverage. The
higher coverage for full-sized vans reflects an assumption that
they will be used primarily for van-pool commuting. Coverage
reflects the cost for a policy where the driver has no moving
violations or accidents in the last 3 years, no youthful
drivers are covered and there is no multi-vehicle discount.
Coverage for all vehicles also includes $100 deductible
comprehensive coverage and $250 deductible collision coverage.
Collision coverage is assumed to be dropped after the first 5
years. The deductibles are higher than those used in 1984,
reflecting the effects of inflation and a trend to controlling
premiums by increasing deductibles. There is a considerable
saving to the insurance company when a large number of small
claims do not have to be processed. The saving is passed on to
the insured in lower rates.

All coverage with the exception of collision are assumed
to remain in effect for the full 12-year period covered. Some
owners of older vehicles do not obtain comprehensive or
collision coverage, either because they choose to self-insure
or because their insurance company does not offer these
coverage on older vehicles.

4. Registration, Title and Inspection Fees are fees
collected by the State and some local subdivisions in which the
vehicle is registered. All States charge a fee for
registration, and some charge an additional fee for obtaining
title to a vehicle when it is first purchased (whether new or
old). Also, some States charge fees for emissions or safety
inspections performed by a State agency or a State contractor.
The fees shown in Tables 2 through 9 consist of an annual
registration fee varying with vehicle weight, a biennial $8.50
emissions inspection fee, and a $12 titling fee applied when
the vehicle changes ownership (assumed to occur only in Year
1).

5. Vehicle Taxes consist of sales taxes and personal
property taxes levied on the value of the vehicle by some
States and local subdivisions as well as the Federal
“gas guzzler” tax and the Federal luxury tax levied on the
portion of a new-car sales price that exceeds $30,000. Tables 2
through 9 show the effect of a five percent “excise titling
tax” applied when the vehicle changes ownership (assumed to
occur only in Year 1 ). None of the vehicles selected for this
study are subject to either of the Federal taxes.

Operating Costs: Operating costs include scheduled
maintenance and unscheduled repairs and maintenance, fuel, oil,
tires, parking, tolls, and the taxes applied to these items.
The majority of each of these costs are a function of vehicle
usage.

1. Scheduled Maintenance includes the services shown in
the owner’s manual. Generally, the suggested maintenance
intervals are expressed in miles driven or period of time
owned. The services include maintenance of the cooling system,
oil changes, safety checks, tune ups, and lubrication. When the
owner’s manual recommends that an item (e.g., brakes) be
checked for wear, the cost of the labour to make such an
inspection is considered scheduled maintenance. If a repair is
found to be necessary, the cost of the replacement parts and
the labour to install them are included in non scheduled repairs.

2. Unscheduled Repairs and Maintenance shown in this
report were estimated by taking data on total costs for repairs
and maintenance (from the 1989 Consumer Expenditure Survey),
adjusting for differences across vehicle classes, and
subtracting the cost of scheduled repairs and maintenance. The
estimated costs exclude the cost of any repairs that are done

by a dealer when a vehicle is traded but that would have to be
performed by the owner if the vehicle is kept for the full 12
years.

About 65 percent of repair and maintenance costs are for
labour and 35 percent are for parts. A Baltimore, Maryland labour
rate of $48.67 per hour was used. Both the labour rate and the
prices for parts include markups that cover the cost of
buildings, equipment, supervision and other costs of doing
business. Actual labour costs for maintenance and repairs vary
widely. This factor should be taken into account in using the
results of the study.

Many dealers offer an optional extended warranty, usually
5 years/50,000 miles, which, if chosen by the vehicle
purchaser, would have a bearing on costs for major unscheduled
repairs. The optional extended warranty is not included in this
study.

Some owners of older vehicles do not obtain comprehensive
or collision coverage, either because they choose to self-
insure or because their insurance company does not offer these
coverage on older vehicles.

Some maintenance jobs, such as replacement of radiator
hoses or fan belts, are relatively easy and present the vehicle
owner an opportunity to save by performing them
himself/herself. Many vehicle owners, however, opt to pay
professional mechanics for these services.

