Consumer Reports article (as reported by Today Show): Prius "least expensive family car" to own

[JimboK]

NBC's Today Show just aired a piece citing Consumer Reports' new April issue (the annual auto edition). The main thrust of the Today Show report was a new CR rating that evaluates total long-term cost of ownership. The reporter stated that CR now deems the Prius to be the "least expensive family car" to own. (Quoting the NBC reporter, not the article directly.)

I haven't gotten my April issue yet so I haven't seen the article itself. I'm anxious to read the details.

(I know this cites the same CR article as Danny did in this thread. But the focus is different, and IMHO worthy enough to have its own thread, so I started a new one.)

[dogfriend]

The Prius got a lot of "face" time, but not a lot of discussion time. Still, it will probably spark some interest especially when gas hits $4 sometime later this year.

[chogan2]

Originally Posted by JimboK

NBC's Today Show just aired a piece citing Consumer Reports' new April issue (the annual auto edition). The main thrust of the Today Show report was a new CR rating that evaluates total long-term cost of ownership. The reporter stated that CR now deems the Prius to be the "least expensive family car" to own. (Quoting the NBC reporter, not the article directly.)

I haven't gotten my April issue yet so I haven't seen the article itself. I'm anxious to read the details.

(I know this cites the same CR article as Danny did in this thread. But the focus is different, and IMHO worthy enough to have its own thread, so I started a new one.)

That was certainly my conclusion when I bought my '05. Most of our driving is city, most cars we were looking in '05 got 18 or so mpg city (e.g, Ford Taurus). At $2.50 a gallon, the lifetime (150K mile) gas cost was roughly $10K less for the Prius. That made the Prius vastly cheaper than any of the alternatives I was considering.

At $4/gallon, the savings is almost $18K, and at $5/gallon, the Prius is more or less free, under the assumptions above. That is, at $5/gallon, the Prius+gasoline about the same as the gasoline alone for the vehicle getting 18 mpg city. That's a slight exaggeration because our miles were not 100% city, and because you can now get better city mileage midsize cars, but it's only a slight exaggeration. Buying the 05 Prius was a total no-brainer from the standpoint of minimizing cost on new family car. Good to see CR figure that out and say it.

The funny (or not) thing is that cars are actually somewhat less sensitive to energy costs than many large appliances. For clothes dryers, the purchase price works out to be about 25% of the lifetime purchase+energy cost. For fridges, it's closer to 50%.

[morpheusx]

Last year this was my conclusion as well, I heavily considered an Accord, Civic, and Fusion. At last years gas prices around $2.50 a gallon the costs were fairly close. But knowing that the fuel prices for gasoline have been trending up assuming gas would stay there would have been a foolish assumption. The higher the price of gas goes, the better the decision looks for the long run. And if the price of gas ever goes back to late 90's early 2000's prices ($1.25 - $1.50 gal) the price of running a Prius goes to costing virtually nothing.

[Doc Willie]

Originally Posted by JimboK

CR now deems the Prius to be the "least expensive family car" to own.

But they have not factored in:

Graphics $360
BT plate $165
ScanGuage $160
Tire Upgrade $360
Seat Covers $500
BT skid plate $360
Hubcaps $160
Detailing supplies $400
Oil changing equipment $70
Oil Valve $40
Sharkfin antenna $60
(All prices approximations from memory)
and who know what else to come?

And do not tell me that this is not a normal cost of ownership, since I have never spent money on these things in the previous 5 vehicles I have owned.

[Boo]

Here's the text of the article, with the chart for Family Cars at the end (sorry for formatting gliches):

April 2008

What that car really costs to own
Knowing a vehicle's cost over time can save you thousands in the long haul

A less-expensive car can cost you more in the long run than a more-expensive alternative, our new ownership-costs comparisons have found.

At about $17,500, a Mitsubishi Lancer could cost $5,000 less than a Mini Cooper to drive home. But when you estimate the total costs of ownership for each car, the Lancer could cost you $3,000 more over five years. A Toyota Highlander can cost you $3,000 more to purchase than a Ford Explorer V6, but owning the Ford after five years can cost $6,500 more.

In addition to shopping for a good deal, car buyers should also consider how much a model will cost them to own. That includes depreciation, fuel costs, interest, insurance, sales tax, and maintenance and repair costs.

To help, Consumer Reports is introducing its new owner-costs estimates, which can help you compare models and could save you thousands of dollars. The "owner costs" Ratings cover one, three, five, and eight years of ownership and are based on a comparison of all models within the Consumer Reports database over eight years. Because depreciation is factored in our estimates, we assume that the vehicle will be traded in at the end of the term.


