Buying a vehicle? Check the TCO

If you are in the market for a new or used vehicle, then it is important to do some homework before you settle on make and model. Here are a few things to consider before you pull the trigger on buying that new or used vehicle: 

(1) A vehicle is a financial decision, not an emotional one. Automobile companies and dealers do a great job marketing stuff that really doesn’t matter for the majority of drivers, like style, luxury, and status. Unless you need your vehicle to impress clients for work, focus on the things that matter, like safety, reliability, and ownership cost.

(2) Think of your vehicle as an asset that is used to create income or efficiently transport precious cargo, not a lifestyle. The income is created by using your vehicle to commute to work, or do your work. The precious cargo is you and your loved ones. If you think of your vehicle as a ‘use asset’ then the most important financial criteria for selecting a vehicle is value, which can be found in the TCO, or Total Cost of Ownership amount. The TCO reflects all costs associated with owning and operating that vehicle over time and should be an important data point when deciding which one to buy.

(3) Never finance a depreciating asset.  Like other consumer products, a vehicle starts depreciating or losing value as soon as it is purchased. Financing the purchase increases your loss of value on that vehicle. Follow this link to see an infographic on how that happens.

You can obtain TCO and resale values for newer and older vehicles at Edmunds.com. If you are in the market for a new vehicle, kbb.com provides annual information on new cars with best resale value. For used vehicles, Consumer Reports provides a list of best used cars by price range.

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