Monday, July 22, 2024 Detailed Auto Topics
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Estimates suggest people spend 18% of their total home budget on transportation cost. Inevitably the decision comes up, should I keep my vehicle or buy another?

good decisions can lower your cost of transportation

There are many reasons why personal cars and trucks are so popular

They are extremely convenient, allowing us to come and go as we please. They are also cost effective, however they are never without cost. Calculating and controlling the cost of transportation can make a huge improvement in the average home budget.

A breakdown of the cost of transportation

Most people have many misconceptions about vehicle ownership

Buying a new vehicle or keeping the one we presently own, there will be cost. The greatest cost is purchasing the vehicle, which amounts to 56% of the total transportation expenditure.

Finance charges are also directly tied to purchasing a vehicle and add another five percent. Even insurance cost are indirectly tied to vehicle value adding perhaps another 12%. All considered, 73% of all vehicle cost are related to buying cars.

Much of this cost is depreciation, a real cost many folk do not consider. For instance, if a new vehicle is purchased for $30,000.00 and driven for three years, it is now worth about $12,000.00. 

It cost $18,000.00 or $6,000.00 per year to drive, not including sales tax, finance charges, insurance cost, fuel or maintenance. Considering these factors the cost is significantly higher.  Depreciation is where a lot of the average budget for transportation goes and can be greatly reduced with planning.

Now consider buying a three year old vehicle. The cost is around $12,000.00. In three years it is worth about $8500.00. It cost $3500.00 or $1167.00 per year. Again, not including sales tax, finance charges, insurance, fuel or maintenance.  Reducing depreciation drastically reduces transportation cost.

The bathtub-shaped curve of problems with vehicles

All manufactured products follow a bathtub-shaped curve, with regard to problems and time

There will always be initial problems, like recalls, wind noises, squeaks and other problems that are usually quickly resolved. This is period a - b. Annoying but the cost was included in the price of the vehicle in the form of warranty.  It is very important to remember that nothing is ever free.  The full cost of warranty, plus a profit on the warranty is included in the price of a new vehicle.

Next we enter the preferred period, b - c. This is the period where few if any problems occurs. This normally last three to fifteen years, depending mainly on how the vehicle is maintained and the original quality of the vehicle design. This is also where a huge amount of money can be saved.

Once the vehicle is paid for, cost drop to the amount spent on repairs and maintenance. The better the maintenance, the lower the repair cost. This is where having the right repair shop can extend this period greatly.

Eventually the vehicle will wear out and problems will begin to rise quickly. This is c -d and represents the time to get rid of the vehicle. The trick is remaining in b - c as long as possible and recognizing c - d as quickly as possible.

Most drivers do not know how to properly maintain their vehicles for lowest cost and arrive at c - d far too soon. Proper maintenance can prevent many of the large repairs people experience. Buying the proper vehicle can also prevent huge downstream cost.  Some vehicles will have far less repair needed than others.

The best plan for maintenance is to find a great repair shop. Bring the vehicle in once a year for a general inspection. This will head off many potential problems and greatly lessen those that occur.

Vehicles with 300,000 miles on the odometer are not at all uncommon using this method. That is not to say they do not require repair, only that all repair cost included the cost of transportation is far less than otherwise.

should you keep your vehicle or buy another

When faced with the decision of making a large repair or buying another vehicle there are several factors to consider

Aggie, The AGCO Automotive logo  Do you like the vehicle and does it meet your needs. If the answer is no, this is a good time to move to a vehicle that better meets your needs

Aggie, The AGCO Automotive logo  Is the vehicle in otherwise good condition. Before making a large decision a general inspection will let you know what other problems may be pending

Aggie, The AGCO Automotive logo  What is the advise of a trusted professional. Never get personally attached to a vehicle. When a trusted professional says don’t repair, it is best to listen

Aggie, The AGCO Automotive logo  Also be aware that some dealership service writers may be paid a commission for referring people to the sales department. Always seek advice from someone that does not stand to gain by your decision

 A method for budgeting auto repair

For years I have used a dollars per month method to decide on major repair. To me there is an amount, per month I am willing to spend on transportation. Let’s use the figure $200.00 as this is less than almost any alternative I may have.

If my vehicle requires a $2000.00 repair I have to honestly consider, if I make this repair, can I reasonably expect to drive ten months without additional major cost? If the answer is yes, I am within my budget. If the answer is no, it is time to make another choice, I have reached the c - d stage.

Over the years I have been able to maintain a cost far below my $200.00 per month threshold and with good choices it is not difficult to do. A few suggestion that may help.

  • Consult a repair professional for advice BEFORE buying any vehicle
  • Look at a vehicle from a repair and maintenance standpoint
  • Technology and features tend to break and cost a lot to maintain
  • Plan ahead, NEVER get in a hurry when buying a vehicle
  • Buy a three-year old vehicle rather than new
  • Have any vehicle inspected BEFORE you buy it
  • Track your cost and break it down to a cost per month
  • Use our calculators to compare your cost
  • Cost saving from higher mileage vehicles may be far less than you think
  • When changing vehicles to get higher fuel milage, overall cost must be considered. By using our fuel mileage calculator you can determine the exact savings

Going from 25 MPG average to 35 MPG average will save $480.00 per year, driving 12,000 miles and with fuel costing $3.50 per gallon. This is often one month’s payment or less.

The automotive buying decision can be emotional or logical

Vehicle manufacturer's always appeal to your emotions.  Emotion is not usually logical and emotional decisions seldom work as well as logical decisions, when it comes to transportation. By approaching transportation cost in a logical manner, literally thousands can be saved. Sometimes buying another vehicle is the best option, sometimes not. Get advice, use our calculators and make a logical decision. Sound decisions make dollars and sense.

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