Classifying Car Insurance

[catch22]

I am building a web program that would allow one to track vehicle expenses.

I have two sets of outputs, Operation & Maintenance, and Ownership Costs.

Under O&M I have Fuel, Regular (Oil, fluids, etc.) and Unplanned Maintenance, Tolls, Tickets/Fines.

Under Ownership I would have Car Payments, Tag Fees, Inspection Fees, etc.

And then I have Insurance. How would you classify Insurance, under O&M or under Ownership? On one hand Insurance is an operating cost, because you have to have it to operate on city streets. On the other, it could also very well go under ownership as insurance does not change how the vehicle operates or is maintained.

I started building this program for myself, because I love data and number crunching and I wanted to make a program to give me detailed reports on driving usage and costs. After I got about 70% done, I decided to modify it to allow others to input their own data. So it comes down to, if you were to use this program, would you prefer Insurance to be tallied under O&M or Ownership?

[gopokes88]

I am building a web program that would allow one to track vehicle expenses.

I have two sets of outputs, Operation & Maintenance, and Ownership Costs.

Under O&M I have Fuel, Regular (Oil, fluids, etc.) and Unplanned Maintenance, Tolls, Tickets/Fines.

Under Ownership I would have Car Payments, Tag Fees, Inspection Fees, etc.

And then I have Insurance. How would you classify Insurance, under O&M or under Ownership? On one hand Insurance is an operating cost, because you have to have it to operate on city streets. On the other, it could also very well go under ownership as insurance does not change how the vehicle operates or is maintained.

I started building this program for myself, because I love data and number crunching and I wanted to make a program to give me detailed reports on driving usage and costs. After I got about 70% done, I decided to modify it to allow others to input their own data. So it comes down to, if you were to use this program, would you prefer Insurance to be tallied under O&M or Ownership?

Ownership.

You basically broke it into variable costs and fixed costs. Insurance is a fixed cost because it is the same premium every month regardless of usage.

[HangryHippo]

Ownership.

You basically broke it into variable costs and fixed costs. Insurance is a fixed cost because it is the same premium every month regardless of usage.

Agreed.

[Martin]

+1 for ownership. -M

[catch22]

Thanks guys!

[mkjeeves]

I'd be inclined to look at it from a standard business accounting perspective and then maybe break it down into a few sections, like reoccuring operating expenses; varible operating expenses; financing; equity in the car; and cash flow.

Everything you listed is an expense except for the payment. The payment has two components, interest and principal. Interest is an expense. Principal is completely different. It reduces the loan, which is a liability offset by the value of the car, an asset. That part of the payment doesn't really have anything to do with the cost of owning and operating the car. It does have something to do with cash flow.

You haven't mentioned depreciation. That is also an expense.

All of your expenses added together, including depreciation, are the costs to own/operate the car. You could break that into fixed and variable but none of it is really fixed, it just might not be variable by the miles driven. Your insurance can go up at any time for instance. But I think fixed and variable are what you are driving at. I would probably use something like reoccuring operating expenses, variable operating expenses, finance expenses (interest) and depreciation as the expense categories if I wanted to lump some of the expenses together.

Part of what you might want to know is if you are wearing out the car at the same rate as you are paying for it and how much equity you have in the car. When a person does pay a car off at the same rate they wear it out, it makes it seem like the payment is a cost to own or operate the car, but it isn't really. To figure that out you're going to need some data and calcs on the loan, down payment, original value of the car, amortization and depreciation. That's not relevant to me. I haven't borrowed money to buy a car in probably 20 years. I realize that's not typical but it happens and people do pay their loans off. That doesn't mean it cost less to operate. It means our cash flow is different than if the car were financed.

If you want to consider cash flow, how much money you're going to pay out over any given period, you would combine the full payment with reoccuring and variable operating expenses, and without considering depreciation.

Edmunds has a decent little calculator for comparing vehicle types. http://www.edmunds.com/tco.html

[gjl]

I would say insurance is O&M. For example I have 2 vehicles I own that are parked and don't get driven so I don't insure them. I will only incur insurance costs when I choose to operate them again. They are black tagged so you don't have to purchase insurance just because you own a vehicle.