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Car Buying Choices - How to Analyze and Calculate with Available Data

Updated on November 11, 2014

Vehicle choices

You can start with a huge spreadsheet that covers every vehicle imaginable, or you can narrow your choice to several vehicles you want to analyze. I usually have at least couple of target vehicles in mind when I'm car shopping. Or my target may include "all wagons" or "all sports cars". I knew I needed an All wheel drive (AWD) or Four Wheel Drive (4WD) vehicle at one point, so those were the only vehicles on my list. Sometimes an older car catches my interest. I get bored with cars easily and have a bit of a reputation for changing often!

Know what you need, then add what you want. If you drive a lot, you need good mpg and you want comfortable heated leather seats. Can you think of 10 things you would change about your current ride? How about 10 things you love? What can you live with and what can't you live without? By making a vehicle a realistic and non-emotional choice, you take away the urge to purchase a fully loaded luxury car you can't really afford or a gas guzzler that ends up being too costly in the long run.

Choosing the right car (for you)

The vehicle you drive is a very personal decision. Sometimes you must compromise because you share the vehicle. Or you must choose a vehicle that is not your first choice in order to satisfy your needs (vs your wants). My "must have" above all other things is a reliable vehicle. The thought of breaking down on the side of the road is always in the back of my mind when car shopping. I live in a very rural area and could spend hours waiting for a car or hiking to find a signal. I just don't want that in my life!

We all have prejudices and beliefs when it comes to cars. My dad knew how to fix cars and made sure I did too. I may know how to fix a car, but I don't want to. I'm going to steer clear of vehicles that I "believe" are less roadworthy. I'm not saying my preferences are better, just that we all have preferences. I've owned certain cars that I loved and would consider again in a minute. I've owned cars that ruined a whole brand for me. The thing to remember, is that this information tool can be used no matter what your preferences are!

Analyze car cost data

Since I love to analyze data AND get a bargain, I find it almost impossible to make a large purchase without doing this exercise. Many available research tools online, so you can determine the true cost of ownership using your realistic and personalized factors. I use a simple Excel spreadsheet that has the following columns:

  • MPG
  • Price of vehicle
  • Yearly miles you drive
  • Price per gallon of gas or diesel
  • Yearly cost of maintenance + tires* (based on miles you drive)
  • Insurance
  • Financing costs (interest)
  • Parking or other fees

*The difference in tire costs can be substantial, especially on AWD vs 2 wheel drive vehicles. For example, on my Subaru you must replace all 4 tires if something happens to one, and they are larger than those on my VW, making the potential cost to replace 2-3 times higher.

Formula = ((yearly miles/mpg)*Price per gallon) + Vehicle cost + maintenance + insurance + financing + other. Then divide by 5 years, or by 60 months to get the total cost. Change this value if you are using a different time frame (8 years, 10 years, etc). The maintenance and insurance values should be multiplied by the time frame ($1000/year x 5 years = $5000) - you will divide later.

Simple calculation example

Simple price comparison using cost and mpg
Simple price comparison using cost and mpg

Make assumptions

Once you have determined your personalized factors you must determine your assumptions. Here are the assumptions I used:

  • Gas powered vehicles will last 200,000 miles without major repairs
  • Diesel powered vehicles will last 350,000 miles without major repairs
  • I will continue to live and work in the same place (you may want to adjust this if you know of an upcoming life event)
  • I will pay to have routine maintenance done (or do it myself) on the scheduled basis
  • Assume you will keep the vehicle at least 5 years

With these variables I was able to calculate my personalized cost to own various vehicles. It took some research to find reliable answers for most of the values, but in the long run, doing this calculation may save you thousands of dollars. The time spent was worth it to me. You can stop at "miles per gallon" in the calculation for a simplistic how much is one car to "run" vs another.

Complex calculation example

A  more complex variation of the calculation. Your calculation may vary!
A more complex variation of the calculation. Your calculation may vary!

Test driving and deciding on a vehicle

Once you complete the initial analysis you should be able to narrow your choices down to 3-10 models. Depending on how much time you have before you "need" a vehicle, you can test drive every one of your choices or use the comparison to limit your test drives. I like to test drive my two finalist choices at least three times - in the light and in the dark at a minimum. I try to find a dealer in an area that has similar terrain to the area in which I live (no dealers in this small town!). I have even rented a car for a week to make sure it really was what I wanted - ended up it was not! Some things can only be discovered when you are not under pressure with a salesperson breathing down your neck.

After the test drives you may have a clear winner - a car that stands out above all the rest to meet your needs and wants. Or you may have to re-analyze what you are willing to give up to have what you "want". Owning a car is one of the biggest monthly expenses even when you don't have a payment.The spreadsheet will allow you to fine tune your choices to fit your budget. At a minimum you will be aware of the costs and able to adjust your other monthly expenses to afford your favorite ride.

My emotional choice - the spreadsheet helped convince me!

At some point we have to throw caution and analysis to the wind and choose from the heart! Although I didn't "need" another car, I wanted one. The spreadsheet allowed me to investigate (with much consideration) my family's true cost to own a TDI Bug.
At some point we have to throw caution and analysis to the wind and choose from the heart! Although I didn't "need" another car, I wanted one. The spreadsheet allowed me to investigate (with much consideration) my family's true cost to own a TDI Bug.

Poll: How much do you love driving?

What would you give up to drive your favorite vehicle?

See results


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