Warning! Long scrolly post ahead.Back in June of 2010, I solicited thoughts on choosing financing for a new vehicle purchase and associated budget reallocation. (Thread here: http://boards.fool.com/soliciting-thoughts-on-auto-financing...)Much of the ensuing discussion questioned the wisdom of a new vehicle purchase rather than the financing questions I posed. As a regular lurker, I was not surprised by the focus of the discussion, and the feedback served to clarify my thinking and helped me choose the correct path. Brief follow up note here: http://boards.fool.com/auto-finance-thoughts-update-28638846...After 17 months of ‘new’ car ownership, I thought it might be an interesting exercise to take a look back at the financial consequences of that decision, and compare it to estimated costs of driving the old vehicle.Assumptions:1 - Fuel and Mileage:I keep a spreadsheet detailing every fuel fill-up which includes fuel quantity, fuel price, and total amount. I also track the mileage between fill-ups and calculate fuel efficiency after every fill-up. Fuel efficiency numbers for the hybrid are based on actual usage and prices. I estimated the fuel efficiency of my old vehicle, at 24 mpg pegging it at the middle of the rated range: 19 City / 27 hwy / 22 combined. This squares with my recollection of average fuel efficiency of that car.2 - Maintenance:Maintenance costs on the new vehicle is the actual total for all routine maintenance to date. I estimated maintenance on the old vehicle by: a - prorating the actual maintenance costs between 1/1/08 - 7/1/2010 ($2350) down to 17 months - $1332 b - Assuming a $1500 transmission repair bill, which was the impetus for purchasing a new vehicle.3 - Insurance:Costs are prorated over 17 months using the latest pricing on the new vehicle, and the last insurance price on the older vehicle.4 - Loan:Interest is the actual amount of interest paid on the auto loan over the last 17 months.Results: Hybrid 12 yr Car Difference (est)Fuel Cost $2,420 $3,747 $1,327Fuel Quantity (gal) 702 1,087 385Miles Driven 26,083 26,083 Milage (mpg) 37.2 24.0 Avg PPG $3.45 $3.45 Insurance $1,275 $510 -$765Maintenance $178 $2,832 $2,654Interest $821 0 -$821TCO $4,693 $7,088 $2,395(Total Cost to Operate)Discussion:I was astounded by the TCO numbers. According to my estimates and calculations, the new car cost almost $2400 less to operate over the last 17 months then continuing to drive the 12 year old vehicle. I was not expecting the number to be that large. The $1300 in fuel savings is almost a wash between the added cost of loan interest and insurance. Maintenance savings is icing on the cake.It should be noted that fuel costs are highly dependent on fuel price. I decided to purchase a fuel efficient hybrid because I fully expect gas prices to be upwards of $5.00/gal by 2014 and I drive many miles. Given the high gas prices last summer, this decision proved to be prescient. I did not expect lower routine maintenance costs on a hybrid: Oil changes every 10000 miles, longer brake life and fewer fluid flushes. Future repair costs are uncertain as hybrid technology is still maturing and there are few (any?) 12 year old hybrids chugging along.Conclusion:Obtaining a low interest loan to purchase a hybrid car in 2010 was the correct financial decision. Or I should say, correct at that time. If I would have taken advantage of the .gov economic recovery incentives in 2009, (as I was strongly considering) I would have laid out a much less for a hybrid AND realized lower operating expenses sooner. In my case, delaying the auto purchase actually cost me more money. I will consider this a lesson learned the next time opportunity comes knocking.Follow up: I have enough funds to fully pay off the car note right now, but the money is earning more interest in an index bond fund then I am paying on the auto note. For now, I will keep paying the note and let the bond interest accumulate. If you made it this far, thanks for reading.
Hybrid 12 yr Car Difference (est)Fuel Cost $2,420 $3,747 $1,327Fuel Quantity (gal) 702 1,087 385Miles Driven 26,083 26,083 Milage (mpg) 37.2 24.0 Avg PPG $3.45 $3.45 Insurance $1,275 $510 -$765Maintenance $178 $2,832 $2,654Interest $821 0 -$821TCO $4,693 $7,088 $2,395(Total Cost to Operate)
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