The Cost Of Vehicle OwnershipI don't think these assumptions are too out of the ordinary for most families. There are relatively few families with fewer than two vehicles and a $15,000 purchase price is quite conservative these days. We are also not factoring in the added cost of interest in car loan. If this family didn't have to purchase any vehicles over this 40 year period this $3,375 per year invested at 8% would grow to $944,261. That is almost a million dollars. This family would in essence have traded close to one million dollars for nine vehicles. Now we all have to realize that most of us need a car to get around in and especially to work so that we can continue to make the payments. It sounds like a never-ending cycle doesn't it? Very few of us can live without at least one vehicle, but we can minimize the loss of our future wealth. Just looking at the above example we can see that by reducing the amount spent we can decrease our loss. For example, if we keep our cars twelve years instead of ten, we would purchase one less vehicle and save that $15,000. We might also reduce the cost of each one as well. Purchasing things that lose value is always a losing proposition. Even if we only purchase one $15,000 vehicle and do not buy another one for 40 years we lose money. A $15,000 lump sum investment gaining 8% over 40 years would grow to $325,867. When looking at the numbers this way it is easy to see that the cost of vehicle ownership is high. Although most of us can't stop driving we can do things to minimize the impact on our finances.
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