Car costs hit record level in 1986

By JAN A. ZVERINA, UPI Auto Writer

DETROIT -- Higher purchase prices and insurance premiums offset cut-rate financing and lower gas prices last year and pushed the cost of owning and operating a new compact car to a record $4,848, up $84 from 1985, a Hertz Corp. study shows.

The study released Sunday said the typical sticker price for a compact car in 1986 was $10,439 -- up 6.2 percent from $9,834 in 1985 and 205 percent higher than the average 1972 price tag of $3,425.


The higher purchase prices, Hertz said, translated into higher insurance premiums and wiped out savings from lower fuel prices and loan rates. Repairs, license fees and taxes also increased last year.

Calculated together, the owning and operating costs for a compact car rose to $4,848, up 1.8 percent from 1985 and triple that of 1972 costs, the study by the giant leasing and rental company showed.

The annual estimates are based on a normally equipped car driven an average 10,000 miles a year for five years, the typical distance motorists drive during the first five years of new car ownership, Hertz said. Parking costs and tolls were excluded from the study.

The study showed that cut-rate financing offers by carmakers during most of 1986 were offset by higher purchase prices and insurance premiums, which accounted for the bulk of the increase.


Although interest rates declined to record lows in many cases, interest costs did not drop as much because more money was paid for the new models.

As expected, ownership and operating costs were less for a subcompact and most expensive for a full-size car. However, costs to own and run a mid-size model increased the most, rising 19 percent to $5,613 from $4,715 in 1985, the study found.

Subcompact car costs declined 1.2 percent to $4,042. Costs for full-size cars stayed even with 1985 levels at $6,298. An average of all car sizes showed ownership and operating costs up 4.7 percent last year to $5,253, the report said.

Hertz spokesman Leigh Smith said owning and operating costs for minivans would fall between the intermediate and full-size car classes, placing annual expenses for those models at about $5,880.

Minivans were not counted in Hertz's calculations because they are relatively new to the industry.

The Hertz report stressed that ownership costs can drop dramatically the longer an automobile is owned.

Driving more miles per year also can reduce the cents-per-mile cost because fixed expenses -- such as loan interest, depreciation and insurance -- are divided into more miles, Hertz said.

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