3. Fuel is a major cost item for vehicles of all sizes.
For the gasoline-engine vehicles used in this study, the
difference in fuel costs between the 1991 full-sized car and
the sub compact over the lives of the vehicles is $2,690
(including taxes). As shown in Tables 2 and 5 respectively,
over the first 3 years, gasoline will cost $791 more for the
full-sized car than for the sub compact. This comparison is more
meaningful when considering the full-sized car provides only
about 35 percent more interior space for the nearly 50 percent
higher fuel cost.

A cost of $1.196 per gallon, including State and Federal
taxes, for unleaded regular gasoline was used for this study.
This represents an 80/20 mix of self-service and full-service
prices for the study area (in line with the average mix of
self-service and full-service purchases). Full-service costs in
the Baltimore area are about 28 cents per gallon higher than
the price used in this study and self-service costs are about 7
cents per gallon lower (though the difference averages only
about 22 cents per gallon nationally).

Fuel is a major cost item for vehicle of all sizes. For
the gasoline-engine vehicle used in this study, the difference
in fuel costs between the 1991 full sized car and the sub compact
over the lives of the vehicles is $2,690 (including taxes).

The gasoline costs shown in Tables 2 through 9 can be
adjusted to reflect changes in the price of gasoline. For each
one cent increase in the cost of a gallon of gasoline, the
total cost per mile for the full-sized car would increase
0.0558 cents. This is computed by dividing the total cost per
mile of gasoline (4.85 cents) plus State and Federal taxes
(1.03 cents and 0.79 cents) by $1.196, the cost per gallon used
in this study. Table 11 show the gasoline cost per mile for
each class of vehicles for a selected range of gasoline prices.

4. Oil Costs for a new or relatively new vehicle are
mainly dependent on the car manufacturer’s instructions for oil
changes, because little, if any, oil is burned by these
vehicles. The oil change interval is 7,500 miles for all five
study vehicles. The sub compact cars and compact pickups have an
average 4.7 quart capacity, the full-sized pickups and
full-sized vans have an average 5.5 quart capacity, and all
other vehicles have a 5-quart capacity.

5. Tires receive 514,000 miles of wear when an automobile
is driven 128,500 miles. All vehicles have radial fires and all
replacement tires are assumed to be radial. The number of
replacement tires is based on a life expectancy of 40,000 miles
for radial tires. Tables 2 through 9 presume that tires are
replaced in Years 4, 7 and 12 (i.e., at odometer readings of
40,000, 80,000 and 120,000) causing small spikes in the
operating cost figures for those three years. In practice, the
timing of these three spikes will depend upon the
tire-replacement schedule actually followed, rather than the
one assumed in this study.

6. Parking and Tolls include metered curb parking, fees
charged in parking lots, and toll charges for using private or
public highways, tunnels, and bridges.

7. Taxes on fuel and oil are the primary component of
operating cost taxes. These taxes are paid on a per-gallon
basis. The Federal gasoline tax is 14.1 cents per gallon. The
Maryland gasoline tax is 18.5 cents.

Adjustment of Costs to Other Vehicles and Localities



In this study, all vehicles use regular unleaded gasoline
at a cost, in suburban Baltimore, of $1.196 per gallon,
including taxes. If the cost in another area is $1.10, persons
living there can estimate their own operating costs by
adjusting the gasoline cost figure to reflect the lower price.
Procedures for accomplishing this are described in the section
titled Fuel. Similar adjustments can be made for other cost
items.

The costs most likely to change in the short run and to
need adjustment for specific geographic locations are fuel
prices, insurance premiums, taxes and fees, repair labour rate,
tolls, and parking charges. Also, the market value of vehicles
can differ somewhat among regions.

In general, rural costs are lower than suburban or urban
costs. This is evident in insurance premiums, primarily because
vehicles in rural areas are exposed to less traffic and fewer
opportunities for accidents. Retail costs and labour rates are
also usually lower in rural areas. Operating costs (fuel, oil,
tires, repairs, etc.) per mile for vehicles in rural operation
also tend to be lower than for comparable vehicles in suburban
use because there are fewer traffic control devices and less
congestion on rural roads.

The worksheet included at the back of this report has been
prepared as a guide so that costs for the first year of a
vehicle’s life can be developed for specific vehicles and for
other localities.

