Comparing car costs: why the purchase price is not enough
Which vehicle costs less over the way I actually use it?
A low purchase price is a one-off advantage. Consumption, repairs and resale value affect the whole ownership period. A comparison should therefore use the same holding period and mileage and include all relevant costs through to sale.
Do not count the purchase price twice
Economic ownership costs use depreciation: purchase price minus residual value. Adding the entire purchase price again would partly double-count the same capital outlay. Ongoing expenses and one-off incidental costs are added separately. ADAC’s cost method likewise distinguishes depreciation, operating, fixed and workshop costs, among other categories.
A fully disclosed example
Assumptions: purchase price €24,000; residual value €12,000 after four years; 15,000 km a year; consumption 6.5 litres per 100 km; fuel €1.80 a litre. Add annual costs of €200 tax, €700 insurance, €600 maintenance, €200 tyres and €400 parking, plus €800 once. These are calculation inputs, not market prices or insurance quotations.
From cost categories to comparable figures
Over 60,000 km, this produces €12,000 depreciation, €7,020 energy costs, €8,400 other ongoing costs and €800 one-off costs. The total is €28,220: a calculated €587.92 per month or about €0.470 per kilometre. Financing interest and returns forgone on the capital tied up are not included.
Test two sensitivities before deciding
A residual value €3,000 lower raises monthly costs by €62.50 over four years. A fuel price €0.20 higher raises total costs by €780 with unchanged consumption and mileage. These separate changes show whether a small consumption saving can compensate for an uncertain residual value at all.
Add financing and payment affordability
First compare vehicles by economic ownership costs. Then add financing costs and the actual payment schedule. With a loan, do not add all principal repayments as another cost category when the purchase is already represented by depreciation; interest is an additional cost. A balloon payment can require a large single payment despite low average monthly costs.
The comparison depends on total costs over the same period of use. Keep depreciation, operation and financing separate, and test residual value and fuel prices with your own scenarios.