Consider the Total Cost of Ownership, Please
Posted by Cap in Personal Finance on September 9, 2006 |Remember how I had that stupid April Fool’s joke, where in I suddenly bought a brand new 2006 BMW 325i? Unfortunately for a lot of Google users, they will find the page and not realize that it was an April Fool’s joke (er, sorry).
This resulted in a number of emails from potential car buyers, with usual car buying questions such as “How’s the ride quality? Is maintenance really expensive? How do you like the car so far?”
One of the frequent asked question would be on the actual ownership cost of the vehicle, aka total cost of ownership. Which makes me worry a bit for these car buyers, mainly because if they’re seriously interested in the BMW, they should be well aware of BMW’s Maintenance Program: you receive all factory recommended maintenance at no cost, for up to four years or 50,000 miles. They should have also done the homework on the cost of insurance, etc.
Although TCO is something many enterprise managers consider on a daily basis, it seems that many consumers don’t consider the total cost of ownership enough. If you don’t factor in the maintenance, insurance, fuel, financing, and tax cost of buying a BMW — you may be getting a vehicle that you can’t afford in the long term.
Remember though that total cost of ownership can apply to other things besides a car. Pretty much any functional thing that you may consider an asset will have an ownership cost. Computers, homes, even clothings have direct (& indirect) cost related to the purchase. Obviously, for big ticket items, these cost are much higher. Figuring out these potential cost before committing to a purchase will save you from future nasty surprises.
3 Responses to “Consider the Total Cost of Ownership, Please”
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September 9th, 2006 at 1:43 pm
Cost also includes time: it’s not just the “cheap” ($12) magazine subscription, it’s also the time it takes to read each issue (or feel bad about not reading it).
September 10th, 2006 at 7:23 pm
I was fooled into thinking you bought the BMW. As an owner of 3 BMW’s (2 of 3 are fully paid off), the TCO is alot lower if you can perform the maintenance yourself. Then again, that’s not saying much since around 98% of BMW buyers can’t or won’t even change their own oil.
September 11th, 2006 at 4:07 pm
Cars……you can sink money endlessly in them.
I switched recently and now only drive a small scooter. Costs much less and takes you from A to B same quick.
But then….I live in Asia (low cost of living anyway) and mainly drive only from my apartment to the beach or shopping for food and groceries.
;-)