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IntelliChoice Value Rating
The chart above shows the purchase price versus ownership cost for each car from a specific vehicle class. The cars with better than average ownership cost/purchase price correlations are the best values, and these best value cars are represented by the dots below the curve. (i.e. the cars that have a lower ownership cost compared to its purchase price.) Those cars, which are worse than average or poor values, appear above the curve.
One way to view the graph is to draw a vertical line through any purchase price. You may see several dots that fall on this line - each of which is a car with a similar purchase price. However, notice the difference in ownership costs of each car represented by the vertical position of the dot. Two cars with the same purchase price can have thousands of dollars difference in ownership costs. This is what separates "good value" cars from "poor value" cars.
What is a good car value?
A "good car value" is one whose cost to own and operate is less than expected. The lower the cost to own and operate a car compared to what is expected, the better the value of that car.
But how do we know a car's "expected cost"?
For each car in the class, IntelliChoice plots the car's purchase price against the total five-year cost to own and operate it as determined by IntelliChoice research. Each dot on the above chart represents a specific car. Generally, we find that as the purchase price of the car increases, the cost to own and operate that car increases. This is why the dots on the graph tend to rise upward and to the right. This phenomenon also makes intuitive sense - as the purchase price rises, financing costs tend to rise, as do insurance, depreciation, taxes, and most other car ownership costs.
This is an important concept. It's normal for car ownership costs to rise as purchase price rises. Therefore, we can't just establish one "average" ownership cost number for each class, since cars in the class have different purchase prices. (This is why the "Relative" shown on each chart is different for cars in the same car class.)
Using statistical techniques, IntelliChoice "connects the dots" to form a curve that defines, for this car class, the relationship between the car's purchase price and car's ownership costs. This curve is our "expected cost" curve. The curve defines, for any car in the class, the five-year ownership cost that we would expect to see at each possible purchase price. If every car in the class were an average value, then all the dots would fall exactly on the curve. However, it's rare that any dot is exactly on the curve. Some dots are a little higher or lower, and some are a lot higher or lower. The dots that are a little lower are better than average car values, while the dots that are a lot lower are excellent car values (A dot that is a lot lower than the curve has ownership costs much lower than expected for a car of its purchase price). Conversely, a dot a little higher than the curve is a poorer than average car value, while a dot that is much higher than the curve is a poor car value.
Value is a relative term, not an absolute term. It is performing better than the logical expectation.
So is a Mercedes-Benz E320 expensive to own and operate? Certainly in an absolute sense. Most other cars cost less. But, when its cost to own and operate is plotted against cars with comparable invoice prices, the E320 costs less. So the E320 is not expensive to own and operate - it is a good car value. The Mercedes does not have low ownership costs, but it has low ownership costs for its invoice price.
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Review From Motor Trend Magazine
Multi-Car - Long-Term Update
By Jeff Bartlett
'95 BMW 740iLOur black-on-black BMW 740iL has a sinister presence augmented by aggressive 16x7.5-inch wheels, a wide stance, and tinted glass. With each passing mile, our respect for this Bavarian limousine grows; logbook entries marvel at the relatively low $59,900 base price. The most loved option clearly is the $1000 front Comfort Seats with memory function. These infinitely adjustable, leather-upholstered, heated thrones are the second most comfortable place to be other than your own bed. In the realm of gripes (all minor), the 4.0-liter DOHC V-8 is hard pressed for low-end grunt, but its personality on the open road is beyond reproach. Likewise, the 7-Series' corner-carving abilities exceed expectations, and the ride quality is suitably soothing. For enthusiastic driving, shifting the transmission back to fourth gear and engaging Sport mode provides snappier throttle response. The low-maintenance drivetrain continues to be trouble free. At this rate, when the service indicator signals that it's time to return to the dealership, we'll have to ask for directions. | Base price | $59,900 | | Price as tested | $67,645 | | Body style | 4-door, 5-pass. | | Engine size/type | 4.0-liter V-8 | | Transmission/driveline | | | configuration | 4-speed auto./ | | | front engine, rear drive | | 0-60 mph, sec. | 7.9 | | EPA mpg, city/highway | 16/24 | | Total mileage | 21,925 | | Test mileage | 21,425 | | Fuel consumed, gal. | 1211.7 | | Fuel cost | $1464.95 | | Average mpg | 17.7 | | Additional oil/cost | None | | Routine maint. | None | | Additional maint. | None | | Previous maint. | $137.55 | | Problem areas | None | | Total operating cost | $1602.50 | | Operating cost/mile | 7.5 |
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