Sunday 24 February 2013

REAL Cost of Owning a Car

For those of you that read my blog, I typically write about real-estate-related matters, however I am going to deviate slightly to some personal finance – the true cost of car ownership.

I overheard one of my colleagues mention last week that she ‘really would love to buy a car’.  She hates walking, waiting for the bus to around is a pain, and her hair is always messed up by her hat in cold weather.
Ho-hum.  I still hate my car…and I told her that.
Why? Because it takes money out of my pocket.  Some people list their vehicles as an ‘asset’, but if you are a follower of Robert Kiyosaki (author of Rich Dad, Poor Dad), you might be inclined to think of it as a liability.  Let me explain….
I have a very accurate picture of how much a vehicle costs as I save every receipt for business purposes so here is my breakdown in expenses for 2012: (note, this is based on driving almost 40,000KM last year, which I realize is above average)
Car Payment:  $0…..(it is a 13 year-old car….no payment here!)
Insurance: $1390…(this is actually low as I qualify for a good discount based on my rental properties being with the same company)

Routine Maintenance: $2020…(oil changes, coolant flushes, tire changes, general issues)
Non-routine Maintenance: $1600…($1200 for a brake-job and ABS sensor, $400 to repair a bumper from a hit and run event in a parking lot)

Miscellaneous: $400..(CAA membership, registration fees, safety + emissions test)
Gas: $3800…(again, I drove 40,000KM)
GRAND TOTAL:  $9210
Remember, this is WITHOUT a car payment.  I also did not include any depreciation, of which I have very little due to my car being 13 years old, but everyone knows that cars depreciate at blinding speed.  Throw in a $300 per-month car payment (which is low) and this number jumps to $12,810.
Don’t get me wrong, I hope to never sell my car.  I need it for work and business  purposes….and like my colleague, I don’t know if I could stand waiting in the cold at a bus stop!  OK, so maybe I don’t ‘hate’ my car like I mentioned above…I just hate that it takes money out of my pocket.

So what I do hope to accomplish with this post?  At least get people thinking about the TRUE cost of car ownership…don’t just look at that advertisement for a nice car at only “$149 bi-weekly”…..what they don’t tell you is that it is bi-weekly payments for the better part of a decade..
And who knows, maybe  you can live without a car for 4 years and have $40,000 in your pocket to invest in some cash flowing real estate!

3 comments:

  1. Andrew I hate to say it but I find your expenses high compared to what they could be if you shopped around. A vehicle that is 13 years old should run you know where near 1390$ for insurance. Costco offers much cheaper version of CAA when you have a vehicle thats I believe 5 years or newer. Check out the Costco tire centre for cheaper oil changes or do it yourself for a bit less. Your gas mileage could be greatly reduced with a new vehicle. Getting your hands dirty and doing your own brakes could get rid of that 1200$ sometimes there are bonus's of a new"er" vehicle.

    ReplyDelete
    Replies
    1. Hi there, thanks for your comment! I will try to clarify why you might see some of the costs as being high.

      The reason my insurance is that high is that I have full collision insurance. Without that full collision, it would only be about $900.

      Also, I use full synthetic oil in my car. This is a personal preference that ads about $20 to an oil change...I used to do my own oil changes, but it is just not worth my time anymore.

      You're right that my gas milage could be reduced with a new car, but my car gets about 9L/100KM. Even if I reduced it to 6L/100KM, my gas bill would only be reduced by about $1200 on an annual basis. To make my money back on a new car would take quite a bit of time.

      As for the brakes, I wouldn't trust myself to do something like that! :)

      Delete
  2. What I have learned is a less-expensive car can cost you more in the long run than a more-expensive alternative.

    ReplyDelete