Even adjusted for inflation, from 1986 to 2013 (about $8,400 in today's money), that's a steal—and one that did indeed prove irresistible for more than 140,000 thrifty Americans.
Yet the GV—for 'great value,' ironically—didn't save its buyers money in the long run. Costly premature engine and clutch failure were surprisingly common and expensive; gas mileage was disappointing for what it was; resale values plummeted; and insurers charged more in premiums because they didn't trust the Yugo's occupant protection. It underlines an important distinction: The cheapest cars to buy aren't necessarily the cheapest to own.
That advice holds true today, yet thanks in part to tighter federal regulations, more of the cheapest models are now safe, dependable, and truly penny-pinching picks over the long term.
Lower-priced cars typically cheaper in the long run
“The smaller, lower-priced cars have the lowest cost of ownership,” said David Wurster, the president of Vincentric, a data analysis firm providing cost-of-ownership information. The cheapest models—which include cars like the Nissan Versa and Ford Fiesta—all have sticker prices under $15,000 and five-year ownership totals under $30,000.
To put it into perspective, that five-year Vincentric ownership number, which includes depreciation, insurance, fuel expenses, maintenance and repair costs, and even an 'opportunity cost'—for what you maybe have earned on your money elsewhere—totals more than $100,000 for many luxury models and more than $200,000 for the Mercedes-Benz S 65 AMG or CL 65 AMG.
Soothing depreciation's sting
Looking at all the components that add up to what a car costs to own, it's the sting of depreciation that hurts most. According to Kelley Blue Book, the average new car will be worth just 35 percent of its original value after five years; and with a current average around the $30k mark, you’ll essentially lose nearly $20,000 for the privilege of driving a new car. Late-model used cars are often the better deal for that reason, as they dodge the steepest part of the depreciation curve, but if you want a new car, along with many of the things that come with new-vehicle ownership—like a strong warranty, the relatively low chances of a breakdown, and modern safety features—you don't need to spend a lot.
Considering these other factors, like insurance costs, anticipated reliability, and projected resale value, if you can find something at the lower end of the market that you like (and if you’re okay doing without the glamor of a more upscale new car), you’ll also take the smallest hit to your wallet in the long run.
That said, unless you’re obsessed with being a die-hard miser, you can’t get too caught up in the bottom-line cost projections. The totals are best viewed when comparing vehicles within the same class against each other, Wurster emphasizes. In other words, choose the kind of vehicle you need first (minivan, crossover, etc.) and then compare the costs.
Don't forget about insurance
The AAA, as part of its most recent annual Your Driving Costs study, found that small sedans have the lowest driving costs'—of about 45 cents a mile, considering all those factors, versus nearly 76 cents for a large sedan.
Thinking about hybrids or special fuel-stingy models? They may come with higher sticker prices, but in general their improved fuel economy (and in some cases better resale value) mostly offset the premium. For instance a modest Chevrolet Cruze 2LS has a five-year ownership cost of $32,678, while the mile-per-gallon-minded Cruze Eco, at $33,492 over five years, can't quite make up for its $2,550 sticker-price premium, despite lower fuel costs.
So remember the Yugo. While many of the cheapest cars on the market are also the cheapest to own, don't assume so; run the numbers for yourself.
For the following list, we ran the numbers with the most recent Vincentric Cost of Ownership data, as of February 2013. And because there can be a lot of variance even within models, we've listed the specific trim and bodystyle whenever needed.
Nissan Versa (S sedan)
Depreciation over five years: $7,199
Average annual insurance: $1,027
EPA fuel economy: 27 mpg city, 36 highway (manual)
Five-year total cost of ownership: $27,405
If you're looking for excitement, you sure won't find it here. What you will find in the 2013 Nissan Versa is a vehicle that's adequate as a commuter and comfortable enough for a modest weekend trip, but certainly no more. Even at the base Versa S level, you get standard air conditioning, although power windows and mirrors are out of the question—but as these numbers attest, the Versa is the best it gets in the U.S. market if low ownership costs are the priority. To echo the Bottom Line from our full review of the Versa, this model is at its best up against used cars.
Chevrolet Spark (Base)
Depreciation over five years: $8,614
Average annual insurance: $996
EPA fuel economy: 32 mpg city, 38 highway (manual)
Five-year total cost of ownership: $27,871
As Chevy's first minicar—a step down in size from the Sonic subcompact that replaced the Aveo—the little 84-horsepower Spark hones in on young Millennial buyers, and those who both live in an urban area and want a very small car at an affordable price. While that, and its color palette that includes hues like Techno Pink and lime-green Salsa, may shout out the wrong message for recent college grads who want to be taken seriously, the Spark's unified, almost sporty design inside and out, combined with a nimble, stable driving feel and a price that's lower than either the Scion iQ and the Smart Fortwo, add up to an interesting way to keep your driving costs low.
Kia Rio (LX hatchback)
Depreciation over five years: $9,355
Average annual insurance: $1,089
EPA fuel economy: 29 mpg city, 37 highway (manual)
Five-year total cost of ownership: $28,516
Just a few years ago Kia was an also-ran import brand, with a lineup of bland economy cars. But look at the perky details and classic hot-hatch proportions of the 2013 Rio hatchback, and you'll understand what kind of transformation Kia has pulled off brand-wide. The base Rio hatchback costs a few hundred dollars more, but it includes a few more features like steering-wheel audio controls and split-folding rear seatbacks, and it's the better deal in the long run because of its lower depreciation.