The cost of owning a car is more than the purchase price. This is especially so if you did not get the best auto loan rates. That is where the first real cost of owning a car comes in.
Your Loan Rates
It is very seldom that someone would purchase a car with cash. Most of the time, you will have to get a loan. The lender would pay the price in full, and you will make monthly installment payments to them. The catch is that they have an interest rate.
Assuming that you get a loan for your car at a 10% down payment payable in five years at average credit, your expense would be around $2,335 per year. There are a lot of variables that can affect that, such as the down payment, how long you will sign up for the loan, and credit.
There are lenders who have an online auto loan calculator. You can use this to see how much the loan would be.
You should also know that there are several fees when getting a loan. That would depend on the lender, so read the agreement carefully before signing.
Do your research and compare different loan providers before settling with one. That way, you can minimize the costs of owning a car.
Your car needs gas to operate. On average, you will be spending about 11 cents per mile. Considering that a car would travel 10,000 miles per year, that equates to over $1,000 worth of fuel annually.
That is just a rough estimate. The actual cost of fuel varies greatly on what type of vehicle you have, the type of gas you need, and how you drive.
The price of gas can be volatile as well. Back in 2014, there was a dramatic drop in gas prices worldwide. In early 2022, however, the story went the other way as prices skyrocketed upwards due to global issues.
Gas is not the only consumable part of your car—there are more. Engine oil, filters, coolant, and brake fluid are just some things you have to replace regularly. Tires can last a few years, but they also need to be replaced eventually. The cost of a new set of tires would set you back a few hundred to a few thousand dollars each.
Depending on how old your car is, you are looking at upwards of $900 per year to maintain your vehicle. That does not include major repairs due to unforeseen incidents. But that is what insurance is for.
Car Insurance Costs
The cost of insurance can be challenging to nail down because there are a lot of variables.
While it is mandatory in all states, the level of coverage depends on where you live. For example, all states require property damage liability. Then, all except Florida require bodily harm liability.
Then there are the add-on policies that may not be required but would be good to have. Roadside assistance is a good example of this. You pay additional money to have peace of mind. You know that if something happens, you have someone to call. Again, it all depends on what you get.
There have been studies that looked into insurance provider pricing across the country. According to them, the annual cost of car insurance is just below $1,600.
Cost of the Car
Of course, you cannot forget the cost of the car itself. The primary factor here is what type of vehicle you are purchasing. According to studies, the average price of a brand-new car across the entire industry is around $38,000.
That is a lot of money. But, considering the average driver keeps their car for 71 months, the monthly cost goes down to about $530.
Car ownership is a necessity for most people. It allows them to get from one place to another efficiently. If it is your first time purchasing a car, it is important to know these costs so you can plan. Here is a breakdown of everything discussed:
- Finance Charges – $2,335 annually or $195 per month
- Fuel Prices – $1,000 annually or $84 per month
- Maintenance Costs – $900 annually or $75 per month
- Car Insurance – $1,600 annually or $134 per month
- Car Price – $3,166 annually or $530 per month
With all that, the actual cost of owning a car is about $9,000 per year. Of course, that is only an estimate. All this would change depending on the car you purchased, the insurance coverage you sign up for, and more. At least this would give you an idea.