October 20, 2013

Whats The Cheapest Car to Drive?

Some people like to buy new cars, others think used cars are a better value.   My dad drives beaters mostly.   I've looked at hybrid or electric cars as a potential way to save money.   Theres pros and cons financially to any kind of car.    An older car will likely have higher average repair bills while a newer car has worse depreciation and higher opportunity cost.

If you consider all options, then whats the cheapest kind of car to buy and drive?    Should you drive a 15 year old beater, a brand new electric car or a 10 year old economy car?

I decided to try and look at this at least as a hypothetical scenario comparing some examples.   I don't have the data to do any kind of exhaustive or scientific study, so I'm just going to pick some example cars that can be bought and then try and estimate the costs of owning and operating them.

Various options:   First of all you could go buy a brand new car that gets the very best fuel efficiency.  That would be an electric car and I'll use a Nissan Leaf as an example.    You might instead try a lease deal on an electric car.  I've seen Leaf leases advertised for $199 a month.     Next option you could consider is a bit older hybrid car.  That would give you great gas efficiency and a reasonable sticker price.   You could go for a car thats say 5-10 years old so its relatively cheap but still not going to have too much risk of high repair cost and has decent mileage.    Lastly you can buy a beater for $2000 that gets decent gas mileage and run the risk of major repair bills.   I'm not considering any other new cars since used cars are generally cheaper and I'm not considering a used electric car since they don't seem to be readily available to buy for reasonable prices on the used market yet.

A big pile of assumptions:  First I'm assuming gasoline costs $3.50 a gallon.  Of course it varies but today thats about what it costs around here.   Second I'll assume that maintenance costs like oil changes and new tires are roughly equivalent across all cars.  Thats not entirely true but close enough for my purposes.   I'm assuming 10% annual depreciation rough average for used cars and 20% depreciation in the first year for a new car.    I'm assuming 50/50 driving between city and highway miles.  I also arbitrarily assume $300 annual insurance costs for comprehensive coverage which you'd opt out of only for a beater car.    Last but not least I'm taking a semi blind guess that your annual average repair costs are going to be roughly $100 x car age in years (i.e. 2 year old car is $200,10 year old car is $1000)    I fully admit right now that some of those assumptions are not super realistic, but I'm trying to get a rough idea on total costs without spending half a year analyzing it so I'll go ahead and work with it.

Here is my table :

year
city hwy cost deprec opport insur repairs
2000 SC1 27 36 $2,000 $200 $100 $0 $1,300
2000 Neon 28 35 $2,000 $200 $100 $0 $1,300
2007 Rio 27 32 $5,000 $500 $250 $300 $600
2000 Civic 28 35 $5,000 $500 $250 $300 $1,300
2008 Aveo 23 32 $5,000 $500 $250 $300 $500
2001 Insight 45 49 $8,000 $800 $400 $300 $1,200
2008 Prius 48 45 $13,000 $1,300 $650 $300 $500
2014 Leaf 129 102 leased
$3,400 $300 $0
2013 Leaf 129 102 $22,000 $2,200 $1,100 $300 $0

cost : rough purchase price
deprec : How much value you'll lose in a given year due to depreciation
opport:  The opportunity cost of the value of the car or the cost in interest to finance the purchase of the car. (for the lease I just added up the lease cost for a year.)
insur : The cost of paying comprehensive insurance
repairs : Rough estimate in repair costs.

The total costs including gasoline (or electricity) that I summed up for annual mileage of 10,000, 20,000 or 30,000 miles driven  are then :




10k 20k 30k
2000 Saturn SC1 $2,734 $3,869 $5,003
2000 dodge Neon $2,725 $3,850 $4,975
2007 kia rio $2,845 $4,040 $5,235
2000 honda civic $3,475 $4,600 $5,725
2008 Chevy Aveo $2,858 $4,165 $5,473
2001 honda insight $3,446 $4,192 $4,938
2008 toyota prius $3,503 $4,257 $5,010
2014 nissan leaf $4,007 $6,814 $9,622
2013 nissan leaf $3,907 $4,214 $4,961

With the lease I'm using the eMPG rating to approximate the electricity cost but I'm honestly not sure exactly how accurate that is.   For the Nissan Leaf lease option I assumed you'd have a 25¢ per mile charge if you went above 10k miles which pretty much kills the feasibility of an electric car lease. 

Usually the cheapest option to drive will be a beater that gets decent gas mileage.     That assumes you drive under 30k miles in a year.

Note that at the 20k mile per year rate there isn't a huge difference in costs for the cars I combined.   You're spending just a little over $400 more a year for the brand new Leaf versus a 13 year old Dodge Neon.  If you're going to give me the choice of a new car for $4200 a year and a 13 year old car for $3800 a year I'd go with the new one.    But then that assumes I've got an extra $400 a year to blow on the nicety of a new car.

If however you drive a LOT then you might do a little better with a 10 year old bargain hybrid like the Insight or with a brand new electric car.   A potential problem with an electric car is that limited battery range may not allow you to drive as much as you need, so you may need a midday recharging option for that to be feasible to get above the normal range.   My total costs are marginally cheaper for the 2001 Honda Insight than the 2013 Nissan Leaf however with so little difference I'd go for the new car instead of the older car as it will be a better car since its new.

Of course this analysis is far from perfect, but I think it gives an idea of how the total costs for cars might compare.

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