How Much Does Owning a Car Cost?
Whether you’re looking forward to that new car smell or buying a used car that fits your adventurous lifestyle, getting the facts on the cost of ownership up front will help you make the best decision in the long run.
Once you whittle your options down to two to three choices, it’s worth considering your potential costs over a 4-year and 8-year period before making a decision.
Interest. You’ll want to know how much you’re being charged above the price of your vehicle. That can depend on how your loan is structured and whether you can take advantage of special pricing. Longer loans typically mean more interest. Shop around to make sure you’re getting the best interest rate you can.
Length of ownership. The length of time you plan to own your car matters. If you own your car for five years, the median cost of car ownership averages at about $9,200 a year. If you own your car for eight years, that median cost drops significantly because you’re enjoying a few years without a loan. However, going beyond eight years means you could be faced with higher repair costs.
Maintenance. It’s always a good idea to plan on some maintenance expenses, even for cars with a bumper-to-bumper warranty. Some sites report owner feedback on average costs. Maintenance includes:
- Oil Changes
- Inspection Services
- Wheel Rotation
- Wheel Alignment
- Cooling System Maintenance
- Spark Plug Replacement
- Fluid and Filters Replacement
- Battery Replacement
- Timing Belt Replacement
- Basic Brake Service
- Air Conditioning Service
Repairs. In the first five years of ownership, repairs are often your lowest factor in the cost of ownership. In used cars, that may be a different scenario. Research how much a car owner spends each year for your make and model.
Insurance. Insurance is a requirement, and your cost and coverage can vary widely. Different vehicles are insured at different rates, so check with your insurance agent before buying a specific make and model. You’ll also want to work with your agent to make sure you’re getting the coverage you need first, then look at the cost of insurance. Remember, you might find cheaper rates, but you could be skimping on coverage.
Fuel. Every car has a miles-per-gallon estimate for city and highway travel. In order to understand the total cost of ownership—not to mention to appropriately adjust your budget — you’ll want to compare the cost of filling your tank (don’t forget to look at tank capacity). The U.S. Government has a handy fuel calculation tool you can use. Simply select the make, model and year use it to compare several vehicles. Gas efficiency can drastically change your cost of ownership.
Depreciation. It’s important to know what you’ll get when you want to sell your car or trade it in. Initial cost is one thing, but depreciation drops at differing rates. Do your research so you can compare the future value of each of your new or used car options.
Roadside assistance costs. Even when buying a new car, you can run out of gas or get a flat tire. And once your car gets some miles on it — especially if you buy a used car — breakdowns can happen. It doesn’t have to be a disaster. Some manufacturers offer roadside assistance for a certain number of miles or time after purchase. In other cases, you can save by adding Emergency Roadside Assistance coverage to your auto insurance.
License/registration. In addition to up-front costs, you’ll need to update your registration. Check on prices and timing with your state’s Department of Motor Vehicles.