Running the numbers on the bigger car: what’s your cost and is it worth it?
I got to ride in a new car, complete with satellite radio and new car smell, yesterday. Prompted by high gas prices, my friend traded in her SUV for a mid-size sedan. Equipped with capabilities to haul camping gear, bicycles, and perhaps kayaks, the vehicle was nonetheless deemed unsuitable for a jaunt to the mountains (hard to handle on those endlessly curving roads) or to the water park (the interior might get wet).
Until just recently, people (my friends included) most likely have thought I was either not so bright or way too broke for anything besides my straight-drive Toyota Corolla. I have continually found this befuddling as many of my friends lived through the gas crisis of the 70s (you may have studied it in history class but if you haven’t, please know that gas was rationed right here in the United States of America) and seem at least vaguely aware of global warming. I’d like to claim a purely environment platform but here’s my rationale: I hate to spend money when I don’t have to.
Okay, let’s do the math:
- Cost: $26,105
- Monthly Payment: $525.58 (60-month, 7.7% loan, calculate it yourself using the PMT-Payment function in Excel or go to www.bankrate.com)
- Fuel cost per month: $195.75 (estimate per www.edmunds.com)
- Cost: $15,350
- Monthly Payment: $309.04
- Fuel cost per month: $96.67
The monthly difference ($315.62) is called the utility cost and you need to decide whether the increased pleasure is worth the expense. But know that if you buy the Corolla, invest the difference in the stock market (and earn 10% annually), then at the end of five years, you will be $24,644.36 richer (I used the FV-Future Value function in Excel).
Hmm… you could even pay cash for your next car.