One of the most underestimated attributes in deciding which car to buy is its Total Cost of Ownership (TCO). TCO typically combines depreciation, fuel costs, repairs and maintenance expenses, insurance and financing costs, etc. over a period of time – 3 to 5 years.

And these are the actual $ that will leave your bank account for good, already accounting for the fact that you can get some money back when you sell it.

The concept is relatively popular for most other purchases of this and even lesser magnitude – home appliances, business equipment, computer hardware, and even fleet cars’ purchases. However, when it comes to consumer car purchases, it’s a relatively ignored concept for marketers as well as customers.

Let’s take an example comparing the 2012 Subaru Impreza with the 2012 Toyota Prius. The Impreza costs $7,000 less to buy than the Prius, making it an obvious choice for anyone on a tight budget. However, over 5 years, the Prius is actually $3,000 cheaper to own! It costs $28K to own and drive a Prius over 5 years, compared to over $31K for the Impreza.

And this is not even an extreme example – cars such as the Ford Focus and Mazda3 could cost over $34K to own over 5 years. Think about it – a car that’s $20K to buy, can actually cost $34K to own.

By no means am I saying that TCO should be the only or even the most important aspect of deciding which car to buy; I’m only emphasizing that it deserves more importance than it is currently given, particularly if financial considerations are key in your decision.

One of the difficulties in highlighting this concept has been the lack of a good mechanism to allow customers to better visualize this concept. To address that, I have created an infographic that tries to clearly lay out the TCO concept, and demonstrate how cars that are cheaper to buy are not necessarily cheaper to own.

Your comments are very welcome.

Sources -,

Buy vs. Own (Sticker Price vs. Cost of Ownership)

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