Worth the Drive?

Your company cars could be gulping more than just gas if you don't know what your ownership costs are.
Magazine Contributor
2 min read

This story appears in the July 2004 issue of Entrepreneur. Subscribe »

If you've discovered your company cars are costing you more to operate than anticipated, maybe you didn't do your homework before the purchase. Ownership costs can vary from model to model even if the cars are basically similar, equally equipped and close in price. A less expensive vehicle may cost more than a higher-priced one. Negotiating a low price on a new car may satisfy your accountant, but you can't estimate the car's true value until you've calculated its expenses over the course of at least one year. Analyzing and estimating how much your vehicles will drain the budget over a five-year period before you buy can save you money.

Figuring out costs is simple when you know the formula. Factor in four major standing, or fixed, costs (depreciation, state fees, financing and insurance) plus three major running costs (fuel, repairs and maintenance). Standing costs usually level out and decrease over time, with finance charges, for example, eliminated when the loan is paid off. Running costs, on the other hand, can increase. As a general rule, the older the car, the more frequent the repairs. Conversely, depreciation on older cars slows, so the increase in running costs can be offset by lower standing costs. Since fuel is the highest running cost, you can save by purchasing a vehicle that gets good mileage and uses regular instead of premium gasoline.

To help you estimate ownership expenses, several online auto sites provide vehicle comparisons, including www.edmunds.com, www.intellichoice.com, www.kbb.com (the Kelley Blue Book Web site), and www.runzheimer.com.

Editor and consultant Jill Amadio has been reporting on the automotive industry for 25 years.


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