Vehicle Depreciation is a Fact of Life.

Guess what the single largest expense of owning a car is. No, it's not fuel, insurance or regular maintenance. It's DEPRECIATION! In case you're not familiar with what that is, here's the skinny.

Depreciation is the reduction in value of a vehicle from its original cost over the years and miles it is driven. This is usually determined by comparing the price of the vehicle when purchased (either new or used) to the price it's sold for when you're done with it.

For instance, and this is an entirely realistic illustration, a car purchased new for $25,000 may just be worth $10,000 after five years and say 60,000 miles. That equals $3000 per year or $250 per month each year just in depreciated value. With more expensive cars it can be even more depending on the make and model.

Let's compare that to fuel cost. If you drive 15,000 miles per year, average 20 miles per gallon and gas is $2.75 per gallon as it is at the time I am writing this, that comes to $2062.50 per year or $171.88 per month.

If you allowed $100 per month for regular maintenance and repairs (probably on the low side, but more than most people allow....heck most people don't even think about putting money aside for maintenance and repair), that comes to $1200 per year.

Since insurance is a mandatory item you need to allow some money for that. Let's say $100 per month (high for some drivers, low for others) or $1200 per year. If you add all of that up you get $6262.50 or $521.88 per month. That doesn't count a car payment if you have one.

When you break it down it looks like this:

Depreciation = $3000.00/yr.

Fuel = $2062.50/yr.

Maintenance & Repair = $1200.00/yr

Insurance = $1200.00/yr

Total = $6262.50/yr

That's a lot of money!

Since in most cases, depreciation is the most expensive part of owning a vehicle, it would be nice if there was a way to reduce that number. The other costs are pretty much fixed, unless you decide to walk more and use less gasoline, or reduce your insurance coverage to the bare limit.

Two Ways to Reduce Depreciation Costs.

1. Buy a new car and drive it until it's fully depreciated, usually 12 to 15 years with over 150,00 miles. By this time that $25,000 car is worth less than $2500 on the market but it's value won't deteriate much after that unless it gets wrecked or has a major mechanical failure. If that happens you'll get its salvage value which will be a couple of hundred dollars.

• If you look at the numbers in this scenario the depreciation cost of ownership of that vehicle over say 15 years is the initial cost of $25,000 minus the $2500 it's worth now ($22,500 spread over 15 years or $1500/yr. or $125/month.) That's about half of the depreciation cost if the car had been sold or traded at the 5 year mark.
• If you only kept it for 3 years the difference is even larger because the highest dollar amount of depreciation occurs within the first few years of owning the vehicle.
• If you bought that same car from someone else after it was 5 years old with 60,000 miles for $10,000 and drove it for 100,000 more miles it would again be worth $2500 or less. But, the depreciation value would be $7500 over 10 years or $750/yr. which is one-fourth as much as the scenario of buying it new and keeping it for the entire 15 years.

2. Buy a used car. Doing so can entail some risk if you're not careful, but it can save you a significant amount of money over time since the original owner will have paid a good portion of the depreciation.

• This is one of the reasons it's a good idea to have a relationship with a mechanic that you can trust. He or she can perform a thorough inspection of the vehicle you're considering buying and give you a very good idea of the potential problems that may occur if you buy that vehicle.
• You can also have the car history researched to determine its repair history or whether its ever been in an accident. The small cost of this report is well worth the investment to help insure you are getting what you want in a used car.
• Depending on the age and mileage of the used vehicle you may have some of the original factory warranty left or the mileage may be low enough to make it worth purchasing an extended warranty.

• If you've taken your time and done your homework you can very easily end up with a vehicle that performs just as well as a new one and is as reliable. After you buy it you can take some of the money you saved by letting someone else pay the high depreciation costs and put it away into a "maintenance & repair fund" in case you do need some repairs later on.

Maintenance Costs

This website is all about taking care of your vehicle. I keep harping on the point that performing regular maintenance will lengthen the life of your car and reduce its overall cost over time. So, just how much should it cost to keep a car in sound mechanical condition so you can drive it that 100,000 plus miles?

Let's take a look at some common maintenance items that most vehicles should have done during their life span.

Every 5,000 to 7,500 miles or around twice per year according to the newer maintenance schedules put out by the vehicle manufacturers.

• Change engine oil and filter...$25 to $75 depending on type and amount of oil.
• Inspect hoses, belts,fluid levels, wiper blades, brakes, lights....Better shops do this for free at each oil change.
• Check tire pressure/tread wear monthly and rotate every 7,500 miles...$10 to $20 some tire stores do this for free if you purchase your tires there.
• Many vehicle manufacturers are beginning to recommend rear differential fluid changes at 7,500 miles because 90% of the wear in the differential occurs prior to this mileage...$50 to $100 depending on type and amt of fluid.

Every 15,000 miles or Yearly

• Change air filter, PCV valve, wiper blades, some cabin air filters...$50 to $100.
• Change fuel filter on some vehicles, esp. diesel engines...$25 to $50.

Every 30,000 to 50,000 miles

• Change transmission fluid and filter...$100 to $250 depending on type and amt. of fluid.
• Change transfer case fluid...$30 to $75.
• Change fuel filter most gasoline engines...$15 to $25.
• Change brake fluid and power steering fluid...$50 to $100.
• Change engine coolant some vehicles...$75 to $125.

• Change cabin air filter...$20 to $50.

Every 60,000 to 100,000 miles

• Flush coolant system and replace coolant, hoses & radiator cap...$150 to $300.
• Replace thermostat...$50 to $150.
• Replace spark plugs...$75 to $250 or more depending on location of plugs.
• Replace timing belt (critical on some engines)...$250 to $500 or more.

Now you see why it's important to have a maintenance & repair fund! Neglecting these items over time will result in major pocket book deflation!

You can save yourself quite a bit of money if you learn to do some of these things yourself. Many of them are pretty easy and you can do them with common tools, a jack and some jack stands.

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