Choosing a new car is a thrilling experience, but beyond the sticker price, numerous factors contribute to the real cost of ownership. Smart car buyers know that understanding the long-term financial implications is crucial before making a decision. That’s where Edmunds’ True Cost to Own (TCO) comes into play, offering a comprehensive tool to compare cars side by side and make informed choices. Edmunds’ TCO calculator goes beyond the initial purchase price, delving into the various expenses you’ll encounter over five years of ownership. This article will break down how Edmunds calculates TCO, helping you effectively Compare Cars Side By Side Edmunds and understand the true financial picture.
Understanding Edmunds’ True Cost to Own (TCO) Methodology
Edmunds True Cost to Own® is designed as a comparative tool to help you evaluate the financial implications of owning different vehicles. It’s important to note that TCO provides an estimated comparison, and your actual costs may vary based on your individual circumstances. However, it offers a robust framework for understanding the potential expenses associated with car ownership.
The TCO calculation is based on a standardized set of assumptions to ensure fair comparisons across different makes and models. These assumptions include:
- Five-Year Ownership Period: Costs are projected over a typical 5-year ownership timeframe.
- Annual Mileage: An average of 15,000 miles driven per year is assumed for calculating mileage-dependent costs like fuel and maintenance.
- Traditional Financing: The calculation assumes you are financing the vehicle with a traditional auto loan, not leasing.
- Above-Average Credit: A good credit rating is assumed to determine a representative financing interest rate.
- Down Payment: A 10% down payment at the time of purchase is factored in.
- Loan Term: A 60-month (5-year) loan term is used for financing cost calculations.
Using these consistent assumptions and proprietary formulas, Edmunds calculates the five-year costs across seven key categories that comprise the True Cost to Own®. These categories allow you to thoroughly compare cars side by side edmunds across the most significant ownership expenses.
Decoding the Components of Edmunds’ True Cost to Own®
To effectively compare cars side by side edmunds, it’s essential to understand each component of the TCO calculation. Here’s a detailed breakdown:
Total Cash Price
This represents the initial cost of the vehicle. For new cars, it includes the manufacturer’s suggested retail price (MSRP) adjusted for market value, commonly equipped options, destination charges, state taxes and fees, and potential gas guzzler taxes, minus readily available manufacturer rebates. It’s important to note that Edmunds’ TCO does not include highly variable or conditional rebates. For used cars, the Total Cash Price is based on the private-party value in “clean” condition, plus typical options and state taxes and fees.
Depreciation
Depreciation signifies the loss in value of your car from the purchase price to its estimated resale value after five years. This is a significant factor when you compare cars side by side edmunds, as some vehicles hold their value better than others. Edmunds calculates depreciation based on the Total Cash Price (excluding taxes and fees), assuming the vehicle is kept in “clean” condition, driven 15,000 miles annually, and sold privately.
Insurance
Insurance costs are a crucial part of car ownership and vary significantly. Edmunds provides an estimated average annual insurance premium for your state. This estimate is derived from data from a major national insurer, considering vehicle make, model, year, and body type, along with defined driver profiles and coverage levels (liability, comprehensive, and collision). However, remember that your personal insurance premium can differ based on factors like age, marital status, credit history, driving record, and vehicle garaging location. When you compare cars side by side edmunds, be aware that insurance costs are estimates and personalize your research with actual quotes.
Financing
Financing costs represent the interest paid on a car loan over five years. Edmunds calculates this based on the Total Cash Price, assuming a 10% down payment and a 60-month loan term. The interest rate used reflects the prevailing rates offered by banks and auto lenders to consumers with above-average credit in your region. Even if you plan to pay cash, understanding the financing cost is valuable. It represents the “opportunity cost”—the potential return you could earn if you invested the purchase price instead of buying the car. When you compare cars side by side edmunds, consider both financed and cash purchase scenarios to get a full picture.
Taxes & Fees
This category encompasses state and local sales or use taxes, license and registration fees, and any applicable gas-guzzler taxes. These costs are often calculated as a percentage of the vehicle’s purchase price and generally decrease as the car’s value depreciates over time. Edmunds’ calculation includes average local and county taxes within each state to provide a comprehensive estimate.
Fuel
Fuel costs are a major ongoing expense. Edmunds estimates fuel expenses based on the EPA’s fuel economy ratings, assuming a driving mix of 45% highway and 55% city driving. The calculation also considers the vehicle’s standard transmission. Fuel price estimates are based on a one-year moving average of self-service fuel prices in your state, using the appropriate fuel type (regular unleaded, premium unleaded, or diesel) as recommended by the manufacturer. When you compare cars side by side edmunds, fuel efficiency is a key factor to consider for long-term savings.
Maintenance
Maintenance encompasses both scheduled and unscheduled maintenance. Scheduled maintenance includes factory-recommended services performed at specific mileage or time intervals. Unscheduled maintenance covers items like wheel alignments, battery replacements, brakes, headlights, hoses, exhaust system components, tires, and wiper blades. Tire replacement cost estimates are provided to Edmunds by The Tire Rack Inc., adding to the accuracy when you compare cars side by side edmunds for long-term upkeep costs.
Repairs
Repair costs account for expenses for repairs not covered by the manufacturer’s warranty during the five-year ownership period, assuming 15,000 miles driven per year. Edmunds estimates this cost using data from typical “zero deductible” extended warranties, subtracting the warranty provider’s overhead and profit to isolate the estimated repair expense.
Federal Tax Credits
Finally, Edmunds TCO considers any applicable federal tax credits, particularly those provided under the Energy Policy Act of 2005 for electric vehicles. These tax credits directly reduce your federal tax liability. The credit is available to the original purchaser of a new qualifying vehicle and is subject to phase-out rules, which Edmunds incorporates into the TCO calculation. If a leased vehicle qualifies, the leasing company may claim the credit. When you compare cars side by side edmunds, especially electric vehicles, factor in potential tax credits to see the true savings.
Why Use Edmunds to Compare Cars Side by Side?
Edmunds’ True Cost to Own® calculator is an invaluable tool for anyone looking to compare cars side by side edmunds because it offers:
- Comprehensive Cost Analysis: It goes beyond the initial price to include all major ownership expenses.
- Standardized Comparisons: Consistent assumptions ensure fair comparisons across different vehicles.
- Detailed Breakdown: Understanding each cost component empowers informed decision-making.
- Reputable Source: Edmunds is a trusted name in the automotive industry, known for its expert vehicle reviews and data.
By utilizing Edmunds’ TCO, you can effectively compare cars side by side edmunds and make a financially sound decision when choosing your next vehicle. Remember to use this tool as a guide and personalize your research with your own specific circumstances for the most accurate picture of your potential car ownership costs.
