The truth about car: redux edition

So, last week I told you I was an incurable car nut. And I also promised to share some (hopefully insightful) nuggets about the true cost of car ownership.

Well, without further ado, here they are—the nuggets of course. (Click to zoom)

Anual Ownership Costs
A couple of details:

  • In the interest of consistency, I standardized the cost of fuel and financing, pegging the price of fuel at $1.22 per liter and imputing 5% financing for each vehicle (financing costs were imputed even for those cars actually bought outright);
  • Also, remember that, depending on factors such as age, geography and other assorted demographics, your actual costs—including insurance and such—may differ from those denoted here.

OK, so.  What does the data reveal?

Start by taking a peek at the total annual costs. Notice that, if you exclude the Sienna, the difference in ownership costs for the remaining three cars is relatively insignificant. Only $925 per year (just $77 per month).

Why?

Notwithstanding that one car was purchased new and two were previously owned (the Accord was 7 years old and the Mazda just 3 when purchased), what they share in common is:

  • They are inexpensive cars;
  • They are highly rated in terms of reliability;
  • They all have four cylinder engines;
  • They tend to stick around for a long time (only the Accord has since been sold).

Bottom line then—if you don’t like to spend a ton of money on cars—consider those four aforementioned bullets as your car-purchasing mantra.

Which means that your ownership costs will clock in at $5-6K. Each and every year.

Yeah but, I want more

Oh, so you want something bigger, something comfier?

Oh my, so roomy!

Well look at the Sienna’s cost analysis and you’ll find that there’s a price to be paid for bigger and more comfortable. Even though it stayed “in the fleet” for more than eight years, the Sienna’s cost averaged about $8,000 for each of those 8 years. That’s a lot of dough. Comparatively speaking. And it would have been higher still had the car been disposed of earlier.

So why? Why did the Sienna cost two grand more per year than the next most expensive car?

Two reasons. Mostly.

  • Depreciation is reason number one. Look at the costing table, $3,000 per year in lost value. Each and every year. What would you do if your investments lost $3,000, every year? Yeah, I know. I’d scream blue-murder too.
  • Then there’s fuel. With its six-cylinder engine and its hefty curb weight, the Sienna is much thirstier than all the other cars here.

So, let’s get this straight. It costs $8,000 per year to own a $30,000 car? And maybe $5,500 to own a smaller, less expensive car? That’s, like, an extra $2.5 grand a year?

In a nutshell, yeah.

Wow, just imagine what a $40 grand car would cost. Or a $50, or 60, or 70-grand car!

No, no. I said “More!” Not, “More expensive.”

Yeah, but… What if you don’t want to drive what some might consider a “penalty box”? What if you don’t want to be seen in—heaven help us—a bleeding mnivan.  What if you want something a little fancier, a little snazzier or a little less likely to break down?

Valid questions, I suppose. Especially that final one, as a quick peek at the Accord’s repair history will attest. (It did, after all,  require almost twice as much service as any other car on the list).

And, what if you want all that, without raiding the kiddies’ piggy bank?

Cash Rules

Alright then. If small, to you, means even smaller pleasure (now, now, don’t let your mind wander too far on that one, OK?). If a minivan, to you, equates with uncool.  And, if visits to a service bay are as enticing to you as that annual visit with your tax accountant (hey wait a minute! That’s me!). Then consider these two options.

Option 1

We said fancier, we said snazzier, right?
OK.
Then lease.
Yes, I said, “lease”.
Check this out.

Kia Optima

You can, right now, lease a brand new, base-model Kia Optima for four years for only $325 per month. By my calculations—all in—that car will average $6,900 per year.
Plus, it’s brand new. Plus, it’s got a warranty.
Not bad, eh?

But, then what?
Then, when the lease expires, lease another one. Or lease something else for that matter. If you’re not big on brand loyalty, odds are that you’ll find another lease—spanking new by the way, please don’t ever lease used—for about the same price.
That way, rather than being an owner, you simply become a renter. All for pretty darn close to the same price anyway.

(Caution! If you do go the leasing route, be aware of all the terms and conditions, especially regarding lease returns).

Option 2

But what if you are, like me, a lifelong gearhead? A 100% bona fide addict?
Then do your homework, shop around, visit a lot of dealerships, and wait for one of those, “They made me an offer I couldn’t refuse” type of deals.

