So, by now, after reading the little bit of information you are now all pumped up, got your game face on, brimming with confidence and decided that you will negotiate the best possible car price and deal the next time out!.
Bravo!
Does this mean finding a nice reliable car for a reasonable price?
To many people this may be the ultimate goal as they trek through one car dealership after another in search of their best automobile deal.
Think for moment.
Does getting a good price on a car mean getting a good value for your hard earned bucks? Is the price you pay for the new car what the car is going to actually cost you? Yes?…. No? ….. Maybe…..
I bring this up at this point just so we can take a brief respite from the hard work of car price negotiating. And to make sure that during all the research and self education that you actually take into account what the vehicle cost is going to actually cost you.
The price you pay to purchase your automobile is not the cost of the car.
Although price and cost are certainly blood relatives (no pun intended), there is a distinct difference between the two.
The price you pay for your car is merely the exchange of cash for the title. The title which either goes to you or the lien holder. There is no expense involved at this point in the car purchasing cycle, just consideration exchanged for a product.
In other words, say… you have just exchanged with the dealer $20,000. The dealer has $20,000 and you now have a vehicle valued at $20,000….. well…. almost.
Of course, part of that $20k you just shelled out or signed loan papers for included the profit the dealer made on the deal, taxes, and fees.
In reality, the actual vehicle market value of your new car never was $20,000. Every car is marked up above the market value. Essentially, this is know as profit.
With the dealer profit attached to the car, the car itself isn’t really valued at $20,000. On a tangible basis your car itself really is not valued at $20,000. Even if you walk straight out of the finance department, don’t even touch your car, and try to sell it, you’ll not see your $20,000 again (at least not from any dealer).
And once you drop yourself behind the wheel and head off to make all your friends and neighbors jealous, you begin to run up the tab.
We all know the typical costs of owning a car, but for you parents out there looking at this with your son or daughter, a quick reminder:
- Your car is already depreciating (ouch!)
- Fuel costs (large and growing)
- Ongoing finance charges and insurance costs
- Routine maintenance and repair
So, back to the question….. is the price you pay for your car, what the car costs you?
Not really.
As you can see it is much more financially prudent to consider all of the costs involved in vehicle ownership rather than just the price of the car as you begin doing your homework on car buying. Consider this. By the time most cars are five year old the cost of ownership will exceed the original purchase price.
Also, while we’re on the subject, and even more critical to think about, is that similar cars with similar or even the same purchase prices can have very different cost of ownership.
This is why it is very important to understand the difference between car price and car cost and how the two relate to each other as you begin your search for the car that will afford you the best value. Don’t limit your thinking to price alone as you begin your quest for finding your best car deal.
Very good!
You are still hanging in there with me. I am surprised and humbled by your presence (really!)….
Check out our handy car cost comparison calculator to give you the whole picture when it comes to ownership costs.
Car Insurance in more detail next….