If current per mile costs for an older vehicle are desired,
the appropriate column of Tables 2 through 9 to use is the
first one that shows a cumulative mileage that is at least
equal to the mileage currently on the vehicle’s odometer. (If
costs over the next year are desired, an additional allowance
should be made for miles expected to be driven over the next
six months.) This column can be used to identify cost factors
for everything except depreciation. Since depreciation is
dependent on both car age and mileage, local used car prices or
“book” values can be used. The figures shown for fuel and
scheduled maintenance may also be slightly low for a vehicle
built several years ago, since these figures are for vehicles
with 1991 technology.

It should be noted that a family’s annual auto usage does
not usually match the mileage distribution in the tables. As
mentioned before. a family would drive approximately the same
number of miles each year. while the tables show a decreasing
annual mileage pattern. This is because the mileage used in
constructing Tables 2 through 9 represent averages for annual
miles of all new vehicles, all one-year-old vehicles, all
two-year-old vehicles, etc. Each of these averages represents a
mix of vehicles that may have been purchased new and used and
may serve as first vehicles, second vehicles, third vehicles,
etc. If the family customarily drives 12,900 miles per year, at
the end of three years its total mileage would be 38,700.
Tables 2 through 9 show the accumulated mileage for Years 1-3
as 37,800. The total miles a car has been driven may not always
be a good measure of its wear or condition. A long highway trip
produces less wear than the same number of miles driven around
town in stop-and-go traffic.

The total vehicle cost per mile is lower for the
high-mileage driver because depreciation in the early years of
a vehicle’s life is determined more by age than by miles and
because some of the annual charges, such as insurance, do not
increase in direct proportion to mileage. However, most
insurance companies charge lower rates for pleasure and
recreational uses of vehicles and higher rates for vehicles
used directly for work or in relation to business, and many
companies apply a surcharge for high-mileage drivers in both
categories.

To some degree, the purpose for which a vehicle is used and
the circumstances of its use will dictate the vehicle-cost
pattern. For example, the high-mileage driver will find that
tire replacements should be moved to earlier years than those
shown in this study.

Applications for Study Data


Choosing Your Next Vehicle: Choice of an
automobile–full-sized, intermediate, compact, or
subcompact–is based on more than the consideration of cost.
For the motorist who needs the space provided by the full-sized
car because of a large family, car-pool needs, or equipment to
be carried, the economic and size advantages of smaller cars
must be foregone. If space needs are not compelling, cost
considerations may lead the motorist to choose a smaller car.
Dollar depreciation, financing and fuel costs are substantially
lower for sub compacts and compacts. Also, repair costs
generally are lower for smaller cars, tires cost less, and, in
some States, registration fees are lower. Non-cost advantages
are manoeuvrability in city traffic and ease of curb parking.
The advantages of larger cars in capacity, comfort, safety and
possibly status can be compared to the dollar costs incurred to
obtain these benefits.

To some degree, the purpose for which a vehicle is used
and the circumstances of its use will dictate the vehicle-cost
pattern.

When To Trade In: There is no set answer to the question
of when to trade in or to sell a vehicle. Monetary
considerations are only part of the answer. Vehicle style,
size, mechanical features, dependability, as well as the
availability of money. are also factors in the decisions
regarding when and which vehicle to purchase. A vehicle owner
can minimise the depreciation costs by keeping the vehicle
longer. The “annual trader” drives a current model vehicle all
the time, but depreciation for the intermediate-sized car will
cost about $52,000 over a 12-year period (12 times the first
year depreciation). A “two year trader” pays about $34,000 in
depreciation. This is a saving of $18,000 from the “annual
trader’s” costs, and even more can be saved by becoming a
“three-year trader.” Of course, consideration must be given to
the outlays for necessary repairs and replacement tires when
the vehicle is kept longer.

Once the vehicle-use pattern is determined, the owner may
be able to relate costs to those shown in this report and to
decide when it will be most advantageous to trade vehicles. Of
course, comfort, dependability, and appearance are important to
most vehicle owners, and these weigh heavily in the purchasing
decision.

Ride sharing is another effective way to reduce automobile
expenses . . . The cost for an intermediate car operator by a
single driver is 33.25 cents per passenger mile compared to a
cost of 8.31 cents per passenger mile for the same car with 4
occupants.

