Can you really afford that car? Find true cost to own

Chervolet AveoI wrote before about bargaining techniques you can use to get the lowest price on a new car. I even mentioned how you can get a car for free. The price you pay for a car is certainly an important part of a good car deal however bargain hunting doesn’t stop there. You need to look beyond the sticker price if you truly want to find the best car for your money.

Edmunds, an online market place for car buyers, has come up with a formula to calculate what the car is really costing you during the first five years of ownership. They call it “True Cost to Own” and it includes a few factors that together reflect total cost of car ownership.

The Edmunds Inc. True Cost to Own (TCO) pricing system calculates the additional costs you may not have included when considering your next vehicle purchase. These extra costs include: depreciation, interest on your loan, taxes and fees, insurance premiums, fuel costs, maintenance, and repairs.

Use this online tool to enter your car model and you will be able to see the estimate of the total amount of money you will have lost provided you sell the car after 5 years.

While I don’t trust the numbers to estimate what MY costs will be since it is something highly dependent on individual circumstances, however I find the tool very useful for comparing cars to each other. Edmunds have realized it as well and started a monthly roundup of “low cost” cars. Below are some of last month finalists from the categories that attract me. Go to Edmunds TCO results for the complete list.

Sedan Coupe Wagon
Under $15,000 Chevy Aveo Kia Rio
Under $20,000 Honda Fit Ford Focus Toyota Yaris
Under $25,000 Toyota Prius
Under $30,000 Toyota Camry Hybrid Subaru Legacy Honda Accord

Another thing I noticed while playing with the tool is that the cost to own a used car on average comes lower than a similar new car, which I expected. You spend more money on repairs but you save much more on deprecation, taxes and loan finance charges.

What car do you have? Did you buy it new or used? Are you likely to consider Edmund’s “True Cost to Own” when choosing your next purchase?

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