Fuel Costs vs. Vehicle Total Cost of Ownership (TCO)

Fuel Costs vs. Vehicle Total Cost of Ownership (TCO)

This is about fuel cost as a percentage of TCO.

Why it Matters:

I have often heard people make the observation that they should buy a new car with better fuel mileage so they could save money.  Of course some folks are merely rationalizing.  They want a new car just because they want a new car.  But they are not comfortable trading off a perfectly good vehicle for no other reason than they want a new(er) one.  So they rationalize the purchase.

But, surprisingly, some people actually believe this foolishness: that trading off a perfectly good vehicle for one with better fuel mileage is something that makes economic sense.

The Reality:

I just calculated the latest fuel consumption numbers for the Honda CR-V we had for 9 years and I thought I would share the actual numbers in case you're interested.  (I track all my vehicle expenses and have the costs categorized.  Yeah.  A little OCD going on here...)

I know this won't be news to a lot of folks but sometimes the actuals are interesting.  For anyone to whom it is news, pay close attention.  Please.

This is for a 2007 CR-V purchased new in November, 2006.  All expenses are to October, 2015 when we sold the vehicle.

Fuel Cost:      $22,466.59
Other Costs:  $58,118.46   (purchase price, finance costs, maintenance/repairs, licensing)
Total Costs:   $80,585.05

Total Kilometres: 199,141

Fuel cost per Km:  $0.11
Total cost per Km: $0.41

The fuel costs are currently 27% of the total cost of owning the CR-V. 

To the point:

Fuel costs after 9 years of driving were still only 27% of the total cost of owning the vehicle.

For perspective, the annual licensing cost (plates and insurance) plus the annual trip to the dealer for regular servicing are nearly equal the total amount of fuel that gets run through the vehicle in that same year.  If it requires service twice in that year, or a new set of tires, the non-fuel operating costs just blew right past the cost of fuel for the year.

And we haven't even included the amortization of the purchase price and finance costs.

Look at it another way.  Let's assume I could buy a vehicle that gets me, say, a 20% improvement in fuel consumption.  That's an improvement of 20% of 27% (the overall fuel cost percentage).

That's only a 5.4% improvement in total cost of ownership.

But, oops, it's actually much worse.  We also need to consider the cost (purchase price and financing) to acquire that new vehicle for its improvement in fuel consumption.

And the increased licensing and insurance costs of a new(er) vehicle.  And...

Yes, when you look at all the numbers it just keeps getting worse.