As I mentioned in Part I, my 14-year-old F-150 has been showing signs that she’s ready for retirement. She’s still great for hauling junk, but not dependable enough for my daily needs. Yes, I’ve made the painful financial decision to upgrade my wheels. To make the decision more urgent, I just started a new job (yay!) which will require a decent amount of driving. A reliable and efficient car is a must!
– Here’s the background –
For the past six months, I worked for a tech start-up company headquartered in Akron, OH (shout-out to Lebron and The Black Keys!). In that role, I worked primarily from the comfort of my dining room table, making the two-hour drive from Columbus to the office for one or two days every third week.
Probably at least four out of seven days in a typical week I did not drive at all. I’m fortunate to live only two blocks from Kroger, less than a half mile from at least three parks, and walking distance from just about anything else I need. In short, I was driving fewer than 500 miles a month.
– The new job –
I’ve been in my new role for about a month now (more on that later), and luckily my daily commute is very favorable. It’s only 2.8 miles one way (or 2.4 as the crow flies), and all on city streets. Bypassing the madness of the morning rush is an unquantifiable benefit of its own.
But while my office commute takes under 10 minutes, I’ll also be driving quite a bit for work, making site visits to clients across a 23-county area of Ohio. That could mean driving up to 120 miles one way to get to the furthest corners of my territory. It also means I will be doing very little city driving, and a lot of highway driving. This will factor in later.
It’s also important to note that I will also get 53.5 cents per mile in accordance with the IRS mileage reimbursement rate. This is playing a huge role in the car buying decision.
– How much it costs to lease –
As I shared before, I recently got out of a lease for a 2014 Honda Civic. I paid $160/mo for 36 months after putting $950 down. It averaged 32 miles to the gallon and added $88.25 per month to my budget in auto insurance costs. FYI, I bundle my home and auto insurance through Liberty Mutual – LOVE them!
When my lease ended, I paid $854.09 in fees for mileage overages and cosmetic issues. If I owned the car, I wouldn’t have incurred this expense. In other words, these were outside the normal scope of maintenance costs that I would spend on any car such as oil changes, tire replacement, etc.
Though I decided not to exercise the purchase option on my lease back in March, I still wanted to see how going that route would have stacked up against buying a new car now.
– Should I lease or should I buy? (dun, dun, dun, dunnnn, dun, dun) –
As our namesake would suggest here at Life is Like a Spreadsheet, we decided to plug a few numbers into a spreadsheet and see what the math said. For this comparison, we’ll be evaluating the following vehicles and purchase/lease conditions:
- Honda Civic, lease to own: Assuming a three-year lease leading to a purchase under the same conditions that I leased my 2014 Honda Civic.
- Honda Accord EX-L, purchase used: My good friend Lanny from Dividend Diplomats supplied these numbers based on his 2013 purchase of a 3-year-old Accord.
- 2003 F-150, purchase used: I purchased this truck from my grandpa earlier this year for $2,225, and have been using it as my primary vehicle since my lease ended. This model shows the cost of continuing to do that.
- 2017 Hyundai Ioniq, purchase new: The financing and specs are from Ricart Hyundai in Columbus, OH.
If you’re not familiar with the Ioniq, say hello to the newly crowned king of hybrid fuel efficiency. It was just released this year in tandem with the nearly identical Kia Niro. These are Hyundai’s first true challengers to the Toyota Prius’ throne.
A quick note on that.
– Hyundai Ioniq vs. Toyota Prius –
For the sake of this article, I’m not going to get into a side-by-side comparison of all the features offered by the Prius and Ioniq, or the other vehicles for that matter. All you need to know is that at face value the base model 2017 Prius is priced $1,275 higher than the Ioniq’s MSRP, and $2,075 higher than the dealership price I was offered.
To boot, the basic Prius gets 54/50 MPG, while the Ioniq gets 57/59 MPG. Notice that the Ioniq interestingly gets better MPG on the highway than in the city. This is unusual for a hybrid, with the Ionig getting 10 MPG better than the Prius in this category (59 vs 50). Since most of the miles I’ll be putting on the car will come on the highway, and because of the $2K price difference, the Ioniq scores an easy win against the Prius in a cost analysis. Again, all other factors for style, trim, manufacturer warranties, dealership bonuses, etc not considered.
Before we dive into the spreadsheet, let me explain the factors that I am and am NOT considering for each vehicle.
