ShopTalk
The Myth of Low-Maintenance-Cost Savings
In the early 1990’s, automotive manufacturers began reducing their minimum maintenance requirements. Marketing pressures rather than changes in technology have primarily driven this. There are examples of improved technology, of course, such as spark plugs. But the biggest change has come from a desire to make market claims for products that require little care and therefore have low maintenance expense. However, these claims of low maintenance requirements have set unrealistic expectations in customers’ minds and, in the opinion of this service provider and others in the automotive service industry, resulted in much shorter service lives for the vehicles on the road today.
Take the example of the spark plugs. At one time they were replaced every 12,000–15,000 miles. Now there are plugs that last upwards of 100,000 miles, but they cost a great deal more than older, primitive plugs. Getting to them on the engine has also become increasingly difficult, so the labor cost in replacing them has also increased as well. In the end, the higher cost of the plugs and the increased amount of labor to change them has resulted in a net increase in cost of maintenance by the time you have replaced the first set of plugs. The savings that seemed evident in the early life of the car vanishes later in its life.
Perhaps more ominous is the increased intervals between oil changes. While newer oil technology has advanced its ability to not break down, nothing has changed about the accumulation rate of contaminants that are detrimental to the service life of your engine. Today’s synthetic oils will go twice as long as organic oils without breaking down, but leaving them in the engine for twice as long doubles the amount of contaminants in the oil. On top of this, most cars today have oil filters half the size of what was used in the past. As a result they become dirty much quicker.
Fortunately for the manufacturers the problems created by infrequent oil changes do not show up until after the car is out of warranty. Sadly for the customer, the cost of correcting the problems falls fully on his/her shoulder in what should be only the beginning of the car’s mid-life.
The moral of the story; There still is no such thing as a free lunch!
Take the example of the spark plugs. At one time they were replaced every 12,000–15,000 miles. Now there are plugs that last upwards of 100,000 miles, but they cost a great deal more than older, primitive plugs. Getting to them on the engine has also become increasingly difficult, so the labor cost in replacing them has also increased as well. In the end, the higher cost of the plugs and the increased amount of labor to change them has resulted in a net increase in cost of maintenance by the time you have replaced the first set of plugs. The savings that seemed evident in the early life of the car vanishes later in its life.
Perhaps more ominous is the increased intervals between oil changes. While newer oil technology has advanced its ability to not break down, nothing has changed about the accumulation rate of contaminants that are detrimental to the service life of your engine. Today’s synthetic oils will go twice as long as organic oils without breaking down, but leaving them in the engine for twice as long doubles the amount of contaminants in the oil. On top of this, most cars today have oil filters half the size of what was used in the past. As a result they become dirty much quicker.
Fortunately for the manufacturers the problems created by infrequent oil changes do not show up until after the car is out of warranty. Sadly for the customer, the cost of correcting the problems falls fully on his/her shoulder in what should be only the beginning of the car’s mid-life.
The moral of the story; There still is no such thing as a free lunch!
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False Economies in Bargain Shopping Auto Repairs
Many consumers shop around for the best bargains and save themselves a little money. That is great when you are buying consumer items like refrigerators, TVs, or computers. The picture changes tremendously when you are shopping for services. Nowhere is this more true than in auto repairs.
It is very difficult to compare what you will get for “a brake job” for instance. One shop may quote you for just pads, another pads & rotors, and yet another pads, rotors, and repack your front wheel bearings, and all of them call it a brake job. Even if you ask specifically what steps are included you still don’t know if you are getting factory parts, OEM parts, aftermarket parts, or really cheap junk parts. What is the warranty period or is their any warranty?
Besides not being able to compare apples to apples in repair procedures and parts you also do not know what the skill level of the technician is who is working on your car. Some shops say they have trained technicians but who are they trained by and what are they trained on?
Some bargains seem to be good at first glance. A local tire chain advertises they have factory trained techs and offer a free lifetime rotate and balance when you buy your tires. They also claim to be qualified to handle all your other service needs. How can they make this offer of FREE service. First, their “techs” are only trained how to change tires and balance them, not on all levels of repairs. They are paid only $10-12 per flat rate “hour” (flat rate hours are another issue we will cover in our next column). That is perhaps good pay for someone who is trained to do only tires but are they qualified to handle, or even recognize, more difficult jobs? How can I say this for sure? Because truly qualified technicians can easily make $25+ per flat rate “hour”. And they know this! No one who is qualified to handle most auto repairs will not work for less than this. Believe me when I say finding qualified techs to fill a position is hard to do even at such a high rate of pay! We have tech positions going begging at this pay rate. It is the old story of you get what you pay for.
