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That includes depreciation, which is effectively the cost of the car. If you own the car outright and aren’t planning on selling it, this is effectively zero.

LeifCarrotson 9y ago
Depreciation is the difference between the price of the vehicle when you purchase it, and the value of the car when you can no longer drive it - whether that's because you sold it, because it died, or because you died. There are different amounts of depreciation between a 2-year-lease of a new vehicle, a purchase of a 50k mile vehicle sold at 150k, and the purchase of a 200k mile vehicle that's sold to the scrapyard to be melted down for steel...but it's all depreciation.
- Mister_Snuggles 9y ago
  The thing with including depreciation in the "cost" is that it doesn't actually matter to individuals. To a business, depreciation is a real thing that affects their tax return. The Canada Revenue Agency has a lot of rules around how to depreciate assets and how they affect income. I'm sure the IRS has similar rules. To a person, this is not the case. If I have a $10,000 car loan on a $20,000 car, the only things that matter are the down payment of $10,000 and the regular loan payments. If I pay the loan off over five years but the car has a 10 year useful life, those last five years are effectively free. Yes, from a pure accounting perspective I would debit the asset account for my car, credit cash for the down payment, and credit a liability account for the car loan. But in reality, that doesn't actually matter. There is no impact on my taxes by amortizing my car over 10 years vs 5 years. The only impacts are how the down payment affected my savings and how the loan payments affect my cash flow.
  - LeifCarrotson 9y ago
    After those 10 years, you can ostensibly sell the car when you feel it has outlived its usefulness to you. Whether you can then sell that car for $8,000 (and thus finance your next vehicle down payment with it) or have to scrap it for $500 has a huge impact on your total cost of owning a vehicle. The loan payments are factored into our sum of car payments, registration, insurance, gas, and maintenance already, yes, but some of your down payment should be factored into the annual cost. Not all of it, because then you'd be ignoring the value of the car when you sell it. The resulting factor in the sum is equal to the depreciation of the vehicle.
r00fus 9y ago
How many cars have you sold where the sale price after X years equals the purchase price? Because that's the major part of depreciation, and it has never been net-zero for me.

LeifCarrotson 9y ago

Depreciation is the difference between the price of the vehicle when you purchase it, and the value of the car when you can no longer drive it - whether that's because you sold it, because it died, or because you died. There are different amounts of depreciation between a 2-year-lease of a new vehicle, a purchase of a 50k mile vehicle sold at 150k, and the purchase of a 200k mile vehicle that's sold to the scrapyard to be melted down for steel...but it's all depreciation.

Mister_Snuggles 9y ago
The thing with including depreciation in the "cost" is that it doesn't actually matter to individuals. To a business, depreciation is a real thing that affects their tax return. The Canada Revenue Agency has a lot of rules around how to depreciate assets and how they affect income. I'm sure the IRS has similar rules. To a person, this is not the case. If I have a $10,000 car loan on a $20,000 car, the only things that matter are the down payment of $10,000 and the regular loan payments. If I pay the loan off over five years but the car has a 10 year useful life, those last five years are effectively free. Yes, from a pure accounting perspective I would debit the asset account for my car, credit cash for the down payment, and credit a liability account for the car loan. But in reality, that doesn't actually matter. There is no impact on my taxes by amortizing my car over 10 years vs 5 years. The only impacts are how the down payment affected my savings and how the loan payments affect my cash flow.
- LeifCarrotson 9y ago
  After those 10 years, you can ostensibly sell the car when you feel it has outlived its usefulness to you. Whether you can then sell that car for $8,000 (and thus finance your next vehicle down payment with it) or have to scrap it for $500 has a huge impact on your total cost of owning a vehicle. The loan payments are factored into our sum of car payments, registration, insurance, gas, and maintenance already, yes, but some of your down payment should be factored into the annual cost. Not all of it, because then you'd be ignoring the value of the car when you sell it. The resulting factor in the sum is equal to the depreciation of the vehicle.

r00fus 9y ago

How many cars have you sold where the sale price after X years equals the purchase price? Because that's the major part of depreciation, and it has never been net-zero for me.