That’s what I did when I landed my most recent purchase, a prior-model-year-but-still-almost-brand-new BMW, with only 300 clicks on the clock. Hey, we’re car nuts, right? And as a car nut, I’m sure you agree that everyone should, at least once in their life, own a BMW.
What? You don’t?
Oh never mind. Just read on.

Bimmer3

Per my calculation, this sweet-running 3-series will cost me $7,004 per year. Which is, you know, only $100 more than the leased car under Option 1.

Why only $7K per year? Well, because of certain provisos, not to mention certain benefits. Which are:

  • At time of purchase the car still had its original manufacturer’s warranty;
  • The purchase price included a two-year extended warranty that kicks in after the the original one expires;
  • The car comes with four years’ service. Absolutely free.

And lastly, the provisos. Which are:

  • I pretty much have to commit to the car long-term.
  • Meaning ten years.
  • At least.
  • And, I have to dispose of the Mazda. Or the Matrix.
  • Or both.
  • Not sure, yet. But, one of them, at least, has to go.

And if it is the Mazda, well, after its faithful (not to mention, exuberant) service these past eleven years, that will leave me somewhat saddened, if not downright brokenhearted. But as they say, back in my hometown, “No use crying over spilled Labatt 50.” (Yeah, we say that, but we say it in French).

By the way, if you are looking for a vehicle of the used persuasion, contact me, about either car, and I’ll send you the deets.

So, dear reader.
As the great Howie Meeker often said, “Keep your stick on the ice.”
Which, to me, simply means, “Drive a nice car, yes. But never, ever, overpay.”

(Yeah, I know. Tenuous. At best.)

 

 

The truth about cars

Civic

Cars.
They’re my thing.
From a very young age, they’ve always been my thing.
The way they look, the way they sound; the telltale nuances in ride and feel and comfort as I drive them.
It’s a long-term love affair, I suppose. And, like any love affair, it’s hard to explain why cars turn me on.
But, they do. They just do.

It’s a troubled romance though.
I’m an accountant, you see.
And therein lies the problem.
Because, as a beancounter I know that cars are a terrible investment.

Think about it.
A car’s value plummets within minutes of signing the sales agreement. And its value keeps on diving right up to the point that you unload the old clunker.
And start the cycle anew by replacing it with a newly-minted, newly-sinking depreciable asset.
And, if that’s not bad enough, the financial setback is made even worse with ongoing costs like maintenance; insurance; interest; parking. And on and on and on.

Fiat500

Ask any beancounter, they’ll tell you; a car’s a lousy investment.
So bad in fact that your worst stock market mistakes can still come out smelling sweeter than those four wheels parked in your driveway.

Take HP for example. HP’s stock price, over the last five years, has been, pretty much, a disaster. Down 46% since 2008.
Pretty bad huh?
But compare that to what an average car sheds in value over the same time, and you might be shocked to learn that, over five years, a car can easily lose 60% of its value.

Here’s the thing. Stock prices fluctuate. So, with stocks, last year’s disaster still stands some chance of transforming itself into this year’s sweetheart.
Cars?
Well, cars simply don’t do that. Car values head in one direction. Down!
That’s depreciation for you. It ain’t pretty.
The only good thing to say about depreciation is that the rate of decline tends to slow down over time. Which is something to keep in mind when choosing your next car (hint: consider buying used).

I know, I know.
You’re thinking, “Hang on a second, you can’t compare a car to the stock market. Cars are utilitarian. They serve an every-day purpose, and thus they can’t be compared to that other vehicle, the one called an investment.”
And to that I’d say, you’re right.
But only part-way right.
Why?
Well, think about this.

Bobcat

A car, most of the time, does exactly what an investment does. It sits there, idle, waiting for you to take it out, have a good time.
The truth is, a car, per the experts, spends at least 95% of its time sitting.
Just sitting; depreciating; parked by the curb.

(Here’s a curious aside: in that 5% that a car actually does get driven, an inordinate amount of that time is spent cruising around looking for a place to park).

Some basic math for you:
Assume it costs $7,500 per annum to run your car. Taking into account a 95% idle factor, every hour you spend (and I mean spend) driving will, therefore, cost you $17.17.
Doesn’t sound like much?
Well, compare that to other assets you use every day. Your computer, for example. If you use yours as often as I do mine, it costs you but a trifle (only 59 cents per hour for my MacBook).
Want to go bigger?
Alright then. Consider your house. With an hourly cost of somewhere between five and eight bucks (and this for an appreciating asset) it’s a relative bargain.

