Owning a car offers several benefits. You no longer need to depend on others to move from one area to another, and you can give people a lift and define your social class. However, before purchasing a car, you should understand how much it will cost you to have one. Learning the cost of car ownership will help you ensure your budget can accommodate the cars on your list. If you’re not careful, owning a vehicle can drain your savings quickly. Here are some of the unavoidable car expenses you should consider before signing the purchase agreement.
1. Fuel
Unless you’re considering buying an electric vehicle, you’ll have to spend money on gas. Fuel prices are highly variable and can change from time to time or from one state to another. Although it’s difficult to project how fuel prices will fluctuate accurately, the U.S average cost for fuel varied between $2.37 and $5.99 per gallon in the last five years. Larger vehicles, such as SUVs and pickup trucks, tend to cost more in terms of fuel, while smaller cars such as sedans and hatchbacks tend to be more affordable. However, how much you spend on fuel every year will largely rely on the distance per gallon that you get with your vehicle, the price of fuel in your area, which can vary considerably, and road conditions in your region.
2. Maintenance Costs
Although the manufacturer’s warranty caters to most of your maintenance requirements during the first years of ownership, you will eventually have to pay for them.
3. Tires
Most people consider tire expenses as a maintenance cost. However, changing them is a distinct task, and thus, we’ve listed them as an expense. Specialists recommend changing tires every 3-6 years, but you should inspect them routinely to ensure the tread remains in peak condition.
4. Insurance
In most states, it’s prohibited to drive without insurance, even if you think you’re a seasoned driver. This implies that you’ve to include it in car ownership expenses.
5. Loan/Financing
Your monthly auto loan repayment is probably one of the most significant car expenses. Although you can reduce your monthly payments by extending the loan tenure, in doing so, you’ll increase your interest outflows. According to ConsumerReports.org, interest accounts for 11% of vehicle ownership costs over five years.
6. Registration Fees
You have to register your car every year to drive around legally. As your vehicle gets older, the registration renewal costs decline. However, it can cost vast sums of money every year during the initial stages. Some states charge registration fees at a flat rate, while others use things like your car’s fuel efficiency or age to determine the costs.
7. Car Property Tax
Some states charge a car property tax depending on your vehicle’s value.
8. Depreciation
Depreciation is not an expense you have to pay annually or monthly, but it has a significant impact on the total cost of car ownership. It refers to the variance between what you spent on buying your car and what you’ll get once you sell it after a certain period. The longer you take, the higher the value your car will lose.
9. Parking
Based on where you live and work, you may include parking fees into your budget. Parking fees vary across cities.
10. State Sales Tax
If your state imposes a sales tax on cars, you’ll need to pay it once you buy your vehicle. The sales tax varies depending on the state you register your vehicle in. If you’re purchasing a car in a different state, the dealership may have to register the vehicle in your state and submit the sales tax to your state’s car agency.