Most shops can’t afford, much less find, a staff of low paid techs for simple jobs, medium paid techs for middle-level repairs, and high paid techs for the difficult diagnostics and serious repairs. Insurance alone makes it prohibitive costly to have such a large specialized staff. But even if you could offer this, the customer still would lose out. Why? Because no one person is looking at the whole car and seeing the relationship of the various service needs. Things fall between the cracks. Who pays for them when they go wrong? The shop? No, the customers. That is why it is better to have one shop do all your service needs. That way they get to know your car and how you drive it. By the shop knowing the whole picture, and having complete service records at hand, puts them in the best position to see trends in your car’s performance and predict what will happen next. This can save you money in the long run.
Another downside to having your car serviced at multiple places there is no accountability for something going wrong with your car. When only one shop works on it and anything goes wrong then it is obvious who, if anyone, is at fault. A shop with a loyal customer will bend over backwards to keep their customers happy. If you only show up for the specials then it is only human nature that the shop might not be as loyal to keeping you happy. Make friends with your auto shop and you will save money in the long run.
It is very difficult to compare what you will get for “a brake job” for instance. One shop may quote you for just pads, another pads & rotors, and yet another pads, rotors, and repack your front wheel bearings, and all of them call it a brake job. Even if you ask specifically what steps are included you still don’t know if you are getting factory parts, OEM parts, aftermarket parts, or really cheap junk parts. What is the warranty period or is their any warranty?
Besides not being able to compare apples to apples in repair procedures and parts you also do not know what the skill level of the technician is who is working on your car. Some shops say they have trained technicians but who are they trained by and what are they trained on?
Some bargains seem to be good at first glance. A local tire chain advertises they have factory trained techs and offer a free lifetime rotate and balance when you buy your tires. They also claim to be qualified to handle all your other service needs. How can they make this offer of FREE service. First, their “techs” are only trained how to change tires and balance them, not on all levels of repairs. They are paid only $10-12 per flat rate “hour” (flat rate hours are another issue we will cover in our next column). That is perhaps good pay for someone who is trained to do only tires but are they qualified to handle, or even recognize, more difficult jobs? How can I say this for sure? Because truly qualified technicians can easily make $25+ per flat rate “hour”. And they know this! No one who is qualified to handle most auto repairs will not work for less than this. Believe me when I say finding qualified techs to fill a position is hard to do even at such a high rate of pay! We have tech positions going begging at this pay rate. It is the old story of you get what you pay for.
Most shops can’t afford, much less find, a staff of low paid techs for simple jobs, medium paid techs for middle-level repairs, and high paid techs for the difficult diagnostics and serious repairs. Insurance alone makes it prohibitive costly to have such a large specialized staff. But even if you could offer this, the customer still would lose out. Why? Because no one person is looking at the whole car and seeing the relationship of the various service needs. Things fall between the cracks. Who pays for them when they go wrong? The shop? No, the customers. That is why it is better to have one shop do all your service needs. That way they get to know your car and how you drive it. By the shop knowing the whole picture, and having complete service records at hand, puts them in the best position to see trends in your car’s performance and predict what will happen next. This can save you money in the long run.
Another downside to having your car serviced at multiple places there is no accountability for something going wrong with your car. When only one shop works on it and anything goes wrong then it is obvious who, if anyone, is at fault. A shop with a loyal customer will bend over backwards to keep their customers happy. If you only show up for the specials then it is only human nature that the shop might not be as loyal to keeping you happy. Make friends with your auto shop and you will save money in the long run.
Smart Car Economies for Uncertain Times
No one likes unexpected expenses, particularly with their car. A car needing unanticipated repairs can leave one feeling vulnerable to immobility as well as financially challenged. Over the last decade many people have chosen to replace their car with a new one every 2-3 years, or about the time they would expect it to go out of warranty. Often, the logic given is that since the car is new and under warranty there will be no unexpected costs. But what you can expect taking this approach is to pay the highest price per mile for your transportation expenses. You know the saying “there is no such thing as a free lunch”. The corollary with cars is there is no free ride.
The biggest expense with new cars is the huge depreciation that you pay the second you sign on the dotted line. On average, a new car looses 20-25% of its value as soon as you drive off the lot. Let’s take an example of a $25,000 car and assume you will drive 15,000 miles a year. As soon as you are off the car lot you have lost $5,000 (assuming the lower 20% depreciation loss) and you have not even driven 100 miles. At ten miles you have spent $500 per mile in just depreciation. After the first year you can expect to lose 30-35% of the purchase price and that does not take into account the sales tax you have paid. If your tax rate is 7% you have also paid out $1,750 in tax. So using the conservative (and unlikely) rate of 30% loss you have spent $9,250 for your first 15,000 miles or almost 62 cents a mile.