Business Use Of Vehicles: This study is not intended to
establish the basis for determining an appropriate
reimbursement for costs associated with use of an employee’s
personal vehicle for business purposes. The results of the
study may be useful as a general guide for determining
reimbursement rates; however, many factors, such as higher
annual mileage and special requirements pertaining to purchase
or upkeep of the vehicle related to use for business purposes
should also be taken into account. Information concerning
reimbursement for private vehicle use can be obtained from
business travel advisory services that have made studies of
costs for specific vehicles and groups of vehicles under
various conditions of use.

Opportunities for Cost Savings



Vehicle costs can be minimised by selecting the smallest,
most economical and fuel-efficient vehicle consistent with a
family’s needs and by avoiding unnecessary use.

During the first year of operation, intermediate-sized cars
have daily owning and operating costs of $21.35. The portion
attributable gasoline costs, including taxes, amounts to $2.14.

Throughout the 12-year life of these vehicles, fuel and
oil costs, including taxes, would account for about 16 percent
of the total cost for sub compact cars, about 18 to 20 percent
of total costs for other cars, compact pickups, and mini vans,
and 24 or 25 percent for full-sized pickups and full-sized
vans. These figures indicate that substantial savings can be
achieved by conserving fuel. This can be accomplished through
more efficient driving habits, careful planning to eliminate or
combine trips, proper vehicle maintenance, and ride sharing.
Fuel efficiency should also be considered when selecting a new
vehicle both in determining the size of vehicle and the
particular model within a size class.

The U.S. Department of Energy has published the “1992
Gasoline Mileage Guide” containing the Environmental Protection
Agency’s fuel economy estimates. Consumer Reports also
publishes fuel-efficiency estimates for individual vehicles as
well as a qualitative information on relative costs for
depreciation and for repair and maintenance.

Ride sharing is another effective way to reduce automobile
expenses. Most people find that work trips are the most
convenient for ride sharing. For example, if an auto is
principally used for the work trip, and the individual
rides hares with another and uses that auto 50 percent of the
time, mileage and depreciation will likewise be reduced.
According to the data generated for this study, the cost for an
intermediate car operated by a single driver is 33.25 cents per
passenger mile compared to a cost of 8.31 cents per passenger
mile for the same car with 4 occupants. For a 9 person van-pool
the cost drops even further to 4.95 cents per passenger mile.
In addition, use of “High Occupancy Vehicle” lanes not only
speed the work trip but reduce depreciation on an automobile,
by avoiding daily “stop and go” travel on congested highways.
Data from the Federal Highway Administration’s 1990 Nation wide
Personal Transportation Survey show that travel to work and
back comprises 32.8 percent of all personal driving, providing
the opportunity for substantial cost savings by ride sharing.

Table 1

Vehicle and Estimating Bases


Vehicles and All vehicles are 1991 models with
Equipment gasoline engines, automatic transmission, power
disc brakes, air conditioning, tinted glass, FM
stereo, speed control, rear window de fogger,
tilt steering wheel.

Additional equipment: Sub compact automobiles (6
nameplates) – power steering
Compact automobiles (4 nameplates) – power
steering
Intermediate automobiles (6 nameplates) –
power steering
Full-size automobiles (3 nameplates) – power
steering, cassette deck, pulse windshield
wipers, power windows, power door locks, left
remote mirror, and white side walls
Compact pickups (3 nameplates) – none
Full-size pickups (2 nameplates) – power
steering, overdrive, cassette deck, pulse
windshield wipers, power door locks, left
remote mirror, and white side walls
Mini vans (3 nameplates) – power steering and
overdrive
Full-size vans (2 nameplates) – same as
full-size pickups plus power windows

Finance Charges are based on an interest rate of 10.5
percent, a 4-year loan term and a 25 percent
down payment.

Repairs and Scheduled – as specified in owner’s manuals.
Maintenance Assumed to be performed by professional
mechanics. Unscheduled – derived as a ratio of
unscheduled to scheduled maintenance using data
from the 1989 Consumer Expenditure Survey.
Excludes cost of repairs performed under normal
or extended warranty, repairs performed by
dealers when traded, and repairs of collision
damage.

Replacement Twelve new radial tires purchased during the
Tires life of the vehicle.

