I recently purchased a new (used) car. In the process I created an Excel spreadsheet to help me analyze the long term cost of owning different cars. For some guidance on what goes into the calculations, I consulted Vincentric, a research firm in Bingham Farms, Mich. Vincentric specializes in calculating cost of ownership for vehicles and tracks more than 2,000 models. They sell their software to fleet managers, car dealers, banks and car manufacturers.
The following eight factors go into the long-term car cost of ownership calculations: purchase price, depreciation, financing, fees and taxes, fuel costs, fuel economy, insurance, and maintenance and repairs.
Excel Pricing Overview Excel pricing starts at $8.25 per month, per user. There is a free version. Excel does not offer a free trial. Simple Excel based accounting software for smaller businesses. Our software is a simple alternative to overly complex accounting software - just the function you need at a fraction of the price. A cost analysis focuses on the cost of any given decision, project, or action without considering what the total outcome will be. This type of analysis is the first step you would take before doing the other 3 economic evaluations to see if it is feasible or suitable for the company.
Here are some screenshots of the spreadsheet:
Input your own driver, vehicle, financing and fuel costs to personalize your estimates and find the least expensive long-term vehicle option. Choosing the right vehicle will save you thousands of dollars over the next few years. The spreadsheet is available for sale from my Research Offers page.
A few things stood out to me in doing the comparisons:
-Everything matters – small changes can have a big impact on the long-term ownership cost.
-Some things matter more – Purchase price (and therefore depreciation) and mpg are key.
-It’s amazing how close some new cars are in long-term costs, despite variable purchase price and mpg. Manufacturers must know and plan for this. The images above show several new car models with exact same 5-year costs of ownership. Even the Chevy Volt came in equal to more standard vehicles.
-Some things matter more – Purchase price (and therefore depreciation) and mpg are key.
-It’s amazing how close some new cars are in long-term costs, despite variable purchase price and mpg. Manufacturers must know and plan for this. The images above show several new car models with exact same 5-year costs of ownership. Even the Chevy Volt came in equal to more standard vehicles.
The real value can be found in buying a used car. None are shown above but that’s where I spent most of my time, looking at 2-3 year old cars with good gas mileage. The costs can get really low on a used car with great fuel economy. Google autocad software.
Before buying a new or used car I highly recommend the following:
from this website:
How to Select a Vehicle that will Save your Life– which is about InformedforLife.org, who do a fantastic job analyzing real safety data in order to recommend the safest new and used cars.
How to Select a Vehicle that will Save your Life– which is about InformedforLife.org, who do a fantastic job analyzing real safety data in order to recommend the safest new and used cars.
and
Buying a Car (How much Car can you afford?)
To determine a fair price to pay for a new/used car I recommend Edmunds.com
When you are finally ready to negotiate an offer on a new or used car, here are two fantastic articles from Negotiation Dynamics:
Negotiating to Buy a New Car; and
Negotiating to Buy a New Car; and
Visit the Research Offers page to obtain this spreadsheet.
2 Questions to ask Yourself Before You Buy:
- Does this product help and make you a more informed, cost-savings car buyer?
- If you purchase this spreadsheet, will you use it soon?
If the answer is YES to these questions, then I promise you will be satisfied with your purchase.
When can a company capitalize software costs?
With the growth in the number and size of software companies, we think it’s important to shed some light on capitalized software costs. Capitalized software costs are costs such as programmer compensation, software testing and other direct and indirect overhead costs that are capitalized on a company’s balance sheet instead of being expensed as incurred.
In order to be able to capitalize software development costs, the software being developed has to be eligible based on certain criteria prescribed under GAAP. Broadly speaking, there are two stages of software development in which a company can capitalize software development costs:
- The application development (i.e. coding) stage for software intended for a company’s internal use.
- The stage when “technological feasibility” is achieved for software that will be sold or marketed to the public.
The accounting and forecasting best practices for capitalized software costs is virtually identical to that of intangible assets: The costs are capitalized and then amortized through the income statement.
Software developed for internal use
Examples of software for internal use include internal accounting and customer management systems. These types of applications and systems cannot be products sold to the public.
Stage | Treatment |
---|---|
Project stage (pre-coding stage) | Expensed |
Application development stage (coding stage) | Capitalized, except for general and administrative costs related to the development |
Implementation stage (software is live and being used) | Expensed |
Excel Software Cost
Software that companies sell or market to the public
How to scan with macbook pro. This includes software to be sold, leased or marketed to external users.
Stage | Treatment |
---|---|
Pre-technological feasibility | Expensed |
Software is technologically feasible but not available for sale | Generally capitalized, with some exceptions |
Available for sale | Expensed |
Microsoft Excel Software Cost
Software costs that qualify for capitalization
When qualifying for capitalization, software development costs that qualify include:
- Software developer compensation
- Allocation to indirect overhead
- Software testing and other direct costs
Benefits of capitalizing software
Capitalized software is capitalized and then amortized instead of being expensed. This will result in lower reported expenses and therefore higher net income. Note that the decision to capitalize for GAAP purpose does not necessitate doing the same for tax purposes. As a result, companies looking to show higher net income for book purposes would prefer to capitalize software costs.
How much leeway do companies have in deciding what to capitalize vs expense
Quite a bit, especially in the decision regarding software that is sold to the public. That’s because deciding what’s in the “technologically feasible” phase but not yet “available for sale” phase is fairly subjective.
Companies that are conservative generally classify software as available for sale once it reaches technological feasibility. In this case, there’s not much to capitalize because costs must be expensed once they are available for sale. Less conservative companies may allocate most costs to the stage where the software is technologically feasible but not yet available for sale.
Similarly, the decision to classify internally used software as in the development stage vs. the implementation or project stage can also be subjective.
Capitalized software costs, an example
AthenaHealth capitalizes a significant amount of development costs for internally used software. In their 2017 10K, they explain that it is for internal use software called AthenaNet:
We capitalize certain costs related to the development of athenaNet services and other internal-use software. Costs incurred during the application development phase are capitalized only when we believe it is probable the development will result in new or additional functionality. The types of costs capitalized during the application development phase include employee compensation, as well as consulting fees for third-party developers working on these projects. Costs related to the preliminary project stage and post-implementation activities are expensed as incurred. Internal-use software is amortized on a straight-line basis over the estimated useful life of the asset, which ranges from two to five years. When internal-use software that was previously capitalized is abandoned, the cost less the accumulated amortization, if any, is recorded as amortization expense. Fully amortized capitalized internal-use software costs are removed from their respective accounts.
Here you can see the impact of capitalized software costs on the balance sheet:
In their footnotes, you can see that these costs are amortized, exactly like other intangible assets:
Meanwhile, Google capitalizes virtually no software development costs:
We expense software development costs, including costs to develop software products or the software component of products to be sold, leased, or marketed to external users, before technological feasibility is reached. Technological feasibility is typically reached shortly before the release of such products and as a result, development costs that meet the criteria for capitalization were not material for the periods presented.
Software development costs also include costs to develop software to be used solely to meet internal needs and cloud based applications used to deliver our services. We capitalize development costs related to these software applications once the preliminary project stage is complete and it is probable that the project will be completed and the software will be used to perform the function intended. Costs capitalized for developing such software applications were not material for the periods presented.
— Alphabet Inc. 10k, fiscal year ended 12/31/17
Because of the subjectivity about determining the software development phases of internal use and commercial software, it is important to understand differences in these accounting decisions when comparing software companies. Two identical software companies might have very different looking financials based solely on this accounting decision.