What Is the True Cost of Owning a Car?
Owning a vehicle is one of the most rewarding things about growing up and becoming an adult. Personal vehicles provide us with freedom and convenience. This makes going to work, getting groceries, and going to the gym a much easier process.
Yet, owning a car is also expensive. Even if you buy a used vehicle, there will be costs you don’t expect.
We want to shed some light on the topic. Keep reading for everything you need to know about the true cost of owning a car.
All vehicles have a depreciating value. Over time, your car will be worth much less than what you paid for it. This is especially true if you buy a brand new vehicle.
New cars lose between 20% and 30% of their initial value after the first year. After that, its value drops 15% to 18% for the next several years.
This is one of the main reasons why financial experts advise against buying brand new vehicles. Depreciation must be calculated into the true cost of owning a car.
Loan Payments and Interest Rates
One of the most obvious expenses of owning a car is your loan payment. However, auto loans also have interest rates, which vary depending on:
- Your credit score
- Your loan amount
- The length of your loan
- Your downpayment
It’s important to factor interest fees into the true cost of owning a car, as they can add thousands of dollars to your final expenses. For example, a $25,000 loan over 5 years with a 4% interest rate will actually cost you $27,625 by the time you pay it off.
We can’t forget to talk about fuel costs when it comes to vehicle expenses. Gas prices are on the rise and the more you travel, the more it’s going to cost you each month to own your car.
If you have a short commute or work from home, this won’t be a big deal. However, if you put in a lot of miles each week, your costs will skyrocket.
Maintenance and Repairs
The average yearly maintenance and repair costs for vehicle owners is over $1,000. However, this figure varies drastically depending on your car, how often you drive, and more.
A brand new car comes with warranties and maintenance plans that help lower these costs. If you’re buying used, however, you need to read the vehicle history report to ensure the car was well cared for and maintained to avoid costly repairs and car problems.
If you do get stuck with a lemon, you can appeal your case to local lemon law attorneys. They can help you get the compensation you deserve.
Insurance and Registration
Finally, the true cost of owning a car includes your monthly auto insurance payments and your yearly registration fees. Your auto insurance payments are dictated by the policy you choose, your deductibles, and the value of the vehicle.
Depending on where you live, your registration fees can also vary. States determine registration costs in a number of ways, including:
- Flat rates
- Age of vehicle
- Value of vehicle
- Weight of vehicle
If you live in a state that charges more for registration based on the age or value of your car, expect to pay hundreds of dollars to register a brand new vehicle.
Are You Prepared to Handle the True Cost of Owning a Car?
The true cost of owning a vehicle is specific to your lifestyle, car, and other financial choices. We hope this guide provided the insight you need to calculate your future expenses.
And if you’re looking for more finance tips, automotive advice, or lifestyle guidance, we’re here for you. Take a look through the rest of our blog to find more articles that can help you improve your life.
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