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Sunday, April 3, 2011

Look beyond sticker price for a car's true costs



Look beyond sticker price for a car's true costs

Ongoing costs — for insurance, repairs and fuel — can vary markedly from one vehicle to another. Ignore those differences and you could vastly underestimate the cost of ownership.


If you're thinking about buying a car this year, you're far from alone. Auto sales appear to be ramping up after a couple of fairly lackluster years.
But with the economy still on tenterhooks, consumers may want to pay careful attention to auto economics, said Jack Gillis, author of "The Car Book," an annual compendium of information on auto safety, reliability and costs.
The price of the car is an important consideration, of course. But ongoing costs — for insurance, repairs and fuel — can vary markedly from one vehicle to another. Ignore those differences and you could vastly underestimate the cost of ownership, Gillis said.
Consider, for example, two luxury sedans. The Dodge Charger has a manufacturer's suggested retail price of about $38,000, according to Edmunds.com. The Lexus HS 250h, a hybrid, costs $35,600. Does that mean there's a mere $2,400 price difference between the two? Hardly.
The Lexus gets roughly 35 miles to the gallon in both city and highway driving, while the Charger speeds through fuel about twice as fast, getting just 13 miles to the gallon in city driving and 19 on the highway. With gasoline prices near or past the $4-per-gallon mark, the consumer who drives about 15,000 miles annually is going to spend roughly $1,700 on fuel each year with the Lexus but about $3,750 on the Charger. That's more than $2,000 in additional costs every year you own the less fuel-efficient car.
The differences don't stop there. The Charger is also one of the most expensive cars in the nation to insure, Gillis said. The final cost of insurance will depend on your driving record, miles driven and where you live. But even a good driver is likely to pay hundreds of dollars more to insure the Charger versus the Lexus.
Gillis' best car-buying advice: Pick three or four cars that you like and then start comparison shopping on a variety of criteria, including how the car scores on safety tests and on the comprehensiveness of the new-car warranty. (A few companies, such as Volvo and BMW, even pay for oil changes in the first few years.)
In addition to insurance costs and fuel economy, Gillis also looks at the cost of preventative maintenance while the car is still under warranty and the cost to repair big-ticket items when the warranty expires.
How long you keep an auto can be a consideration. If you don't keep cars for more than a few years, you might put less weight on the cost of repairing big-ticket items, particularly if you buy a model that offers an extensive warranty. If you drive a lot, you might put added weight on fuel economy.
"There's no one car that's best in every category," Gillis said. "We're forced to make trade-offs."
Gillis said he largely ignores resale values because supply and demand can make those figures swing widely. Besides, he looks upon cars as an expense, not an investment.
"You should never imagine that a car is going to retain its value and be worth a lot when you sell it," he said. "They're great for transportation, but they're lousy investments."
To prepare for a price negotiation with a dealer, Gillis advises doing research on the Internet. Sites such as Edmunds.com and Kelley Blue Book (www.kbb.com) show how much buyers are typically paying for a model in a specific part of the country.
Don't get talked into extras you don't want. There are plenty of dealerships, plenty of cars. If you don't like how you're being treated, walk away.
If you know what you want to buy but hate negotiating, Gillis said you might consider the CarBargains service offered by the nonprofit Consumer's Checkbook. The service charges $200 to shop five area dealerships for the exact make, model and options you want. Each dealer provides a firm quote that's good for seven days.

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