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.
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.
Considering these other factors, like insurance costs, anticipated reliability, and projected resale value, if you can find something at the lower end of the market that you like (and if you’re okay doing without the glamor of a more upscale new car), you’ll also take the smallest hit to your wallet in the long run.
That said, unless you’re obsessed with being a die-hard miser, you can’t get too caught up in the bottom-line cost projections. The totals are best viewed when comparing vehicles within the same class against each other, Wurster emphasizes. In other words, choose the kind of vehicle you need first (minivan, crossover, etc.) and then compare the costs.
Mike Calkins manager of the AAA's Approved Auto Repair program, notes that depreciation, fuel costs, insurance, and finance charges are the four most significant ownership/driving costs.
Don't forget about insurance
“Get a quote from your insurance agent before you buy a car to avoid any nasty surprises,” Calkins recommends. He also argues that paying cash for a new car, or getting a loan with the lowest possible interest rate, helps cut finance fees that will cost you in the long run.
The AAA, as part of its most recent annual Your Driving Costs study, found that small sedans have the lowest driving costs'—of about 45 cents a mile, considering all those factors, versus nearly 76 cents for a large sedan.
Thinking about hybrids or special fuel-stingy models? They may come with higher sticker prices, but in general their improved fuel economy (and in some cases better resale value) mostly offset the premium. For instance a modest Chevrolet Cruze 2LS has a five-year ownership cost of $32,678, while the mile-per-gallon-minded Cruse Eco, at $33,492 over five years, can't quite make up for its $2,550 sticker-price premium, despite lower fuel costs.
So remember the Yugo. While many of the cheapest cars on the market are also the cheapest to own, don't assume so; run the numbers for yourself.
For the following list, we ran the numbers with the most recent Vincentric Cost of Ownership data, as of February 2013. And because there can be a lot of variance even within models, we've listed the specific trim and bodystyle whenever needed. All are for model year 2013.
Read on to see our ten cars for which being thrifty pays off.