Re: Commuters Resort to the Rails As Gas Prices Rise
Author: Money talk
Date: 06-16-2008 - 20:27
You can't discount depreciation even on older car. The fact that it is "paid off" doesn't negate depreciation. What about someone that pays cash for a car? Does it not depreciate? The only way to calculate depreciation is to figure the aquistion cost of the vehicle minus the price of the sale of the car (even scrap) divided by the miles driven during the period you own the car. That gives you an amount of depreciation per mile but that can be adjusted based on how new the car is. Of course you don't really need to know that except to calculate cost of capital. Cost of captital is what you pay to finance a loan plus lost interest on the down payment. If you pay cash then you must calculate what rate of return you're missing if it were invested. That is where you need to know the constantly changing value of the car since the capital tied up in the vehicle will be constantly changing.
By the way I enjoyed the post regarding the true costs of parking. We too often do not consider such costs. I'd add in the lost property tax if a munciple lot.