Back in the 1980s, the Yugo GV sold for a base price of just $3,990.
Even adjusted for inflation, from 1986 to 2013 (about $8,400 in
today's money), that's a steal—and one that did indeed prove
irresistible for more than 140,000 thrifty Americans.
Yet for the most part, the GV—for 'great value,' ironically—didn't
save its buyers any money in the long run. Costly premature engine and
clutch failure were surprisingly common (and expensive);
gas mileage
was disappointing for what it was; resale values plummeted; and
insurers charged more in premiums because they didn't trust the Yugo's
occupant protection (or its bumpers).
Most of those Yugos have long ago been retired to the scrap heap; but
it underlines an important distinction: The cheapest cars to buy aren't
necessarily the cheapest cars to own, and the Yugo is a lesson for what
can go wrong if you shop for a vehicle (or anything else) only by its
sticker price.
That advice holds true today, yet thanks in part to tighter federal
regulations, more of the cheapest models are now safe, dependable, and
truly penny-pinching picks over the long term.
Lower-priced cars typically cheaper in the long run
“The smaller, lower-priced cars have the lowest cost of ownership,” said David Wurster, the president of
Vincentric,
a data analysis firm providing cost-of-ownership information. When you
look at today's new cars there aren't any albatrosses like the Yugo, and
considering all of the categories (depreciation, insurance,
maintenance, etc), some of the cheapest models stand out: The Nissan
Versa, Chevrolet Spark, Kia Rio, Toyota Yaris, and Ford Fiesta all have
sticker prices under $15,000 and five-year ownership totals under
$30,000.
money
To
put it into perspective, that five-year Vincentric ownership number,
which includes depreciation, insurance, fuel expenses, maintenance and
repair costs, and even an 'opportunity cost'—for what you maybe have
earned on your money elsewhere—totals more than $100,000 for many
luxury models, or more than $200,000 for the Mercedes-Benz S 65 AMG or CL 65 AMG, for instance.
Among these cheapest-to-own vehicles, Wurster points out, they’re all
strong sellers (indicating high demand); they all have supply that
doesn’t exceed demand by an extreme amount (like many larger SUVs and
trucks several years ago); and they’re powered by smaller, highly
efficient engines. Altogether, those factors keep fuel costs down and
resale value relatively strong.
Soothing depreciation's sting
Looking at all the components that add up to what a car costs to own,
it's the sting of depreciation that hurts most. According to Kelley
Blue Book, the average
new car
will be worth just 35 percent of its original value after five years;
and with a current average around the $30k mark, you’ll essentially lose
nearly $20,000 for the privilege of driving a new car. Late-model used
cars are often the better deal for that reason, as they dodge the
steepest part of the depreciation curve, but if you want a new car,
along with many of the things that come with new-vehicle ownership—like a
strong warranty, the relatively low chances of a breakdown, and modern
safety features—you don't need to spend a lot.
Considering these other factors, like insurance costs, anticipated
reliability, and projected resale value, if you can find something at
the lower end of the market that you like (and if you’re okay doing
without the glamor of a more upscale new car), you’ll also take the
smallest hit to your wallet in the long run.
That said, unless you’re obsessed with being a die-hard miser, you
can’t get too caught up in the bottom-line cost projections. The totals
are best viewed when comparing vehicles within the same class against
each other, Wurster emphasizes. In other words, choose the kind of
vehicle you need first (minivan, crossover, etc.) and then compare the
costs.
Mike Calkins manager of the AAA's Approved Auto Repair program, notes
that depreciation, fuel costs, insurance, and finance charges are the
four most significant ownership/driving costs.
Don't forget about insurance
“Get a quote from your insurance agent before you buy a car to avoid
any nasty surprises,” Calkins recommends. He also argues that paying
cash for a new car, or getting a loan with the lowest possible interest
rate, helps cut finance fees that will cost you in the long run.
The AAA, as part of its most recent annual
Your Driving Costs
study, found that small sedans have the lowest driving costs'—of about
45 cents a mile, considering all those factors, versus nearly 76 cents
for a large
sedan.
Thinking about hybrids or special fuel-stingy models? They may come
with higher sticker prices, but in general their improved fuel economy
(and in some cases better resale value) mostly offset the premium. For
instance a modest Chevrolet Cruze 2LS has a five-year ownership cost of
$32,678, while the mile-per-gallon-minded Cruse Eco, at $33,492 over
five years, can't quite make up for its $2,550 sticker-price premium,
despite lower fuel costs.
So remember the Yugo. While many of the cheapest cars on the market
are also the cheapest to own, don't assume so; run the numbers for
yourself.
For the following list, we ran the numbers with the most recent
Vincentric Cost of Ownership data, as of February 2013. And because
there can be a lot of variance even within models, we've listed the
specific trim and bodystyle whenever needed. All are for model year
2013.
Read on to see our ten cars for which being thrifty pays off.
For more information visit http://PPMSale.com
