The True Luxury Car Cost of Ownership

It’s nearly impossible to avoid Tesla lately, either in the news from the misadventures of Elon Musk or during a commute where the Model 3 and Model S’s appear to be the status symbol de jeur. I’ve got nothing personally against Teslas, they seem like attractive cars and on some level the promise of low maintenance, gasoline-free operation strikes me as attractive. But on a much more primeval level, something poorly evolved in my brain stem is utterly repulsed by the thought of dropping eighty grand on a car. The true luxury car cost of ownership is staggering.

Cars are one of the most important things you should avoid financially screwing up, if at all possible. Buy a cheap, reliable one and keep it until the wheels fall off. Still, all of the Teslas got me wondering just how much better off I am in my crummy 2006 Honda Accord with damaged upholstery.

Total Luxury Car Cost of Ownership

Fortunately, Edmund’s provides very good total cost of ownership metrics for every make of vehicle on the road. Their estimation uses 5 years of ownership at 15,000 miles a year.

From their estimates, I’ve calculated the estimated cost per mile of each of four different types of popular vehicles:

ItemHonda Accord LXAudi A4Tesla Model SFord F150 XLT
Depreciation$0.159$0.331$0.586$0.173
Taxes$0.036$0.067$0.121$0.056
Financing$0.051$0.099$0.183$0.073
Fuel$0.110$0.145$0.067$0.166
Insurance$0.083$0.126$0.153$0.098
Maintenance$0.052$0.101$0.085$0.074
Repairs$0.012$0.033$0.031$0.013
Tax Credits-$0.100$0.000
Total$0.504$0.901$1.126$0.652

Lifetime Luxury Car Cost of Ownership

I believe deeply in thinking in terms of ‘how much will this save me over a month, a year, a decade, and a lifetime.’ When you start turning tepid, boring savings amounts into 40 and 50 year saving regimens, the answers became far more material.

Edmund’s analysis ignores, however, the return that could be earned on excess savings by choosing a cheaper vehicle. For cars, they are truly epic. 

Below are the respective wealth levels of someone that is given annually an amount of money sufficient to pay for 15,000 miles of a Model S. I assume that vehicle operating costs will increase at 2.5% annually and that excess savings (if a cheaper vehicle is chosen) will earn a fairly conservative 4% return. This example is equivalent to assuming you will purchase a new car every 5 years, which a true FIRE advocate will call into question. 

The distance between the lines at year 40 reflects the total amount of future wealth sacrificed to maintain the Tesla S lifestyle. Yes, that’s seven digits of potential wealth destruction between the modest but stalwart Honda Accord and the Model S. A more aggressive market return of 7% drives the delta to a whopping $2.5 million. 

Just a little bit of food for thought about the implications of choosing luxury over practicality.

 

 


2 Responses

  1. David says:

    I agree. Been driving Priuses around now for almost 10 years. I originally got rid of my Lexus and bought my brother in law’s Prius on the cheap which smelled like a college dorm.. which is no surprise bc he was in college. No regrets!

  2. Nathan says:

    Seems a that if you add in you can actually do DIY with an F150 you’d end up ahead of the accord. I may be biased