COSTS VARY AMONG SIMILAR MODELS

Here is how ownership costs break down over five years, based on our study of more than 300 vehicles.

In analyzing ownership costs based on 2007 data, we made some notable discoveries:

• While Hyundai and Kia models have low prices and long warranties, the savings are often offset by poor resale values. Hyundai's Accent and Elantra don't prove any less expensive after five years than Honda's more expensive Fit and Civic.
• Most Lexus models have relatively high maintenance and repair costs (primarily due to maintenance), despite excellent reliability. The Lexus ES350 racks up an average of $2,300 in maintenance and repair in the first five years, about twice what you'd pay on a Lincoln MKZ.
• A little sports car can cost less to own than a family sedan. The Mazda Miata and Mazda6 V6 sell for about the same price. But at the end of five years, we estimate the Miata owner will be about $6,000 ahead.
• The Toyota Prius is one of the few hybrids that can save you money. It costs about $7,500 more than a similarly sized Chevrolet Cobalt to buy but costs almost $2,000 less over five years.

CALCULATING THE COSTS

Our cost of ownership Ratings comprise six main factors:

Depreciation is the largest cost factor by far. On average, it accounts for about 48 percent of total ownership costs over five years. Depreciation is a vehicle's loss in value over a defined period. To calculate it, we start with the price of a typically equipped model and factor in the discounts offered off of the manufacturer's suggested retail price on some models. The average model depreciates about 65 percent over five years. Some vehicles depreciate faster than others because of oversupply, limited appeal, or rebates on similar new models. When we don't have depreciation data for a new model, we use estimates based on comparable vehicles.

Fuel costs can really add up, especially for SUVs. For example, you could pay more than $10,000 to fill up a Dodge Nitro over five years, while a similar-sized but more-efficient RAV4 V6 could save you $2,000 during that time. To calculate fuel costs, we assume the vehicles are driven 12,000 miles a year, the average reported by respondents to our annual survey. To that we apply the national average price of $3.00 a gallon for regular gas as of December 2007. For models that require premium or diesel fuel, we use these costs: $3.20 a gallon for premium, and $3.40 for diesel. On average, fuel is the second-largest cost of vehicle ownership, at 21 percent over five years.

Interest is tied directly to vehicle price, and accounts for about 12 percent of five-year ownership costs. We calculate it based on a five-year loan, with a 15 percent down payment, because that is how many people buy cars. We use the average interest rate of 6.86 percent as reported by Bankrate.com in December 2007.

Insurance costs vary depending on many factors, including your age, location, and driving record. And they can dramatically boost the ownership costs of models that otherwise would seem affordable. For example, if you're looking for a fast car on a budget, steer clear of the Mitsubishi Lancer Evolution. Insurance can run $2,500 a year or more based on our 2007 figures. Conversely, the similarly priced Acura TL can cost as little as $900 to insure over a year. Overall, insurance makes up about 11 percent of total ownership costs over five years. Costs are derived from data from the Insurance Institute for Highway Safety.

Maintenance and repair costs make up 4 percent of ownership costs over five years on average, according to data from 675,000 Consumer Reports subscribers who responded to the online version of our 2007 Annual Car Reliability Survey.

They gave us their estimated costs for the last year-excluding tires-and their responses provided data for more than 300 models on vehicles up to eight years old. We used estimates based on similar models when data was unavailable. The majority of the costs are covered by the factory warranty during the first few years. But for some vehicles it can still add up. On average, we found that the Range Rover is the most expensive vehicle to own for maintenance and repairs, costing about $2,000 in the fifth year alone. But the Toyota Land Cruiser is also luxurious and very capable off-road and costs only $600 in that year.

Sales tax costs owners about as much as maintenance and repair does. We use the national average of 4.83 percent in 2007.


CARRYING COSTS VS. OPERATING COSTS

Costs can be divided into carrying costs, tied to the vehicle purchase, and operating costs associated with ongoing driving expenses. Operating costs include fuel, insurance, and maintenance and repair costs. Depreciation, interest, and tax are carrying costs.

Carrying costs diminish significantly over time, while operating costs rise slightly, primarily due to increasing maintenance and repair costs. Still, on average, operating costs are less than carrying costs until a vehicle is about five years old.

Still, we found that some cars are expensive to drive, even though they're affordable to park in your garage. Some small cars, for example, have low prices, but their high insurance costs make them relatively expensive to operate. The Toyota Yaris is the least-expensive car to own in our estimation, and most of its costs go into insurance, gas, and maintenance.

But small cars are the exception. On average, carrying costs outweighed operating costs by 60 percent over the first five years for the average model we examined. For example, carrying costs for the Lexus LS add up to more than $12,000 a year. But it is relatively inexpensive to drive at just $3,500 a year.