– Other factors of a car’s true cost –
First, this is designed to be a side-by-side comparison that assumes certain constants which may not actually play out in real life. For instance, you’ll see that for each vehicle – Ionic, Civic, Accord, and F-150 – I estimate driving 1,500 miles/month. However, if I only had my F-150 available, in practice I would be much more cognizant of how often I was driving. Not only does it get terrible mileage, but it sounds like it’s trying to cough out engine parts every time I turn it on.
This model also assumes driving each car for the next 10 years. The F-150 would almost certainly not last that long if it were being driven as my primary vehicle. And if it were being driven that often, the maintenance costs would far exceed anything that the new Civic or Ioniq would likely need.
– The factors we considered –
Here is the quick list of assumptions for this model:
- 10 years of car ownership
- 1,500 miles/mo
- 500 reimbursable miles for work
- 5 cent reimbursement/mile (current IRS rate, no change)
- $2.65/gallon (no change)
- Current auto insurance rates (do not change, though in real life they certainly would)
- Registration fees and scheduled maintenance (oil, filter, etc) are consistent across vehicles
- NO unforeseen maintenance is included, though that would certainly happen for any car with the F-150 seeing the worst of it
- Depreciation schedule as predicted by Money-Zine and Omni Calculator
- Ioniq – I used actual price and financing offer from local dealership. MPG from EPA rating
- Civic – I used actual lease terms that I had from 2014-2017 for my old Civic. MPG from actual driving experience
- F-150 – I used the actual purchase price. MPG from actual driving experience
- Accord – I used the actual financing, insurance, MPG provided by the Dividend Diplomats
– Calculating gas costs –
For calculating gas costs, I used Ohio’s current average fuel price of $2.65. Amazingly, this is within one penny of the inflation adjusted fuel cost averages over the past 100 years! For this reason, and because of the impossibility of predicting the global energy market over the next decade, I’m sticking with the 100 year average. Obviously, if fuel prices rise the Ioniq’s value will also rise as compared against less fuel efficient cars, while dropping prices would erase some of that advantage.
– Car insurance premiums –
I did not adjust the insurance rates over the 10-year period because, first, I don’t know with any accuracy how they might change. I’m one of those believers in autonomous cars disrupting the insurance industry. We will definitely see a shift towards insurance companies punishing non-autonomous vehicle owners. In fact, this is already starting.
Common sense would say that as a car gets older, the insurance premiums decrease. In this case, the premium for a new Ioniq has the most room to fall, which might translate to seeing the largest percentage decrease on that policy. It also means that the Ioniq’s final cost of ownership will be less than the numbers here indicate.
– Maintenance expenses of owning a car –
Of course, the largest expense not accounted for by this model is the extraordinary maintenance and repairs that will come up. Because this is again impossible to predict, I’m going to operate under the assumption that most new vehicles will see roughly the same amount of servicing over their first five years, with the better made vehicles holding up best of 10-years (duh). A 2003 F-150 can’t be fairly compared to a new car of any kind, so it doesn’t make sense to try making predictions there. It’s old. It will break. Eventually, it won’t be worth fixing, and that will happen well before 10 years.
– Predicting uncertainty when buying a car –
The final thing that this model does not consider is what happens if, A) I leave for a different job that does not reimburse for mileage, or B) I start driving for Uber or Lyft and earn extra income, though add even more miles to my car.
Whew. Okay David, so what does the spreadsheet say, already!? Look through the five tabs below to find out.
If you’re having any trouble viewing the embedded Google Sheet, here is the screen capture which shows the results.
OR, you can click this link to open the file in Google Sheets. Feel free to download and modify it for your own comparisons!
– The Ioniq is the winner* (*for me, for now) –
What do you think? As you can see the Ioniq comes out on top for cost of ownership over 10 years, with the used Accord and F-150 taking first and second place over 5 years. Does $9,900 seem reasonable for the true cost of buying and driving a new car for a decade?
The fun part of putting numbers into a spreadsheet is how easy it is to isolate one variable. A tweak here or there can drastically change the outcomes.
For instance, if I didn’t get reimbursed for work mileage, the Ioniq would cost more than $42,000 over ten years! Remember, that does not even factor in unplanned maintenance costs which could add several thousand more. Obviously, mileage reimbursement is a major factor for me in this model, and I’m still mostly guessing at how things will play out.
– Find out how much your car really costs –
Given your unique work/life situation, what do you need in a car? Or do you even NEED a car? In my opinion, the only way to save money on a car is to never own one. It’s very difficult to change a car from a liability into an asset, no matter how fuel efficient it is.
From the picture at the top of this article, you already know I decided to buy a Hyundai Ioniq. I’m excited to track my actual expenses and to see how close my predictions were. Stay tuned for monthly updates and a new spreadsheet!
Thanks for reading 🙂