The vehicle's value rating is calculated by our data vendor, Vincentric.
How does Vincentric measure value and establish its ratings? This question is best answered with an example. Two vehicles can have the same purchase price, but different ownership costs. The vehicle with the lower ownership costs is a better value than the one having the higher ownership costs.
To put this concept into action for the 2006 model year analysis, Vincentric first measured the cost of ownership for over 1,900 vehicle configurations. Cost of ownership is calculated by combining the costs associated with depreciation, insurance, repairs, maintenance (scheduled and unscheduled), finance, fuel, taxes and state fees (including the Federal Hybrid Tax Credit), and opportunity costs. This creates the "Measured" Cost of Ownership.
The vehicle's "Expected" cost of ownership is based on statistical models that correlate the price of a vehicle with cost of ownership within each of the 34 segments that comprise all vehicles. An average "Expected" cost to own is established. Any vehicle that falls above the Average Value line is a better value than a vehicle that fall below the "Average Value" line.
Vincentric uses this approach to rate each vehicle from Excellent to Poor on a five point scale. These ratings can also be expressed numerically as 5, 4, 3, 2 or 1, with a score of 5 being Excellent and 1 being Poor. The scores are calculated based on the percentage difference between a vehicle's "Expected" cost of ownership and its "Measured" cost of ownership. This statistically driven approach allows Vincentric to measure value in an unbiased manner, and help consumers and the automotive industry better understand how ownership costs impact the creation of value for the buyer.
Depreciation is an estimate of the reduction in value incurred by owning and operating a vehicle over a period of time. The depreciation cost is calculated using a combination of data sources and assumptions, including the value of the vehicle, the mileage of the vehicle, and the overall the condition of the vehicle.
Fuel costs are an estimate of what it will cost you at the gas pump for the vehicle over a period of time. Fuel costs are calculated using the U.S. Government Environmental Protection Agency's estimated mileage figures (when available) for both highway and city driving, then adjust based on the estimated percentage of mileage for these two types of driving. The estimated miles driven per year, the type of fuel the vehicle requires, and current state gas prices are all factored into the estimated fuel costs.
Financing is an estimate of what it will cost you to borrow money to purchase a vehicle. The financing costs are calculated by using various data sources from multiple lending institutions, including standard down payment amounts, loan terms, and current interest rates.
Insurance costs are an estimate of what it will cost you to insure the vehicle over a period of time. Insurance costs vary widely based upon the driving record of the owner and the coverage amount, so we estimate the cost using assumptions about the driver and coverage amount. The cost is estimated based on data from multiple insurance industry sources.
Maintenance costs are an estimate of what it will cost you to maintain the vehicle over a period of time. Maintenance costs can vary greatly based upon the vehicle you own and how you drive it, but the maintenance cost estimated is based on three key data points that we receive from industry sources: frequency of incident, labor rates, and parts prices.
Fees and taxes are an estimate of the costs you will incur to operate the vehicle over a period of time. Fees and taxes are imposed by state and local governments and government agencies, such as the DMV, and they include the cost of registration, title fees, and state sales taxes.
Repair costs are an estimate of what it will cost you to repair the vehicle over a period of time. Repair costs are estimated using the national average consumers will pay to keep their vehicle in operating condition (please note that because maintenance costs are measured separately, the repair cost does not include these costs). The estimate is prepared using a $0 deductible extended service contract that will pay for repairs for 5 years or at least 75,000 miles. Figures quoted are averages from nationally available service contract providers and are adjusted to eliminate the profit margin from the calculation.
Opportunity cost is an estimate of the interest that could have been earned if the funds had not been spent owning and operating the vehicle. The opportunity cost is calculated using other Total Cost to Own data fields and the interest calculated is based on current interest rates, supplied by nationally recognized financial institutions.
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