29 October 2006

The Cheapest New Car You Can Buy

What is the cheapest new car you can buy?

Based on MSRP alone, you'd pick the 2007 Chevrolet Aveo 5, with manual transmission and an MSRP of $9,995. It doesn't include air conditioning or a CD player. Even more important, it's fuel efficency (27 mpg EPA city), means that over 100,000 miles of city driving, with a fuel cost of $3 a gallon, that a lifetime of fuel for the vehicle will cost $11,111. Thus, for fuel and MSRP combined, you are looking at $21,106.

The cheapest competitor in a no air conditioning, no CD player model is the Hyundai Accent, which gets 32 mpg city and has an MSRP of $10,415. It's lifetime fuel costs with the same assumptions is $9,375, for a total of $19,790. So, once you consider the price of gas, this is a cheaper option than the Chevy Aveo 5.

The runnerup, with the same fuel efficiency, is the base model Kia Rio, which has an MSRP of $10,770, for a total of $20,145, it is also cheaper than a Chevy Aveo 5 once fuel costs are considered.

Now, suppose that you can handle manual transmission, but you do want air conditioning and a CD player. The Aveo's MSRP with those options is $12,690. The Hyundai Accent's MSRP with those options is $11,765. The Kio Rio's MSRP with those options is $12,645.

The Toyota Yaris 3-Door Liftback's MSRP with those options is $11,790 (you can't buy it without air conditioning, but can drop it to $11,050 if you skip the CD player). The Yaris gets 34 mpg city, according ot the EPA, a lifetime cost with the same assumptions of $8,824.

So, the combined fuel and MSRP with air conditioning and a CD player for all four models is:

Toyota Yaris 3-Door Liftback: $20,714
Hyundai Accent: $21,140
Kio Rio: $22,045
Chevy Aveo: $23,801

In fact, on a model with air conditioning and a CD player, the Yaris is still a better deal, even if the Chevy dealer provides a $3,000 discount from MSRP on the Aveo 5 (more than 23%), while the Toyota dealer insists that you pay full MSRP. In reality, the Chevy dealer won't give you that good of a deal, while the Toyota dealer will likely cut a deal something below MSRP, even if it is a modest discount.

In fact, even with automatic transmission, a Yaris still gets 34 city/39 highway, and the MSRP with automatic transmission, AC, and a CD player is $12,690, compared to $12,690 for a Chevy Aveo 5 with manual transmission, AC and a CD player getting 27 mpg city.

Thus, while the Chevy Aveo 5 has the lowest MSRP of any 2007 new vehicle in the United States, the Toyota Yaris, Hyundai Accent and Kio Rio are all better deals once fuel efficiency is considered. The Hyundai Accent has the lowest possible cost adjusting for fuel efficiency in its bare bones model, and the Toyota Yaris is the cheapest vehicle you can buy, adjusting for fuel efficiency, if you want a vehicle with air conditioning and/or automatic transmission.

Incidentally, while a number of hybrid vehicles get better fuel efficiency and come iwth tax credits, the fuel savings and tax credit benefit combined are still not enough to outweight their higher MSRP and put them in contention for being the cheapest vehicle in the U.S. adjusting for fuel price.

The lowest MSRP hybrid on the market is the Honda Insight, which starts at $19,330, and would have a lifetime expected fuel cost, using the assumptions above of $5,000 with a manual transmission (which is found in the less expensive model), for a total of $24,330. After a $1,450 tax credit, the MSRP plus lifetime fuel costs less the tax credit is $22,880. The less expensive model does not include air conditioning, although it does include a CD player. Of course, the Insight, a two seater, is actually a smaller car than any of the other vehicles considered above as well.

Throw in automatic transmission and air conditioning, as well as the standard CD player, and a Honda Insight gets 57 mpg instead of the 60 mpg that the manual model gets (implying a $5,263 lifetime fuel cost), and starts at an MSRP of $21,530, with the same tax credit available. This brings the total of MSRP and lifetime fuel cost less the tax credit to $25,343, also more than a comparable Aveo, Accent, Rio or Yaris. And, in reality, you are likely to get a better break from MSRP from the dealer on a conventional subcompact, than you are on a hybrid of any kind.

The bottom line is that if you want a new car with the cheapest lifetime cost available, the Toyota Yaris is the way to go, on an apples to apples basis, and that Hyundai Accent is the way to go if you want the absolutely most stripped down new car commercially available.

The Yaris also outperforms the Aveo 5, with 3% more horsepower and has a slightly larger exterior, despite having much greater fuel efficency, and the Yaris has considerably more cargo space. The Yaris has a slightly smaller passenger area overall.


Anonymous said...

By my reckoning, the Yaris is the cheapest of the loaded cars even at 25,000 miles of $2.50 gas. Likewise, the bare-bones Accent breaks even at around 25,000 miles.

BTW, I get slightly different numbers than you for the loaded Yaris ($21,614) and Rio ($22,020). This is the sort of article for which a chart or graph would be worth at least a thousand words.

Andrew Oh-Willeke said...

I wish I knew how to do charts and graphs on Blogger. It is one of the things I have yet to figure out, in part, because the system is so clunky.