Monday, May 3

Tracking a New Monthly Expense: Depreciation on my Car

Starting with my April expenses, I am adding clarity to my vehicle expenses. In the past I have adjusted the value of my car periodically based on the Blue Book value. Beginning with my April expenses report, I will make a monthly adjustment for vehicle depreciation.

This is something I should have been doing all along, and I'm not sure why I didn't think of it sooner since it isn't a difficult calculation. I will take the total miles driven and multiply it by the depreciation factor below.

Here's how I calculated the depreciation factor:
  • Cost of 2009 Pontiac G5: $13,000
  • Expected Life of Car: 150,000 miles
  • Cost per mile: $.0867
Since I already track the interest I pay on my car loan as well as fuel, maintenance, insurance and expenses, it only makes since to calculate this real cost of ownership as well.

I drove 6,250 miles in April, a bit more than average since I don't drive to Omaha every month!

6,250 * $.0867 = $541.88

I will also make an adjustment to the value of my car in Quicken. Previously I had written down its value by $3,000. Based on the above calculation, I overestimated the depreciation. Since I ended April with 18,860 miles on my car, I will deduct $1,093.29 from the original purchase price for usage prior to March. Moving forward I will make a monthly adjustment.

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