Back in the 1980s, the Yugo GV sold for a base price of just $3,990.
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 for the most part, the GV—for 'great value,' ironically—didn't save its buyers any 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 (or its bumpers).
Most of those Yugos have long ago been retired to the scrap heap; but it underlines an important distinction: The cheapest cars to buy aren't necessarily the cheapest cars to own, and the Yugo is a lesson for what can go wrong if you shop for a vehicle (or anything else) only by its sticker price.
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. When you look at today's new cars there aren't any albatrosses like the Yugo, and considering all of the categories (depreciation, insurance, maintenance, etc), some of the cheapest models stand out: The Nissan Versa, Chevrolet Spark, Kia Rio, Toyota Yaris, 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, or more than $200,000 for the Mercedes-Benz S 65 AMG or CL 65 AMG, for instance.
Among these cheapest-to-own vehicles, Wurster points out, they’re all strong sellers (indicating high demand); they all have supply that doesn’t exceed demand by an extreme amount (like many larger SUVs and trucks several years ago); and they’re powered by smaller, highly efficient engines. Altogether, those factors keep fuel costs down and resale value relatively strong.
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.
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