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The Real Cost of Car Ownership

Very few people can actually tell the true cost of their car ownership. There is so much more involved in buying, owning, operating and maintaining an automobile. Paying for a car either by paying cash or making monthly payments is only a part of the real cost of car ownership.

Cost of Car Ownership

There are many things to consider when assessing the real cost of car ownership. All too often many car buyers only consider the monthly payment rather than looking at the big picture. All of the items below can vary greatly depending on the vehicle you might purchase, the miles you drive regularly, our age and where you live. Take a close look at all of these factors before you decide to buy your next automobile.

Factors for Figuring the True Cost of Car Ownership

Price of Car: The price of the car is simple and straightforward, but you also need to remember that you will have to pay sales tax on the amount of your purchase, which could easily be thousands of extra dollars depending on the vehicle you purchase. However if you do have a trade-in that you free and clear that amount will be deducted from the purchase price. Depending on where you live the sales tax may be calculated on the trade difference rather than the new car price alone. Check with you state where you reside to see how sales tax is calculated on car purchases and trade-ins.

Finance Charge/Interest Rate: Here is a simple chart of the financing costs of a 60-month car loan calculated at various interest rates. You can see how the payment goes up and the total interest costs really jump up when you spread it across 60 months. You see how easily the real cost of car ownership can add up if you don’t do your car buying homework.

Amount Financed Interest Rate Term Payment Total Cost Interest Cost

20,000

1.9

60

350

20,981

981

20,000

3.9

60

367

22,046

2046

20,000

5.9

60

386

23,144

3144

20,000

8.9

60

414

24,852

4852

Insurance: You couldn’t talk the costs of owning and operating a car if we didn’t talk about insurance. Whether we like it or not if you drive a car you will have to have insurance. You may only need to have liability or financial responsibility insurance required by the state where you live, but if you finance a car you be required to carry full coverage auto insurance. The cost of auto insurance can vary greatly and be impacted by a huge number of variables including age, location and vehicle. Your car ownership insurance costs could be as little as $40 a month to several hundred a month which be a major factor when deciding what you can afford to pay for your next car.

Maintenance: Cars are machines and they need to be maintained regularly which is another expense to owning a car. Whether you buy a new car or a used car they still require standard maintenance like oil changes, fluid flushes, alignments and tire rotations. They all cost money unless you purchase a new car that offers free maintenance like Toyota and several others that includes a 25k mile or 24 month service package. However after that time you will be the one paying for these expenses which is all part of the real costs of owning a car.

Repairs: The last thing you want to think about when buying a car is how much you will be spending on repairs. If you purchase a new car you will receive a manufacturer warranty, but these are limited warranties. These warranties will not covers items that wear like brakes, tires, belts and hoses. These repairs are what you will be paying for out of pocket. Plus most manufacturer warranties are only good for 3 years or 36,000 miles. However many include power train warranties for 5 years or 60,000 miles, but they have limited coverage. Unless you have an extended warranty on your vehicle you better allow for repair expenses down the road. Sooner or later you will have to spend money on repairs, which is simply a fact of life when it comes to car ownership.

Fuel Economy: The price of gas can certainly have an impact on the real cost of car ownership. If came out of a small vehicle that was averaging 25 miles to the gallon and you are now considering an SUV that averages 15 miles per gallon that cost can make a substantial difference in your monthly car expenses. Those 10 miles per gallon can add up to quite a chunk of change if you drive 1500 miles a month that’s 15 gallons and at $3 to $4 a gallon you have $45 to $60 a month. Think about the fuel economy of your next car because it is all part of the operating expenses of owning a car.

Vehicle Usage: Not many people think about usage, but when you get a new car you are going to like to drive it more than you did your old car. Therefore your new car will probably become the vehicle of choice when going out, going on trips and taking a vacation. You will want to take your new car and why not, that’s why you bought a new car. However that extra usage will cost in a variety of ways like the ones listed above. I am not saying you should refrain from driving your new ride, but I am saying ha you will start using it more and it should be considered as one of the costs of ownership.

Most people don’t consider all these factors when they think about what it costs to own and operate an automobile, but they are real dollars and cents that can eat away at your hard earned money. These items may seem small, but they add up quickly. So make sure you consider all the possibilities when you figure your real cost of car ownership.

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