The 2006 Chevrolet Cobalt SS costs only $21,943 to purchase, but over five years your total cost to own this car will be $38,181. That is an astonishing gap of 74 percent. (Photo courtesy of Chevrolet Motor Division)
The Mercedes-Benz SL65 AMG will cost $203,932 to purchase, but only $202,772 to own a difference of only -0.57 percent. (Photo by Scott Jacobs)
Is a Mercedes-Benz SL65 AMG a better deal than a Chevy Cobalt SS?
Performance cars are popular because they are fast, eye-catching and handle well. But, economically speaking, how do these cars handle in the long run? The brutal truth is that many performance cars come with hidden financial roadblocks such as steep depreciation and skyrocketing related costs.
Inside Line has gone on a hunt to show you how to find performance cars that give customers the best value for their money over five years of ownership. We'll also point out how to steer clear of problem cars that will do little more than turn into a money pit.
For years, shoppers have focused on a car's price tag while ignoring the related expense of ownership. But now, thanks to Edmunds.com's data, it's clear that some cars are cheap to buy but will be expensive in the long run. Other cars have a higher price tag but will save you money for years to come.
In this article we will show you a new way to choose a car which is especially valuable when applied to performance-car shopping. This will demonstrate how significant the related costs of car ownership are. These expenses are revealed by a tool on Edmunds.com called True Cost to Own<SUP>SM</SUP> (TCO). Related costs include taxes, fees, depreciation, financing, insurance, fuel costs, maintenance and repairs. (Of these additional expenses, depreciation is by far the most significant.)
By comparing Edmunds.com's True Market Value<SUP>SM</SUP> price (TMV) (the price of a car after negotiations) and TCO, you can discover where the screamin' deals are. Once you learn to use TMV and TCO, you will never buy another car without consulting them.
Formula for success
First, we'll show you how we arrived at our conclusions. Yeah, there's a wee bit of math involved, but it's just one simple, painless equation and once you do it, a new world of car buying opens up to you.
Here it is: Let's take a fictional sports car with a TMV of $30,000. Now let's say that over five years, the purchase price of this car and all the related expenses will add up to $40,000 (TCO). If you take the difference between these figures and divide this by the TMV then you get the percentage difference: $40,000 - $30,000 = $10,000/$30,000 = 0.33, or 33 percent. The lower the percentage the better the value of the car.
Now for a few disclaimers and qualifications. For easy categorization, high-performance trucks, SUVs, station wagons and crossovers have been excluded from this study. All of the vehicles, unless noted, were 2006 model year and the prices were accurate as of March 2006. In the calculations that follow, the figures identified as TMV, are actually the total cash price of the car. This means it is the TMV price of a "typically equipped model" (configured the way the cars are likely to be found on lots) plus destination charge, sales tax and local vehicle registry fees.
Generalizations about performance cars
Typically, the difference between the TMV and the TCO of most sports and performance vehicles lies in the 8-to-50-percent range. Any performance vehicle with ownership costs 50 percent or higher than the original market value should make a buyer think twice before parting with hard-earned cash.
At first glance, the statistics show that American vehicles can run up quite a bill over the years, while Japanese cars tend to fit right in the middle. German performance cars seem to deliver the highest degree of value to the consumer, with Porsche and Mercedes-Benz's AMG brand doing the best at narrowing the percentage gap between TMV and TCO.
The most accurate prediction about sports and performance cars is that the cheaper vehicles tend to cost their owners more over the years in proportion to their original cost than more expensive vehicles. There are, however, some major surprises good and bad that lie outside the 8-to-50-percent range.
You gets what you pays for (or does you?)
Edmunds.com's data has shown that the pricier sports cars also deliver the greatest amount of value for your dollar. But it turns out that some of the more affordable performance vehicles can end up costing you more than you'd think in the end.
For instance, take the 2006 Chevrolet Cobalt SS. This vehicle costs $21,943 to purchase but $38,181 to own over five years an astonishing gap of 74 percent. You have to wonder how many people would purchase Chevy's zippy "economy" performer if they knew how much extra cash above the vehicle's true market value they'll be shelling out.
Another of GM's budget sports cars, the Saturn Ion Red Line, seems to deliver plenty of spunk for its cost of $22,687. Our statistics show, however, that over the course of standard ownership, the customer will pay $38,615 70 percent more than the original purchase price of the car in standard operating costs.
Correlations between prices instead of brands
In fairness to GM, not many companies are competing in the budget performance segment, so it's not easy to get a handle on just what a good TCO-to-TMV ratio is for this category. A much more accurate test of the value of performance vehicles can be determined in the higher-price classes.
One might expect a Dodge Viper Coupe to have a much lower TCO-to-TMV ratio than the Dodge Stratus R/T. The Viper's ratio is 9 percent, compared to 67 percent for the Stratus R/T. But how does the Viper measure up against its competition?
Take the Porsche 911 Carrera S Coupe, which sells for $96,086 close to the Viper Coupe's TMV of $100,256. The ratio of these vehicles' cost to own to their cost to buy is 9 percent for the Viper Coupe and 6 percent for the Carrera S Coupe. The next closest competition, pricewise, to the Carrera S and Viper is the Jaguar XKR Coupe, which has a slightly lower TMV than either of the first two vehicles at $82,288. Owning an XKR costs 18 percent more than the TMV price of the vehicle.
AMG: Does cost equal quality?
Of all the major auto manufacturers, DaimlerChrysler seems to have done the best job of keeping the true cost to own its vehicles within close range of their market prices. Most of the Chrysler vehicles, as well as many of the standard Mercedes-Benz vehicles, fall in terms of cost either right along or just below the ownership status quo.
Despite the hit that Mercedes has taken in recent years over quality-control problems, the company really seems to deliver the goods and justify its higher price tags.
Particularly notable within the Mercedes-Benz stable are the ultraperformance AMG models. Nearly all of the AMG Mercedes cars keep their TCO within 2-8 percent of their original purchase price. As could be expected, the more expensive AMG sedans have the lowest difference between their TCO and TMV, with the extreme high-end AMG vehicles costing their owners little more to own than they do to purchase.
The SL65 AMG, the most expensive of all AMG vehicles, will cost $203,932 to purchase but only $202,772 to own a difference of -0.57 percent. The next most expensive AMG car, the S65, has a true cost to own only 2 percent greater than its $184,832 purchase price.
While most of the AMG Mercedes models keep their TCO-to-TMV ratio below 8 percent, a precipitous increase in operating costs is evident the further you go down the rungs of the lineup. Compared to the relatively low cost to own an SL65 AMG, the series' low-man-on-the-totem-pole (relatively speaking, of course), the C55 AMG, has a true cost to own some 21 percent greater than its purchase price.
If you guessed that the C55 costs substantially less than its AMG siblings at $64,453, you would be correct.
In summary
Is an AMG Mercedes really a better value than a Saturn Ion Red Line? Considering how much more it costs, one would hope so. But then again, a Porsche 911 Carrera S doesn't seem to be that much more of a financial burden to its owner than a Viper Coupe. While there are certainly quality differences among certain models in the same price bracket, things seem to change more from vehicle to vehicle than brand to brand.
The truth is in the numbers and the numbers are all listed in TCO. Check TMV and TCO before buying and you can drive your performance car with the peace of mind that comes from making the most of your money.
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source:http://www.edmunds.com/insideline/do/Features/articleId=110049#3
