Today marks the one year anniversary of my used car purchase. I swapped my 1995 Buick Sedan with over 180,000 miles for a 2003 Toyota Echo with 87,000 miles. The primary reasons I opted for this model was to obtain better fuel economy while finding something with great reliability and an affordable price tag.
I want to examine my car’s cost per mile on this one year anniversary of ownership. The cost per mile calculation is a valuable figure for determining the efficiency and economy of one’s vehicle selection. Here are the stats:
- 22,000-Miles Driven
- $1,900- Depreciation- (Purchase Price – Kelley Blue Book)
- $ 592- Insurance & License
- $ 30- Maintenance
- $1,824- Fuel
- $4,346 Total Cost
- $0.197 per mile ($4,346÷ 22,000 miles)
Overall, my vehicle provided cheap tranportation in my first year of ownership, allowing me to achieve a 19 cents per mile cost. This destroys the IRS calculation of cost per mile of 56.5 cents, good for 66% less than the average American driver.
However, I was shooting for 15 cents per mile. My primary obstacle in attaining this goal was the depreciation component which was the single largest expense at nearly 9 cents per mile. If I had used a 5 year straight line depreciation (instead of the purchase price – Kelly Blue Book method I used for the above calculation), my depreciation hit would be $1,180 for 5.3 cents per mile reducing my total cost to around 16 cents per mile. I plan on owning this vehicle for many more years into the 200,000+ mile range so my depreciation hit will be much lesser going forward.
The other cost categories were great as the car required minimal maintenance (only oil changes) and averaged over 42 MPG. Compared to my last vehicle averaging 26 MPG, this car saved significant greenbacks. A quick calculation shows :
- New Car- 22,000 miles÷ 42.3 MPG= 520 Gallons Fuel @ $3.50 average cost per gallon = $1,824 spent on fuel
- Old Car – 22,000 miles÷ 26 MPG= 846 Gallons Fuel @ $3.50 average cost per gallon = $2,961 spent on fuel
- Total Fuel Savings in Year 1- $1,137
My car purchase also saved on maintenance as my previous car was 18 years old and approaching 200,000 miles. The overall cost per mile would probably be about a wash compared to my old car for this year. The fuel savings provided by the new car on fuel is negated by the old car’s clunker’s minimal depreciation. But, it’s great to drive something so fuel-efficient while having to drive an obscene number of miles.
In any case, the best solution to reduce transporation expenses is to drive less and avoid driving if possible. Unfortunately, given that I’m still in the asset accumulation phase before FI and with the nature of my career I have to be highly mobile (six different job locations in past year). Ideally, I would plant close to work and minimize any driving, but I don’t have that luxury since I’d constantly be facing lease breaking fees, etc. In the meantime, I walk or bike for short trips <4 miles and leave the car for commuting and continue looking forward to the day when I can park my commuter and enjoy my free time.
Good move! You are now in a newer vehicle with lower costs. I made a similar move recently by buying an older van for $1500, while I hope to sell my car for about $7500. I plan on pocketing the $6000 savings while having similar fuel costs. I know I will have to replace the van earlier, but I will have very little depreciation. In addition, I hope to get 3-5 years out of this older van.