This last year has been a rollercoaster ride for the automotive industry. The auto manufacturers started the first quarter predicting the return of glory days’ sales. Then June and July came along with a little reminder that stellar gas mileage was not the only thing driving sales.
I host a call-in radio show in Denver, so I get to talk to lots of consumers (although I prefer to call them vehicle owners). One of the most common questions I get is about what to buy to replace their existing car. I have a very strong belief that you should own transportation vehicles with an eye to cost per mile. After 17 years doing this show, most of my listeners already know this when they call. I guess it is my job to talk them out of buying something new. Why do I share this with aftermarket business folk? I don’t think our message is strong enough.
Our country and our world needs to make better use of its resources, and running through a car every 3 years because of poor maintenance is about as irresponsible as it gets. In the aftermarket we try to convince vehicle owners to maintain their car because it is the right thing to do. Of course coming from the folks who perform the service and sell the parts, it sounds a little self serving.
I have a slightly different message for vehicle owners. It starts with a question: how much does it cost you per mile to operate your mode of transportation? My listeners always start with their 30 miles per gallon, but that is not more than a small part of their cost per mile; and, the less they drive per year, the higher that cost is. I ask them to consider the costs of insurance, license plates, tires, maintenance, depreciation, car payment and interest just as the starting points. For many, the one-year deprecation on most new cars would buy gas for their old 25 mpg car for 55,000 miles. The payment on the most entry-level car is around $250 per month, which means about $3000 per year in the payments. I have no statistics on license plates because every state does it differently, but nearly every state charges much more for a new car than for an older model. Insurance is generally more and in most states you can carry liability only on an older where there is no lien. When you start plugging in the 18,000-mile average most Americans drive, you get quite a shock.
Let’s take a look at my trusty 1998 Ford Contour SVT. Not sexy anymore, but it works perfectly, passes 2010 emission specs in Colorado and gets an average of 24 mpg. I am pretty far below the average mile per year since my car spends most of its time sitting at the shop or an airport, and I live pretty close to work. My annual cost for the service, insurance, plates, tires, maintenance and amortized acquisition cost is right around $2,048 per year; and my fuel costs are $1346.25. Add those together and divide by the number of miles I drive and it costs about 38 cents per mile to drive what I have. That means if I go to pick up coffee on my way to work the trip costs me $2.66. Sounds like a lot, doesn’t it?
Well let’s take a brand new small car with lower-than-average depreciation, a $249 monthly payment, and we will assume I am driving it 9,000 miles per year with 35 mpg. I will use all the numbers for maintenance and such that the Be Car Care Aware program uses for a new car, factoring in the amortized down payment and depreciation over 3 years. The cost per mile is a staggering $1.26. Now my coffee stop costs $8.82 every morning and I still haven’t paid $5.00 for my non-fat 31-flavor latte. It costs about $12,000 dollars the first year to own that car and the plates are the only thing that really drops at all in the first 3 years. My car costs $3,394 per year. What will I do with the other $8,600 I didn’t spend? Probably build a hot rod, but that is a whole different subject. If you can keep that car for a few years, it is a significant savings. What should our message be to vehicle owners? We can make you rich if you let us maintain your car for you, the right way.
