It pays to analyse in areas other than computers. Two and a half years ago I purchased a 2 year old car on the basis that it was better value. Now it is up for $7,000 in costs over and above normal services - and I found that I can't trade it in for nearly the figure I still owe. So, this time I attempted a total cost of ownership analysis.
First I looked at same or similar model in the same marque that has been around for 4 years. I compared it's new price against worst case private sell price for a car in good quality low mileage. From this I get a percentage drop in price. For example I used carsales.com.au to compare a BMW 118i hatch:
New price: $50,000
High 4 year: $40,000
Low 4 year: $20,000
% drop: 44%
I ran a few other cars through for comparison. Drop in value appears to be fairly consistent for a marque. In Australia BMW is around 45%, Peugeot is 55 and Citroen 65%.
My second table attempts to calculate the total cost of ownership over 4 years - for both the older cars and the new replacements. One column for each car and rows for:
- Purchase Price - being $0 for an owned car or one on lease.
- On-Road - again a new car cost.
- Repayment - Monthly repayments for lease, hire purchase or whatever
- Term - time lease is for.
- Residual - How much you would need to pay to own the vehicle after the term
- Resale @ 4 years The cost of the vehicle adjusted for the %drop in value from above.
- Trade In - The difference between 5 and 6, being positive if it is worth more than you owe.
- Service per year - Calculate average service over 4 years. A car that needs servicing yearly will have 3 services while one that requires 2 yearly will only need 1 in the life of the lease. If you do big mileage this will be a different calculation.
- Paid Out - is the total cost of repayments over 4 years.
- Sub-total/year - being yearly cost of repayments and servicing.
- Economy l/100k - used to calculate fuel costs
- Cost per litre - a guess on average cost of fuel over the next 4 years
- Fuel @ 10k/year - Cost of fuel given an estimated distance driven per year
- Rego - Registration costs from your local registry office.
- Insurance - Insurance calculation. Many insurance companies have calculators for this.
- TCO / year - Adding all these up gives a rough total cost of ownership
- Per week - Byt reducing that to a weekly cost we see how it effects our budget.
Don't use my figures. Make a similar calculation based on the cars you look at. It is worth the time and effort. There are non-financial consideration - or those that are at least unmeasurable. We chose BMW because if (1) safety, (2) 2 years between services and (3) because of guaranteed by-back at end of lease.