Fuel Price: $1.196 per gallon of gasoline,
including taxes.

Average gasoline mileage:

Sub compacts: 26.23 mpg
Compacts: 22.86
Intermediates: 19.87
Full-size cars: 17.99
Compact pickups: 21.69 mpg
Full-size pickups: 14.48
Mini vans: 17.54
Full-size vans: 11.23

Oil One oil change every 7,500 miles. One extra
quart of oil assumed between changes.

Average capacity: 4.7 quarts for sub compacts
cars and compact pickups; 5.5 quarts for
full-size pickups and full-size vans; 5.0
quarts for all other vehicles.

Insurance Full-size van: $300,000 single limit
liability, $2,500 personal injury protection,
$50,000 uninsured motorist, $100 deductible
comprehensive, and $250 deductible collision
coverage for the first 5 years of the life of
the vehicle.

All other vehicles: $20,000/$40,000 bodily
injury, $10,000 property damage, $2,500
personal injury protection, $20,000/$40,000/
$10,000 uninsured motorist, $100 deductible
comprehensive, and $250 deductible collision
coverage for the first 5 years of the life of
the vehicle. Coverage is the minimum required
by law in the State of Maryland and according
to State officials is the most common coverage
purchased.

Parking Includes average of 1.19 cents per mile for
and Tolls parking and 0.09 cents for tolls ($138 per
year for a vehicle driven 10,700 miles per
year).

Taxes Includes taxes at 1991 rates: Federal excise
and Fees tax on gasoline (14.1 cents per gallon)
effective December 1, 1990; Maryland tax on
gasoline (18.5 cents per gallon) effective
June 1, 1987; Maryland excise titling tax (5
percent on retail value of vehicle); Maryland
sales tax (5 percent on other retail items);
Maryland title fee ($12) if vehicle is
financed, registration fee ($27-$40.50,
depending on weight), and emissions inspection
fee ($8.50 in alternate years).

[Tables Omitted]

Worksheet to Convert Costs to a Specific Vehicle and Locality



Your Costs

1. Amount paid for your car $________

2. Cost of a tire to fit your car $________

3. Price of gasoline per gallon (including tax) $________

4. Price of oil per quart (including tax) $________

5. Annual cost of your insurance $________

6. Estimated cost of your daily parking $________

7. Estimated annual tolls $________

8. State registration fee for your car $________

9. Sales/titling/gas guzzler and/or personal
property tax $________

10. Mechanics labour charge per hour $________

11. Monthly interest cost ((Monthly payment
x Number of months for loan) less (Amount
of loan + Number of months for loan)) $________

12. Term of your auto loan $________

13. Your mileage for the year $________

Estimated First Year Cost

Ownership Costs (First Year)
Total Cost per
(Total
Column +
line 13)
14. Depreciation (37%2 of line 1) $________ ________

15. Insurance (line 5) $________ ________

16. Registration fee (line 8) $________ ________

17. Financing (12 x monthly interest cost) $________ ________

18. Sales/titling, and/or property tax
(line 9) $________ ________

19. Inspection fee (include only for
years in which inspection is
required) $________ ________

Operating Costs3 (First Year)

20. Gasoline (Annual gallons
used x line 3) $________ ________

21. Oil (line 13 + oil change interval
x oil capacity x line 4) $________ ________

22. Maintenance and Repair ((0.35 + 0.65
x line 10 + $48.67) x first year
scheduled and unscheduled repair and
maintenance costs from appropriate
table (2-9) for your vehicle class) $________ ________

23. Parking (240 x line 6) or actual
days parked x daily cost $________ ________

24. Tolls (line 7) $________ ________

25. TOTAL COST (Add lines 14-25) $________ ________


1 If you wish to compute your costs for other than the first
year, note additional instructions in section titled
“Adjustment of Costs to Other Localities.”

2 Use 37% for sub compact, 35% for compact, 30% for
intermediate, 29% for full-size car, 37% for compact pickup,
28% for full-size pickup, 26% for mini van, and 34% for
full-size van.

3 All maintenance and repair, both scheduled and non scheduled,
are included in operating costs.






———– END ———–

You are heresignpostArticles/Auto Cars/The Cost Of Owning Motor Vehicles<

arrow_upTop Of Page

dog2