The Cost of Car Ownership

I purchased a new car last Sunday. My day-to-day supervisor at work owns four cars and talks about the cost of ownership in dollars per mile. That got me thinking to work on analyzing the cost of the car I currently own.

That car was purchased in June 2007. The note was paid off in 2011. Our plan is to continue to own the car since it has been designated the Dog Transportation Vehicle (DTV). It is a 2001 model Lexus RX 300 that now has 170,000 miles on it. I regularly service it at Lexus of Seattle and they expect it will hang around until 225,000 miles. That should take us to five years with the current amount of driving. Now that I have another car, the Lexus should only see regular driving on Tuesday and Thursday. Statistically, that should decrease the miles driven per week by 60%. Reducing 10,000 miles per year by 60% yields 4,000 miles per year. That means, based on mileage, the car should survive another 12.5 years.

When it comes to analyzing the cost of ownership, I have experienced four categories of costs:

  • Purchase
  • Insurance
  • Maintenance
  • Gasoline

There are also parking costs, but they are so low, compared to the other categories, that I have included them in the Gasoline category. These categories are interesting from a planning perspective; here is what I mean: Purchase is a fixed amount but non-persistent. Insurance is fixed and persistent. Maintenance is variable and persistent. Gasoline is variable and persistent in a limited fashion.

I mention that maintenance is persistent because it must be performed based on mileage or based on a calendar date. Now that I will be driving the car less, I expect to the hitting the calendar date rather than the mileage. Contrast that with gasoline which is only required if the car is being driven. The cost is variable in that sense because it is variable to miles driven per week and variable to price per gallon purchased.

After I gathered all of the costs of ownership of this car, I was surprised to see I had spent $64,500 in just under six years. That seems like a lot of money, but the breakdown makes it seem reasonable. The purchase cost (this is principle plus interest) is $26,000. This number is now set and will no longer change. The expectation is the cost per mile will start to substantially decrease and with one year without payments, that is what I have seen.

Surprisingly, insurance has only been $5,500. I guess I had just not thought about it but I have been accident and ticket free for the duration of my ownership. Also, since the bill shows up every six months, it always seems like a large sum of money. There is one conclusion to draw: the cost of insurance is less than 10% of the total ownership cost. This number is only good for this point. Because of the loss of monthly purchase payments, the insurance expense will start to grow as a percentage of the cost of ownership.

Maintenance will require some analysis and merits itself as a watch item. I have currently spent $16,400 in this category. This will need to be watched in case it starts to grow. With the loss of the monthly payments, I will need to calculate the percentage of expenses that maintenance consumes. If that percentage starts to grow, it should be a leading indicator that cost per mile will begin to grow. At each step, a decision will need to be made regarding the retention of the car. Part of that decision will be comparing the cost of maintenance and the reliability of the car. For example, if the car retains its reliability, the increasing maintenance cost might be justifiable.

The final category, gasoline, is where the real surprise was at $17,000 spent. That is about 25% of the total amount. I would have guessed it was lower, but much like the insurance expense, I lose the total cost in the small charges at a high frequency. Isn’t that an interesting psychological insight?

In six years, I have driven the car almost 100,000 miles at a cost of $0.69 per mile. Since the end of the monthly purchase payments, that cost is near $0.30 per mile.

I will have a good time comparing the expense curve to the new car. The new car gets 30 miles per gallon and has a lower monthly purchase expense versus the (nearly) 20 miles per gallon of the Lexus.


From Savings to Investments

A question I have been pondering for awhile is “How do I become an investor?” Way back in the annals of history, I worked for an investment management firm and wondered how some people managed to accumulate so much money. It seems to me these items are related since a saver becomes an investor after a period of time and then the investor becomes wealthy if they are good at investing.

I should start with what I mean by a saver. I have divided up my savings into two objectives. The first is to accumulate enough for an emergency. I have read many books and blogs that recommend three to six months of expenses. I think each person’s level depends upon the economy and their lifestyle. If I think it will be easy to find a similar job if I were to lose my current job, then three months is likely sufficient. If it think that will be hard or I am dealing with debt that needs to be re-paid quickly, I will make that higher. As an aside, this debt is linked to the purchase of a car or something like that where I may need a loan of a few years to assist in the purchase. Any other debt should be handled as part of normal expenses.

The second objective of saving is to prepare for retirement. Nothing helps the preparation better than a long time frame. While it may be hard to think of retirement when it is forty or more years away, it is the unknown changes that will arrive over the decades that make retirement planning essential as early as possible.

My plan has been to put aside 10% of my net income into the first savings pool, the emergency fund. In addition to that, I have been putting another 10% of my net income into the second savings pool, the retirement fund. If these funds are transferred into accounts when each pay check arrives, it is psychologically easier for me since it is like the money isn’t available to spend in the first place.

Once the first pool is filled with at least three months of expenses, it is time to think about saving for other items. Typically these are big ticket items like a house or a vacation or a new car. Now that normalcy has returned to the mortgage market, the traditional 20% down payment is required. I like to think that way about each purchase where I want to put 20% down and finance the rest. Of course, by financing, I may be changing the requirements of that first pool of savings because my monthly expenses have risen.

I think we have covered that first pool of savings well enough. The concept is to save for emergencies and then to save for bigger items. Let’s move on to the retirement savings.

Becoming an investor starts with this pool of savings. Typically no one saves enough for retirement by saving 10% of their net income. They usually need help from inflation and market returns. That means it is necessary to move these savings out of cash as quickly as possible and into securities. The traditional security of the long-term investor is the stock market.

Choosing individual stocks can be quite difficult. No only does the investor need to follow the business prospects of the company, they also need to follow the management of the company, the industry the company is in, and what the market thinks of the company. For a beginning investor, following the market average is usually the best way to get into the market. The historical way has been through mutual funds with the new way being the purchase of ETFs.