The next year you can expect to lose 15-20% of the cars 1-year-old value according to NADA. So at the end of year two the car is worth roughly 80% of it’s 1-year-old value of $17,500, or $14,000. The same happens again at year three. Now your car is worth $14,000 X 80% or $11,200. So far your expense has been $13,800 in depreciation and $1,750 in sales tax for a total of $15,500 over 45,000 miles. This equates to 34.5 cents per mile. Note this is the net expense for just depreciation and does not include financing cost! Nor does it include annual tags or insurance.
Let’s say you paid $2,500 down and financed $22,500 for 3 years at 8%. That would give you a payment of $705.07 per month with a total interest due of $2,882.52. Let’s add the interest to your depreciation cost which gives a total expense of $18,382 or almost 41 cents per mile. You will still have some maintenance expense for oil changes, tire rotation, and whatever other services the manufacturer requires to maintain you warranty eligibility. But you most likely will not have any unexpected repair expenses.
Let’s now look at the same scenario but start with buying a 1-year-old version of the same car from a private owner (you don’t pay sales tax that way). The initial cost is 30% less or $17,500. We will still finance it for 3 years at the same rate, which equates to $2,242.04 in interest. Using the same formulas from above you will have $8,540 in depreciation. Now your expense has been $10,782 or less than 23 cents per mile. You have saved $7,600. That is a savings of almost a 44% savings! Plus each year your tag and insurance will be cheaper than it was if your car was one year newer.
It is true that the car will have now have probably gone out of warranty and soon will be needing some repairs on top of routine maintenance but it still saves a great deal of money over buying a new car. It is very unlikely you will spend your $7,600 in savings on repair work if you have done your routine preventative maintenance.
Now let’s look at keeping the car another three to six more years as opposed to replacing it with another one-year-old car. In our example we calculated the cost of ownership at less than 23 cents per mile on the used car but we did not address the cost of repairs (not to be confused with maintenance) that start to show up once the car is out of warranty.
Your car will continue to depreciate each year at about the same rate of 20% per year. If you keep the same car we started with for another 3 years you would lose $4,372 more dollars. Your expense in depreciation would be just under 10 cents per mile. That is less than half the depreciation expense from the first 3 years of ownership!
But your car will need some repairs and maintenance along the way, plus new tires every 30,000 – 50,000 miles depending in the type of tire you are buying and the way you drive. Let’s say near the end of the first 3 years of ownership we add a set of tires costing $850 installed. Our second 3 years of ownership just started off with a big expense but now you no longer have the car payment you had for the first three years so maybe that isn’t so bad. But your car now has close to 60,000 miles on it. At some point soon it will need a tune-up and probably a timing belt, maybe even a water pump or some brake pads and rotors. This is when the uncertainty of monthly expenses starts to crop up.
We have compared numerous case scenarios for our customers of what they might expect to spend over 3 years on a used car kept in good shape. Depending on the type of car they have the average cost of tires, maintenance, and repairs ranges from $1,500 to $2,000 per year for driving roughly 15,000 mile per year, or a total expense of $4,500 to $6,000 dollars over the 3 years. Let’s take the worst-case scenario of $6,000 of expense and divide that over the 45,000 miles. That comes out to about 13 cents per mile. In this worst-case example we have a total expense of about 23 cents per mile for depreciation, maintenance, and repairs. That is what we calculated for depreciation and interest alone on first 3 years of ownership.
We did not calculate the cost of maintenance in our first three years. Nor did we look at taxes and insurance. While it is true your maintenance won’t be that high in the first three years, but the newer the car is the higher the taxes and insurance are. There are so many variables on the taxes (where do you live?) and the insurance (how good is your driving record?) that it becomes next to impossible to calculate an average. What is true is you will continue to save money on the lower taxes and insurance for an older car the longer you own it. Don’t forget we took the worst-case scenario on the maintenance and repair costs, in your case it could be less.
Now let’s extend this same example for another 3 years. By now the depreciation is less than 5 cents per mile for the years 7, 8, & 9 of ownership. Still taking the worst-case scenario of 13 cents per mile for maintenance and repairs you are now down to around 18 cents per mile for the final 3 years. The worst part is that the expenses do not come at an even pace. One month you won’t have any expense and another it might be quite high. But overall you save money by keeping the same car and having it maintained and repaired. The key to enjoying this savings is to put aside a fixed amount for your car care every month so that you are prepared when the expenses come in.
The biggest expense with new cars is the huge depreciation that you pay the second you sign on the dotted line. On average, a new car looses 20-25% of its value as soon as you drive off the lot. Let’s take an example of a $25,000 car and assume you will drive 15,000 miles a year. As soon as you are off the car lot you have lost $5,000 (assuming the lower 20% depreciation loss) and you have not even driven 100 miles. At ten miles you have spent $500 per mile in just depreciation. After the first year you can expect to lose 30-35% of the purchase price and that does not take into account the sales tax you have paid. If your tax rate is 7% you have also paid out $1,750 in tax. So using the conservative (and unlikely) rate of 30% loss you have spent $9,250 for your first 15,000 miles or almost 62 cents a mile.
