You may be surprised by how much your vehicle is eating into your annual budget. Vehicle ownership can be an expensive proposition. Beyond the price required to drive your car off the lot, there are a variety of other costs that some consumers don’t take into account when they are looking to buy or lease a vehicle.
These costs go far beyond the payments that are tied to the initial purchase, which can be expensive enough on their own depending on the type of vehicle you’ve chosen. Did you know that your credit score plays a role in your monthly payment, whether you got the financing from the dealership or a car loan from your bank? Your car loan incorporates interest into each payment and the better your credit score then the lower the interest rate you’ll be charged.
But those payments are just to allow you to call the car your own. Leasing or financing payments can already take a chunk out of your monthly income. It’s possible you haven’t even considered the myriad of other costs that come with a motor vehicle.
Well wonder no more, it’s time you got an accurate account of how much your car is truly costing you to own and operate. If you’re in the market for a new or used automobile, take a look at this breakdown of the real expenses associated with that vehicle before you make your final decision. The type of car you own will greatly affect all of these expenditures each month, so consider these additional figures first, then head to your dealer.
Make and Model
The kind of car you select will have a major impact on your finances. So think seriously about the kind of car you actually need – you may be saving yourself a lot of money in the long run.
Many of us would love to have that flashy convertible or roomy SUV to drive around town. But those cars aren’t always the most practical choice and they may end up costing you a whole lot more than you can afford. Every vehicle size has the most cost-effective make and model in that range, so be sure to compare auto costs over a five to eight year period. Brands like Toyota, Honda, and Volkswagen consistently offer the most affordable vehicles for cost of ownership.
If you are looking to purchase a car, research depreciation costs and see which models retain their value best. This will give you the option to trade or sell your vehicle for a different model when you are ready for your next car.
Ownership Costs
Everyone knows the old adage that a new car depreciates the second you drive it off the lot. In fact, depreciation is the largest component that factors into the cost of a vehicle, representing as much as 60% of your first year costs. Sales taxes also contribute to the price of your car in the first year as well.
The good news is that these expenses decrease after that initial year, even if you factor in expected maintenance and repair costs. Maintenance includes oil changes, tires, brakes, basically any part of the car that needs replacing due to normal wear and tear.
For a number of brands, the costs that come with maintenance and other repairs are covered by warranty. BMW, for example, offers a four-year warranty which covers most necessary maintenance and repairs. They’re not the only company to offer such coverage, but once it runs out then you’re on the hook for the payments yourself.
Some vehicles are more dependable than others to own over the long term, even after things start to break down. Although you’re incurring the costs of repairs after the warranty ends, modern vehicles are manufactured to run with long-lasting reliability. So, while the repair costs might be higher, you’re likely going to need to make fewer of them for the duration of ownership.
Maintenance
These costs include more than just oil changes and wheel alignments. The best way to depreciate your vehicle even further is to keep it dirty on the inside and out. Failing to wash your car routinely can damage the paint job and neglecting the interior will make you feel like you’re driving around in a Dumpster. This may seem like a frivolous cost at first glance, but the longer you ignore it, the worse your car will look and smell. Car detailing prices can vary based on the services you ask for, but these costs can really soar if you let the vehicle languish under harmful road grime and dirt for an extended length of time.
Insurance Rates
You can’t drive without insurance. That’s another monthly expense going towards your motor vehicle. Factors like your driving record, the area where your vehicle is garaged, if you park it inside or on the street, and of course, the make, model, and year of your vehicle are all considered when the insurance company determines your policy rate. Depending on how many speeding tickets you’ve racked up and the kind of car you want to insure, this can average out to about $1000 a year.
Gasoline
It’s no secret that gas prices can be astronomical. They fluctuate so wildly it’s hard to get a gauge on how much you’re going to pay from one week to the next. But if you rely on your car for a lengthy commute or drive it as part of your work, then these costs can really add up. The price of gas is also affected by what region of the country you live or work in. According to AAA, the average annual cost of filling up your tank can approach $10,000.
Registration and Licensing Costs
The costs don’t end yet. You still need to register your motor vehicle. These prices vary from state to state and can be affected by any outstanding parking tickets or other fees and taxes that are levied by the DMV. You can’t drive your car without a driver’s license, either. The average cost of getting your license can run about $40 with renewal fees being paid every four to eight years depending on the issuing state.