Car Shopping? Consider the Cost to Insure and Drive That New Vehicle

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April 2004

If you're in the market for a new or used car, then you're probably spending a good bit of time trying to discover what vehicle's right for you. If you're shopping the StraightTalk way, then you've figured what you can afford to purchase and are previewing models and makes in your price range in the ads, on the Internet, and down at the dealerships. In the shopping excitement, however, many buyers overlook one crucial question: Can you afford to drive the vehicle after you bring it home?

Would it surprise you to know that even if you are looking at two vehicles in the same class—say two compact pickups, midsize sedans, or minivans—that the cost to own the two similar vehicles can vary widely. Smart buyers will check out the cost to own and operate that great set of wheels. You'll need to consider these factors.

Fuel Efficiency

Every vehicle needs gasoline and oil to run, but some models drink lots more than others. And as we prepared this report, gas prices have hit record highs and are predicted to continue to climb to and perhaps through the summer. Here's a glimpse of what differences in fuel economy can mean to your wallet. Take a look at, from best to worst, several typical fuel costs using regular gas, at $1.72 per gallon.

51 mpg (hybrid vehicle)	$10.12
30 mpg	$17.20
26 mpg	$19.85
20 mpg	$25.80
18 mpg (SUV, truck)	$28.67
16 mpg (SUV, truck)	$32.25

Check out the vehicles you're shopping for at www.fueleconomy.gov. You can compare individually or put up to four on the screen at once.

Insurance

Next to gasoline, insurance is often the biggest cost for driving a vehicle. If you're a teen driver (teens, even under parents' policies, pay much higher premiums), it can often cost more per month than fueling the car. The same amount of auto insurance on the same vehicle does not always cost the same from different companies. Also the cost of insurance varies widely between makes and models of vehicles.

In a study published in October 2002, Consumer Reports found some unexpected differences. A consumer might expect to pay more to insure a luxury SUV as compared to a modest sedan, but the study found surprising differences between various model vehicles in the same class. For example, coverage from the same insurer for the same drivers for a 2002 Dodge Neon ES cost $1,565 per year compared to $1,087 for a 2002 Saturn SL2. The study also found large differences between insurance providers.

So check out what it will cost to insure the vehicle you like before you buy. Call your insurance agent and ask for a quote. You can also check with your Corning Credit Union Insurance Agency. They may be able to save you money on your auto insurance. You can reach them at 607-937-5292 or 800-505-5292. Or you may wish to try an online service (though beware of giving out unnecessary personal information).

Registration, license and taxes

Yes, that auto tag and registration cost money each year. Many states also charge an annual tax determined by the value of the vehicle. These costs can range from a few dollars for an older model to hundreds of dollars for newer luxury models. When shopping for a car the StraightTalk way you estimate the first year of these costs when you figure the cost of purchasing a vehicles. But remember that these are annual fees. Can you afford to pony up $400 for property taxes when you go to renew your tag (registration) for your new Expenso SUV next year?

Maintenance, tires, repairs

What maintenance service will the vehicle require? What's the cost of regular maintenance required by the manufacturer's warranty if the car is new or still under warranty? Is some maintenance service provided free or discounted as part of the warranty? When will the vehicle need tires and what will they cost? Also consider the cost of balancing and rotating tires.

If you are driving a vehicle that's brand new or only a year or two old, repairs may be a fairly small cost. But on an older car, repairs can come along regularly. That's one reason that smart used car shoppers check a vehicle's reliability rating and have an independent mechanic or diagnostic service check out the vehicle before making an offer. And don't think that just getting a service contract (or "extended warranty") will solve the problem. Not only do you have to include the cost of the service contract in the cost of operating the vehicle, but you have to shop and negotiate carefully for one because many such contracts are over-priced and big profit makers for the sellers, and in some cases offer little real protection to the owners.

Depreciation

Everyone knows that a 2004 luxury sedan is worth considerably more than a 1999 luxury sedan. That difference in value over time is called depreciation. Most people don't think about it, but that loss of value is a cost of driving. Car owners usually only pay attention to it when it's time to sell or trade-in their vehicle; then everyone would like to have a car that has kept its value as well as possible.

Calculate the cost of owning and operating a vehicle

If you'd like to give the ownership costs of your car or potential car a test drive, both Edmunds.com and Intellichoice.com provide cost-to-own calculators that enable you to estimate these costs. We recommend that you run the vehicles you're considering through both:

• True Cost to Own (TCO)^tm from Edmunds.com. A calculator that can give you an estimate of these costs to use for early comparison.
• Side-by-Side Comparison from Intellichoice.com. Click on "ownership costs" under the contents menu.

For the greatest accuracy, you'll want to research individually each factor, particularly the insurance, fuel consumption, and annual property tax (as applicable in your state).

The truly happy car buyer is not the one who just negotiated a great deal on the purchase, but the one who drives safely, comfortably, and economically each year he or she owns the car. Do your homework on cost to own and that happy driver should be you.

Prepared for Corning Credit Union by Remar Sutton & Associates, April 2004. Reviewed March 2007. All rights reserved