Financial Idiot 002 - TCO Total Cost of Ownership

This Blog Post was originally distributed by the Newsletter "Financial Idiot". You can find and subscribe to it here.
DISCLAIMER: I'm an idiot and this isn't financial advice! You can lose money when investing, and you should never invest money you don't own or you can't afford to lose. I'm not responsible for your decisions!

How much money does your car/home cost you? You probably have an overview of monthly costs, but do you know how much cash sinks away? Welcome to a new Issue of "Financial Idiot".

Years ago, a good friend of mine sent me Horst Lüning. A German Video Producer with his own Whisky Imperium (no, this Issue is not sponsored). In one of the "Unter Blog" ("Unternehmer Blog") Videos, he was talking about the Total Cost of Ownership. A term I didn't hear before. He was calculating the TCO of his Tesla Model S, if I remember correctly.

At that time, I noted all my expenses for my first vehicle. I knew how much it cost, how much fuel went into it and how many kilometres I was driving. All that information was a great base to calculate the TCO of my vehicle and all succeeding once. I still have got all the data for my whole vehicle journey. I can make an excellent comparison for three (well, four) different vehicles. But first, let's have a closer look at the Total Cost of Ownership.

According to Wikipedia, you can use the TCO to calculate an investment's "total economic value". When you know the total costs for something (a vehicle, an apartment, a building, ...), you can break those costs down to a comparable level. For example, I can calculate how much driving of one-kilometre costs for my vehicle. Or I can calculate the exact cost down to the day. With both values, vehicles get comparable because you can compare the expense of one kilometre from one car with the other.
You can also calculate how much your apartment or house costs you per day. With the per day value, you can compare different rents. Interestingly, you can make those calculations as complicated or simple as possible. You can leave out power costs between apartments for simplification because they are probably similar (unless you're switching from a single apartment to one you're living in with your girlfriend or wife).

What it can't do for you is make decisions. But the total cost of ownership is a great tool to compare stuff. So let's get started with my first vehicle I bought back in 2013 (after I got my driving licence).

  • Bought on 3rd of July 2013, sold on 3rd of September 2017 (1.524 days)
  • Buy price: 2.000€
  • Sell price: 1.000€
  • Total kilometres: 39.589
  • Total insurance: 3.000€
  • Total cost for diesel: 2.748,97€ (2.270 liters, 1,21€/l; 5,73l/100km)
  • Total other costs (repairs, services, washing, motorway sticker, …): 5.591,10€

Sum of all costs (adding buy price, subtracting sell price): 12.350,07€, which leads to an expense per kilometre of 0,31€. The daily cost of the car for the 1.524 days I owned it was 8,10€. As you can see, the cost per kilometre is minimal, so you could argue it was a cheap vehicle. Let's now look at my 2nd vehicle, a Seat Exeo.

  • Bought on 4th of September 2017, sold on 4th of October 2018 (396 days)
  • Buy price: 11.000€
  • Sell price: 9.500€
  • Total kilometres: 11.789
  • Total insurance: 1.820€
  • Total cost for diesel: 1.066,58€ (788,88 liters, 1,35€/l; 6,69l/100km)
  • Total other costs (repairs, services, washing, motorway sticker, …): 1.906,05€

Sum of all costs (adding buy price, subtracting sell price): 6.292,63€, which leads to an expense per kilometre of 0,53€. The daily cost of the car for the 396 days I owned it was 15,89€.
As you can see, for the significantly shorter time I owned the car (a little bit longer than a year in contrast to the four years of the Leon), there is already a substantial difference between those two.

It is also an essential factor at what price you sell a vehicle after its usage time. Of course, you only get the selling price when you're selling it, but if you don't intend on selling, you can always use zero as that value.

The next is another Seat Leon, a demonstration vehicle I decided to buy when the Exeo was in service.

  • Bought on 4th of October 2018, sold on 23rd of March 2021 (902 days)
  • Buy price: 8.284,89€
  • Sell price: 15.875€
  • Total kilometres: 11.789
  • Total insurance: 4.344,78€
  • Total cost for gas: 1.859,09€ (1391,3 liters, 1,34€/l; 11,8l/100km)
  • Total other costs (repairs, services, washing, motorway sticker, …): 18.929,96€ (this now includes the leasing cost and buyout price of the vehicle)
    Sum of all costs (adding buy price, subtracting sell price): 17.543,72€, which leads to an expense per kilometre of 1,49€. The daily cost of the car for the 902 days I owned it was 19,45€.
    Another jump in the cost per kilometre. But the daily running cost only changed 3,56€. Interestingly, although the car wasn't as fuel-efficient and was running on gas instead of diesel, the average price per litre was lower (though only 1 cent).

Now we take a look at my current car. A Tesla Model 3 I bought because I could. Since I didn't sell the car yet (there are still around four years of leasing time), I can only use hypothetical values).

  • Bought on 30th of March 2021, end of leasing 30th of March 2026 (5.114 days)
  • Buy price: 12.000€
  • Sell price: 0€
  • Total kilometres: 50.000 (maximum defined per leasing contract)
  • Total insurance: 6.000€
  • Total cost for charging: 1.007,32€ (11.069,5kWh, 0,091€/kWh; 22,14kWh/100km)
  • Total other costs (repairs, services, washing, motorway sticker, leasing, connectivity package, …): 20.274€

Sum of all costs: 39.281,32€, which leads to an expense per kilometre of 0,79€. The daily cost of the car for the 5.114 days I will own it is 7,68€.
Sure, the kWh price did jump in recent months, but as long as I'm mostly charging free, that value should be pretty accurate.
Interestingly, the Tesla will be almost as "cheap" as the Exeo, although the car is nearly five times the value.

Is 0,79€/kilometre much for an electric vehicle? I will be able to tell that when I'm having another one or if I calculate the TCO of a similar car.

As I've said, TCO isn't a Formular to rule them all, and I'm still an idiot, so don't trust me on those values. :)
Also, I'm doing the call to action thing again. Please reach out to me if you want to calculate your TCO for something and be part of a future issue of "Financial Idiot". Especially similar upper-middle-class cars like the Model 3 would be interesting.

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