Which, you know, means that your car is the most expensive item you might ever own.

Which also leaves this car loving accountant torn.
Torn between the heady allure of shiny new wheels,
And the sensible-shoes approach of responsible money management.

GTV

And while I’m likely as any gear-head to tune in to the car shows (Top Gear’s my favourite) and while I’ll avidly lap up the latest “best car” pronouncements of the automotive press, what sets me apart from the average car lover is the little voice inside my head that calmly reminds me of the amount of shekels such a desirable object will suck out of my bank account. Each and every month. For as long as I own it.

And it’s that last thought that stops me in my tracks.
Why?
Because—surprise, surprise—I have a tendency to crunch numbers. Which means I can quite accurately predict what almost any four-wheel dreamboat’s going to cost me.

And now I’ve got all this data.
Real life, historical data that itemizes the ownership costs for each of the last five cars I’ve owned.

(If, at this point, you’re thinking accountants are an anal and pedantic bunch, well just be happy you studied law or computer science or whatever—and then go ahead and benefit from my pedantry).

Cooper

So here’s what I’d like to do.
I’d like to share my data with you, put you in the driver’s seat.
And show you how much a string of cars have cost me.
Some of the data, I think, will surprise you. Especially in way they address those age-old questions of: lease or buy? Or old or new?

My hope is you’ll come away with some important information.
That will assist you when it comes time to acquire your next car.

So stay tuned while I prepare that data. Tidy it up, make it more presentable.
Back soon.

Yeah but, I’m on a Mac

You’re an entrepreneur and you love your Mac. And, you’re an iPad or iPhone user too?
Then you know what you need?
You need this!

AE Desktop Splash

Why do you need that?

Well, that, my friends, is the missing link. AccountEdge is what you’ll install on your Mac (actually you can install it on your Windows computer too) to keep track of all your customers, your suppliers, your invoices, your inventory, your expenses–and a whole lot more.
But it gets better.

Once you install AccountEdge on your computer, you can then install—for free—this AccountEdge app on your iPhone or iPad.

AE Mobile Splash

And, all of a sudden, your data data is mobile.

And that means you can check your inventory,  view your customer lists, prepare a customer quote or send an invoice, all from your iPhone or iPad.

AE Sales Entry

To zoom in, click image

And no, you don’t need WiFi or 3G (or any other acronym) to use AccountEdge’s mobile apps.
However, once you do have access to the web, you can then go ahead and sync your data, from your iPhone, your iPad and your computer. And now all your devices are on the same—figurative—page.

There’s no fuss. No muss. And no missed opportunities.

It’s a no-brainer.

It’s easy.

And, if you do need help setting up AccountEdge. Call me. I’m mobile too!

Cloud? Desktop? What’s up with that?

Cloud DesktopCloud? Desktop? Which would you choose? Which should you choose?

Let’s face it, cloud computing is where we’re all going.
It’s where we’ve been too.
If you sync with Dropbox. If you store photos on Flickr. If you plop important tidbits onto Evernote, then you’re already using the Cloud.

But, what about your financial data?
What about the invoices you send your clients?
Or the payments you make to your suppliers?
Should you record all that in the Cloud?

It used to be easy.
Whether you ran a small-medium business. Or whether you managed a not-for-profit.
You had three choices: QuickBooks; AccountEdge; Or Simply Accounting (Sage 50 as it’s now called).
And whichever one you chose, they all worked the same way:

  • You bought the program of your choice;
  • Installed it on your computer;
  • Used it to create a data file;
  • That recorded all of your financial transactions;
  • All of which was also stored on your computer.

It used to be easy.
But then mobile devices came along.
And then the Cloud followed along,
And, suddenly, we’re all living in what Steve Jobs called “the post-PC era.”

And now, in addition to AccountEdge, QuickBooks and Sage 50.
We’ve got FreshBooks, and Wave Accounting, and Kashoo and QuickBooks Online (to name just a few).

Which leaves you with more—much more—to choose from.
Which also leaves you with a sometimes confusing matrix that cross-references criteria such as platform, software brand, and mobile device, not to mention other considerations such as collaboration, scalability and technical requirements.
Which usually leaves the average owner/manager just a little bewildered and just a little befuddled.
Which is why you should attend this free two-hour information session that helps you determine your best options.

Cloud VS. Desktop.
Which should you choose?
Attend this session and let’s figure it out together.