Even so, operating costs for some vehicles can be surprisingly high. The Ford F-250 turbodiesel, for example, costs about $5,750 a year for fuel, insurance, and maintenance and repair. The Dodge Viper is even more expensive, costing more than $7,000 a year to run. Insurance alone on the Viper costs almost $4,000 a year.


AVERAGE CARRYING VS. OPERATING COSTS

Carrying costs of depreciation, interest, and tax diminish over time. Operating costs, including fuel, insurance, and maintenance and repair increase over time.


OWNER COSTS DROP OVER TIME

Our ownership costs compare the expense of keeping a new car for one, three, five, and eight years.

Most people keep their new vehicles for three or five years. But the high depreciation costs in the first year help explain why new cars are so expensive to own, so we break that out as well. Depreciation is the biggest reason cars cost so much to own during the first few years. It makes up almost 60 percent of the cost in the first year, and depreciation is still the largest annual ownership cost for vehicles up to six years old. Sales tax also adds to the cost of the car the first year.

Cars cost less to own every year after that. For example, the average model in our study costs twice as much to own the first year as it does the second year. The sixth, seventh, and eighth years combined about equal the cost of the first year.

While maintenance and repair costs increase, even over eight years they still don't average one-sixth the cost of depreciation.

Still, we found that some cars can be inexpensive to own initially compared with others, then become relatively expensive as they age.

For example, maintenance and repair costs are very low for BMWs over the first five years of ownership, primarily because BMW offers free maintenance during the four-year warranty. In fact, our readers report that the BMW Z4 roadster is the least-expensive car to maintain over the first five years. But BMWs are some of the most expensive cars to maintain over the long term. Once the free maintenance period expires, the BMW X3 SUV, 3 Series sedan, X5, and 5 Series went from having near the lowest maintenance and repair costs in their categories to among the highest.

In the end, though, it is almost always less expensive to hang on to your current car than to buy a new one. Even the most-expensive repair bills for an old car can't outweigh the cost of depreciation on a new one.

While our data can't show exactly what you'd pay for a specific vehicle, it can help you approximate which new vehicles can be the best value in the long run.

Soon, online subscribers will be able to compare costs for one, three, five, and eight years of ownership from within the model pages. Find the model you want to research from the pull-down search tools and go to the "Prices & Costs" tab.

AVERAGE COST PER YEAR

Owner costs decrease significantly as cars age in most cases.

For the average vehicle, owner costs decrease significantly with age, largely because depreciation—the highest cost—diminishes significantly. Paying off the new-car loan also eliminates interest payments. Maintenance and repair costs rise as cars age, but not nearly as much as other costs fall.

MOST AND LEAST EXPENSIVE TO OWN

FAMILY CARS

Least Expensive

Toyota Prius - $27,500
Toyota Camry (4 cyl) - $30,250
Chevrolet Malibu (4 cyl) - $31,750
Ford Fusion (4 cyl) - $31,750
Mercury Milan (4 cyl) - $31,750

Most Expensive

VW Passat (V6) - $44,750
Mitsubishi Galant (V6) - $41,500
Dodge Avenger R/T - $41,000
Mazda 6 (V6) - $40,250
Nissan Altima (V6) - $39,750

[Jack66]

Originally Posted by Doc Willie

But they have not factored in:

Graphics $360
BT plate $165
ScanGuage $160
Tire Upgrade $360
Seat Covers $500
BT skid plate $360
Hubcaps $160
Detailing supplies $400
Oil changing equipment $70
Oil Valve $40
Sharkfin antenna $60
(All prices approximations from memory)
and who know what else to come?

And do not tell me that this is not a normal cost of ownership, since I have never spent money on these things in the previous 5 vehicles I have owned.

I have to say that I have never known as much about my Prius as any of my other automobiles and I have a mechanics background. Not only am I more educated about the Prius but IT IS FUN!!!!

[Godiva]

I heard on NPR the other day that for the last 8 months, California has used less gas than the previous year's same months.

I couldn't help wonder if we'd reached a point where the Prius was making a difference.

But probably not. It's probably more a result of belt-tightening due to current depression/recession/stagnation/inflation/BAGEL.

Still. I think the money you save on gas really makes the Prius a top choice for any car, not just family.

[hill]

Well Mr. Spinella? Back to the drawing board

[tochatihu]

Sounds like CR got their heads around the issue of Prius depreciation

Glad to hear it. Actually the lowest TCO happens when you by a economical reliable *used* car and run that for a few 100 k. Most of them use a bit more fuel than Prius though, and a bit more polluting.

Heaven help us, if fuel becomes so expensive that a new 2008 Prius actually has a lower TCO than a 1998 Camry (purchased used today).