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IntelliChoice Value Rating
The chart above shows the purchase price versus ownership cost for each car from a specific vehicle class. The cars with better than average ownership cost/purchase price correlations are the best values, and these best value cars are represented by the dots below the curve. (i.e. the cars that have a lower ownership cost compared to its purchase price.) Those cars, 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 car with a similar purchase price. However, notice the difference in ownership costs of each car represented by the vertical position of the dot. Two cars with the same purchase price can have thousands of dollars difference in ownership costs. This is what separates "good value" cars from "poor value" cars.
What is a good car value?
A "good car value" is one whose cost to own and operate is less than expected. The lower the cost to own and operate a car compared to what is expected, the better the value of that car.
But how do we know a car's "expected cost"?
For each car in the class, IntelliChoice plots the car'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 car. Generally, we find that as the purchase price of the car increases, the cost to own and operate that car 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 car ownership costs.
This is an important concept. It's normal for car ownership costs to rise as purchase price rises. Therefore, we can't just establish one "average" ownership cost number for each class, since cars in the class have different purchase prices. (This is why the "Relative" shown on each chart is different for cars in the same car class.)
Using statistical techniques, IntelliChoice "connects the dots" to form a curve that defines, for this car class, the relationship between the car's purchase price and car's ownership costs. This curve is our "expected cost" curve. The curve defines, for any car in the class, the five-year ownership cost that we would expect to see at each possible purchase price. If every car 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 car values, while the dots that are a lot lower are excellent car values (A dot that is a lot lower than the curve has ownership costs much lower than expected for a car of its purchase price). Conversely, a dot a little higher than the curve is a poorer than average car value, while a dot that is much higher than the curve is a poor car 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 cars cost less. But, when its cost to own and operate is plotted against cars with comparable invoice prices, the E320 costs less. So the E320 is not expensive to own and operate - it is a good car value. The Mercedes does not have low ownership costs, but it has low ownership costs for its invoice price.
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Article From Truck Trend Magazine
2006 Sport/Utility of the Year Road Test & Review
We were surprised. We were impressed. And, yes, we were disappointed, too.
By Angus MacKenzie
Photography by John Kiewicz
The Dirty Dozen? Well, at least they looked that way after a day negotiating the sand traps, frame-twisters, hungry rocks, and rutted hills of our off-road evaluation course. Heat and dust and the sound of engines working hard: It must be Sport/Utility of the Year time again. Twelve contenders made the cut for this year's judging, their widely varying technical specifications and packaging reflecting the diversity of a market segment that's come a long way from the days when four-wheel drive was a necessity for farmers, soldiers, and intrepid adventurers rather than a suburban-lifestyle statement. Engines included an I-5, a flat-six, and a bunch of V-6s. We had V-8s, too, including one with quad cams, a supercharger, 390 horsepower, and a Jaguar pedigree. We had live axles with leaf springs, live axles with coil springs, independent suspension, and air suspension. Transmissions? They ranged from four to seven--count 'em--speeds, some with low-range transfer cases, some without. Some of our contenders seated five, others seven. As-tested prices ranged from under $24,000 to more than $75,000. They were an international bunch, too, reflecting the complex globalization of the auto industry and the U.S. market. One contender was all-Japanese (Suzuki Grand Vitara), two were all-Korean (Hyundai Tucson and Kia Sportage), and three were all-American (the Ford Explorer/Mercury Mountaineer twins and Hummer H3). And before you ask about the Jeep Commander, remember the Jeep guys ultimately report to Stuttgart these days. Still, in a nice piece of symmetry, the all-new Mercedes ML is bolted together near Tuscaloosa, Alabama. Building sport/utes is clearly an American specialty: Despite their Japanese badges, both the Nissan Xterra and Subaru B9 Tribeca are made here (Canton, Mississippi, and Lafayette, Indiana, respectively), and while the bright-orange Range Rover Sport may be British-built, the beancounters who approved it call Dearborn home. But it's Pontiac's Torrent that gives us a real glimpse of the auto industry's New World Order: The V-6 under its hood is made in China.
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