Smart Buying Essentials

IntelliChoice Value Rating

The above graph charts the purchase price and ownership cost of each vehicle in the represented class. The vehicles with better than average ownership cost/purchase price correlations are the best values, and are represented by the dots below the curve. Those vehicles, 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 vehicle with a similar purchase price. However, notice the difference in ownership costs represented by the vertical position of the dot. Two different vehicles with the same purchase price can have thousands of dollars difference in ownership costs. This is what separates "good values" from "poor values."

What is a good value?

A "good value" is a vehicle whose cost to own and operate is less than expected. The lower the cost to own and operate compared to what is expected, the better the value.

But how do we know a vehicle's "expected cost"?

For each vehicle in the class, IntelliChoice plots the vehicle'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 vehicle. Generally, we find that as the purchase price increases, the cost to own and operate 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 ownership costs.

This is an important concept. It's normal for ownership costs to rise as purchase price rises. Therefore, we can't just establish one "average" ownership cost number for each class, since vehicles in the class have different purchase prices. (This is why the "Relative" shown on each chart is different for vehicles in the same vehicle class.)

Using statistical techniques, IntelliChoice "connects the dots" to form a curve that defines, for this vehicle class, the relationship between purchase price and ownership costs. This curve is our "expected cost" curve. The curve defines, for any vehicle in the class, the five-year ownership cost that we would expect to see at each possible purchase price. If every vehicle 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 values, while the dots that are a lot lower are excellent values (A dot that is a lot lower than the curve has ownership costs much lower than expected for a vehicle of its purchase price). Conversely, a dot a little higher than the curve is a poorer than average value, while a dot that is much higher than the curve is a poor 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 vehicles cost less. But, when its cost to own and operate is plotted against vehicles with comparable invoice prices, the E320 costs less. So the E320 is not expensive to own and operate - it is a good value. The Mercedes does not have low ownership costs, but it has low ownership costs for its invoice price.