The next year you can expect to lose 15-20% of the cars 1-year-old value according to NADA. So at the end of year two the car is worth roughly 80% of it’s 1-year-old value of $17,500, or $14,000. The same happens again at year three. Now your car is worth $14,000 X 80% or $11,200. So far your expense has been $13,800 in depreciation and $1,750 in sales tax for a total of $15,500 over 45,000 miles. This equates to 34.5 cents per mile. Note this is the net expense for just depreciation and does not include financing cost! Nor does it include annual tags or insurance.
Let’s say you paid $2,500 down and financed $22,500 for 3 years at 8%. That would give you a payment of $705.07 per month with a total interest due of $2,882.52. Let’s add the interest to your depreciation cost which gives a total expense of $18,382 or almost 41 cents per mile. You will still have some maintenance expense for oil changes, tire rotation, and whatever other services the manufacturer requires to maintain you warranty eligibility. But you most likely will not have any unexpected repair expenses.
Let’s now look at the same scenario but start with buying a 1-year-old version of the same car from a private owner (you don’t pay sales tax that way). The initial cost is 30% less or $17,500. We will still finance it for 3 years at the same rate, which equates to $2,242.04 in interest. Using the same formulas from above you will have $8,540 in depreciation. Now your expense has been $10,782 or less than 23 cents per mile. You have saved $7,600. That is a savings of almost a 44% savings! Plus each year your tag and insurance will be cheaper than it was if your car was one year newer.
It is true that the car will have now have probably gone out of warranty and soon will be needing some repairs on top of routine maintenance but it still saves a great deal of money over buying a new car. It is very unlikely you will spend your $7,600 in savings on repair work if you have done your routine preventative maintenance.
Now let’s look at keeping the car another three to six more years as opposed to replacing it with another one-year-old car. In our example we calculated the cost of ownership at less than 23 cents per mile on the used car but we did not address the cost of repairs (not to be confused with maintenance) that start to show up once the car is out of warranty.
Your car will continue to depreciate each year at about the same rate of 20% per year. If you keep the same car we started with for another 3 years you would lose $4,372 more dollars. Your expense in depreciation would be just under 10 cents per mile. That is less than half the depreciation expense from the first 3 years of ownership!
But your car will need some repairs and maintenance along the way, plus new tires every 30,000 – 50,000 miles depending in the type of tire you are buying and the way you drive. Let’s say near the end of the first 3 years of ownership we add a set of tires costing $850 installed. Our second 3 years of ownership just started off with a big expense but now you no longer have the car payment you had for the first three years so maybe that isn’t so bad. But your car now has close to 60,000 miles on it. At some point soon it will need a tune-up and probably a timing belt, maybe even a water pump or some brake pads and rotors. This is when the uncertainty of monthly expenses starts to crop up.
We have compared numerous case scenarios for our customers of what they might expect to spend over 3 years on a used car kept in good shape. Depending on the type of car they have the average cost of tires, maintenance, and repairs ranges from $1,500 to $2,000 per year for driving roughly 15,000 mile per year, or a total expense of $4,500 to $6,000 dollars over the 3 years. Let’s take the worst-case scenario of $6,000 of expense and divide that over the 45,000 miles. That comes out to about 13 cents per mile. In this worst-case example we have a total expense of about 23 cents per mile for depreciation, maintenance, and repairs. That is what we calculated for depreciation and interest alone on first 3 years of ownership.
We did not calculate the cost of maintenance in our first three years. Nor did we look at taxes and insurance. While it is true your maintenance won’t be that high in the first three years, but the newer the car is the higher the taxes and insurance are. There are so many variables on the taxes (where do you live?) and the insurance (how good is your driving record?) that it becomes next to impossible to calculate an average. What is true is you will continue to save money on the lower taxes and insurance for an older car the longer you own it. Don’t forget we took the worst-case scenario on the maintenance and repair costs, in your case it could be less.
Now let’s extend this same example for another 3 years. By now the depreciation is less than 5 cents per mile for the years 7, 8, & 9 of ownership. Still taking the worst-case scenario of 13 cents per mile for maintenance and repairs you are now down to around 18 cents per mile for the final 3 years. The worst part is that the expenses do not come at an even pace. One month you won’t have any expense and another it might be quite high. But overall you save money by keeping the same car and having it maintained and repaired. The key to enjoying this savings is to put aside a fixed amount for your car care every month so that you are prepared when the expenses come in.