Let me take a moment to describe how they are different. The one difference I want to focus on is how the transaction is charged. These purchases are not free. For the mutual fund, each individual transaction is not charged, but a percentage of your investment is taken each year. For the ETF, each transaction has an expense. So if you have no transactions or a large amount of investable money, the mutual fund can be more expensive. If you are conducting many transactions, the ETF is more expensive. That leads to the easy way to minimize expenses by limiting the number of transactions.

For example, if I am receiving 24 pay checks per year, I do not need to perform 24 purchases. I could make that 12 purchases and cut the amount paid in transaction fees by half.

The next decision becomes what to invest in. There is not a shortage of ETFs to invest in so is it advisable to simply choose a fund that mimics the market? While the answer is yes, how the fund performs that mimicry matters. The traditional method is the S&P 500 fund. This captures the price movement of the 500 largest companies in the market.

That description leads to the problem I have with the fund — following the price movement also means I am buying more of the higher priced companies and less of the lower priced companies. That usually leads to a high amount of volatility as prices correct. Shouldn’t we be investing based on how a company is performing?

There are three funds that invest based on several fundamental factors of a company (like sales growth). I like the concept of these funds since they are not price weighted. These three funds split up the investment universe into the United States, the Developed Markets (except the United States), and the Emerging Markets. For myself, I have placed 45% of my investment into the U.S. fund, 45% into the Developed Market fund, and 10% into the Emerging Market fund. Which fund I invest in each month depends on which fund is furthest away from its target level.

So there is the plan. From my experience, an investor becomes wealthy through time, persistence of staying with a well-constructed plan, and choosing well. The ideas I have mentioned here are good to begin with but will need refinement as assets and experience grows.

Baseball Ideas

It seems to me there is still plenty of analysis to be done with respect to the Seattle Mariners. I have four full years of game data.

I think there are two themes I would like to follow this season. The first is a weekly theme where I highlight one batter. There will need to be a reason for highlighting him, his season to date performance, and a comparison to previous seasons. Runs Created per Game will still be the primary statistic to follow. The second theme will be monthly and will focus on a starting pitcher. The same type of focus where I highlight the reason for the focus, his season to date performance, and a comparison to previous seasons. Game Scores will be the primary statistic to follow.

I liked showing the team’s performance, but breaking the season by series may have been too much detail. This year I would like the focus to be by home stand and road trip. I will need to figure out which statistics to follow, but I imagine it will be runs created and game scores with the comparison between the Mariners and the opposition. I will need to work out how to use the Custom CSS to show the data properly.


I do have to confess there is a distraction in my life. I live in one of the greatest places on Earth which is near the wine tasting room area of Woodinville, Washington. While my wife and I have discovered the pleasure of traveling to Walla Walla (and the true wine country of Washington state) twice a year for Spring and Fall release weekends, it is an issue for me with a large array of wine tasting rooms near by. This evening consisted of Patit Creek, Forgeron, Garrison, and Mark Ryan. On a night where I had not planned to buy any wine, I went home with ten bottles. All are going into long-term storage at our locker in Bellevue. According to Cellar Tracker, I am up to 74 bottles in my possession.

My wife prefers wine she can drink everyday. I prefer wines that I can brood over. These need to have depth of character, can stand on their own or work well with food, and be good from the first glass through the evening until the bottle is empty. The wine that meets both of our interests is older Washington state Cabernet Sauvignon. By older, I mean those that stay in the barrel longer than average. There are three labels in Washington state that top my list. For classic cab, the winery of our choice is Col Solare. Neither of us have much interest in Syrah or Merlot, yet the wines from Garrison Creek are among the finest we have ever tasted and that is all they had for sale at Fall release weekend. For big Washington state Cab and Syrah combined with an amazing attention to detail on the art of wine making, we both enjoy nearly everything produced from Rasa Winery.

I used to wax eloquent over the structure of pie, but I find myself contemplating the glory of terroir in wine. I spent this evening in four wine tasting rooms plus split a bottle of wine at dinner and I can sit at my keyboard and bang out almost 500 words about something that is off topic for this blog. Distraction indeed. I suppose time away from book learnin’ will help me re-focus. Or is that a justification? Either way, I expect I will be collecting some thoughts about fermented grapes here. SalĂșt.


I thought this road would start with the meeting I attended two weeks ago regarding the Certified Analytics Professional designation. Instead, I think it really begins when I realized that thirty years ago, I was entering college. While that road took from me chemical engineering to computer science to mathematics where I finally matriculated with a Bachelor’s degree, it is a distant land removed from the thirty years that have accumulated on the grey matter. I have become concerned recently that my skills are becoming stale and to combine that with the realization that I am not ready to leave the work force yields the conclusion that an update in my programming was required.

Enter the Certified Analytics Professional designation from There are eleven books recommended to successfully pass the exam. Alternatively, there are a number of universities offering an MA/MS in Analytics. A few of us at work have decided the cheaper path is the self-study approach of the CAP. As of today, eight of the eleven books have arrived at my home. My initial fear that I was falling behind has been confirmed by the content of some of these books.

My plan is to post comments about my learning as I move through the books. I stand by my long-held belief in the foundational aspects of reading, writing, and arithmetic. I expect much of the writing I will be doing will be technical so the annotum theme sounds well suited to my purposes. We’ll see how that goes.

In addition, I want to pursue something meaningful on a personal level. While I don’t need another hobby, I have developed a pointed interest in asteroids lately. The recent explosion of an meteor over Siberia combined with the asteroids@home project through the BOIC program plus some information from Planetary Resources all combined to make me think there was plenty of data here to work with at home. Items to explore include lightcurves, spectrometry, and HERA.

This seems plenty for now.