The Surprising Lifetime Cost of Car Ownership – doughroller.net
Rob Berger
Have you ever tallied up what it costs to own a car? I don’t mean on a year-to-year basis, but the total cost of owning a car over a lifetime? According to the American Automobile Association (AAA) it costs $8,876 per year to own and operate an average car. Now if you add that up over 50 years, it comes to $443,800, based on current dollars.
But I don’t think that tells the whole story. In fact, we can understand just about everything related to money by examining the financial ramifications of owning a car.
So let’s look at the cost of owning a car from a different angle:
The Opportunity Cost of Owing a Car
For this exercise, were going to look at a single aspect of owning a car: the cost of investing money in the purchase of a series of cars over a lifetime, versus investing an equivalent amount in a diversified investment portfolio comprised primarily of stocks.
Let’s begin by establishing a baseline. Well, assume that an individual pays $20,000 for a car at age 25. She pays cash. Five years later she sells the car for 50% of what she paid and buys another $20,000 car. She repeats this process until she buys her 10th car at age 70. We’ll assume she sells her last car for $10,000 at age 75 and her children drive her where she needs to go thereafter. (At least I hope my kids start driving me around if I make it to 75!)
Have you ever tallied up what it costs to own a car? I don’t mean on a year-to-year basis, but the total cost of owning a car over a lifetime? According to the American Automobile Association (AAA) it costs $8,876 per year to own and operate an average car. Now if you add that up over 50 years, it comes to $443,800, based on current dollars.
But I don’t think that tells the whole story. In fact, we can understand just about everything related to money by examining the financial ramifications of owning a car.
So let’s look at the cost of owning a car from a different angle:
The Opportunity Cost of Owing a Car
For this exercise, were going to look at a single aspect of owning a car: the cost of investing money in the purchase of a series of cars over a lifetime, versus investing an equivalent amount in a diversified investment portfolio comprised primarily of stocks.
Let’s begin by establishing a baseline. Well, assume that an individual pays $20,000 for a car at age 25. She pays cash. Five years later she sells the car for 50% of what she paid and buys another $20,000 car. She repeats this process until she buys her 10th car at age 70. We’ll assume she sells her last car for $10,000 at age 75 and her children drive her where she needs to go thereafter. (At least I hope my kids start driving me around if I make it to 75!)
