Debt Free

Continuing with the cost reduction as a method of debt reduction theme, one area that you should be sure to attack is automobile related expenses. According to the U.S. Government (they are all knowing, after all), in 2005, the average operating cost per mile for owning and operating a vehicle in the U.S., assuming 15,000 miles driven, was 52.2 cents. Fuel accounted for a mere 18.2 % of this total. The moral here is that if you only consider fuel costs when calculating travel costs, you’re cheating yourself. Other expenses such as maintenance, insurance, depreciation, repairs and tires account for the balance of associated costs. 

Obviously, you can save money by being frugal when it comes to choosing an automobile in the first place. Buying used, for example, erases much of the deprecation hit you’ll take when driving that new Silverado off the lot. When buying a new ride, you should check the depreciation stats to determine how much you’ll lose in that drive off the lot and every year of ownership thereafter. If you plan to keep the vehicle until it turns into a rusting hulk, it’s no big deal, but if selling it is in your future, especially within 3 years, you should concern yourself with the depreciation. Depreciation also is used to calculate a vehicle’s residual value, so it affects lease rates too.

 By the way, according to the Automobile Lease Guide, that Silverado has the worst depreciation of any new vehicle in the U.S., tied with the Hyundai Accent at 32.2% value retained after 3 years of ownership, when purchased new. One will have to wait and see if Chevy’s introduction of the all new, much improved truck this year will do anything to change that. What’s the best from a depreciation standpoint? By a wide margin, it’s the pint sized Mini Cooper at 67.3%, trailing a bit behind in 2nd place is Porsche (a 2 syllable word, Porsche) 911 Carrera, at 62.9%. See, that 911 you’ve always lusted after really isn’t as expensive as you thought.

According to IntelliChoice, your best bet for low total cost of ownership in a new car would be a Toyota Corolla LE, with a Honda Civic LX nipping at its heels. To sweeten the deal, the Civic and Corolla, along with the Hyundai Elantra, finished at the top of the latest JD Power initial satisfaction survey for the compact car segment. If you need something with a bit more space, surprise, surprise, that same Chevy Silverado 1500 that did so poorly in depreciation is your best bet among light trucks when it comes to overall cost of ownership. It must be pretty thrifty in other areas besides depreciation.

When it comes time to purchase a new car, it can definitely be shock inducing wandering around the lot, especially if you haven’t looked at new car prices lately. What you may not know, however, is that new car production costs haven’t increased in real terms since the early 1990’s, according to the U.S. DOT’s  Producer Price Indices for Transportation Equipment. Contrast this with aircraft, ships and motor homes, which have all seen producer prices steadily rise, according to the same report.

If you’re buying a used car to avoid the depreciation or satisfy some other budgetary concern, you’ll want to mitigate risk as much as possible by shopping for only the most reliable vehicles. You can check the reliability of a prospective vehicle at MSN Autos.   In addition to using reliability as a primary consideration, you should have the car inspected by a reliable auto care provider with a good reputation for such inspections. Make sure you schedule the inspection in advance, and don’t just show up. You want to allow them time to adequately inspect all areas of the vehicle. Overlooking something here could prove very costly. You might also think about one of the certified used cars available from manufacturers nowadays as a risk mitigation tool. Keep in mind that the average new car buyer tends to keep their car longer than the average used car buyer, so you can not directly compare differences in cost or ownership.

Keep the rubber side down and the shiny side up, especially on New Year’s Eve! Happy New Year everyone. Hope you had a great 2006 and here’s to a great, debt free 2007!

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