What are all the costs involved with buying a car. Well, there are many. I guess that owning a car can be regarded as a luxury, at least in most countries. Not so much in North America as it seems that every household owns at least two cars.
1. The actual price tag – If you buy the automobile outright (not many people can), it depends on what model it is. For example, if it is a Ferrari, it can cost anywhere from $250,000 to $1,700,000 (1.7 million).
But, if you are like most people and not filthy rich, a Hyundai Elantra might cost you $18,000 new, a GM Cadillac sedan around $40,000, Chevrolet Cruze around $16,975 to $24,000, Ford Escape SUV $24,000 to $30,000, Ford Fiesta $14,000 to $21,000, Ford F-150 truck $26,500 to $63,000. It really depends on how many extras you add to your purchase.
Then again, most people finance their car over 60 to 84 months, so the monthly expense can range greatly from roughly $250 – $1,000 depending on your down payment, interest rate and term. You can also lease a car which is less expensive, but you will not own it, unless you buy it after the 3 or 4 year lease.
Remember that the car company will look at your credit report and ask for proof of income before handing over any car to you. It is just part of the game, just like a loan.
2. Fuel – Do you use regular or premium gasoline? What kind of mileage does the car get? Average fuel costs were $1,682 per year ($140 per month), according to AAA.
But what you’ll pay depends on the car you drive. Over five years, a family could spend $18,000 to fuel an SUV, compared to only $11,000 for a large sedan, according to Edmunds.com data.
3. Tires – Okay, hopefully when you get your car it will have tires on it (Ha Ha), but if you live in the north part of the USA or Canada or another part of the world that has cold winters, you’ll need snow tires too. All season tires are not as good as snow tires, so those will cost you about $1,000 or so for four. And you’ll have to replace your summer tires every 4 or 5 years, so you’ll have to consider all that.
4. Maintenance and repairs – How much will it cost for the scheduled maintenance recommended by the manufacturer, including oil changes, tire rotations, battery inspection and testing? It shouldn’t cost much every 6 months or so, but that might go up after a few years depending on the complexity of the maintenance.
What type of repairs will be needed, and how much will they cost? Total costs averaged $700 per year, the AAA study found. So, if you are buying a new car, try and ask for free oil changes or a discount on future maintenance. They might just give that to you. If not, shop around at other dealers first and find out who has the best deals.
5. Taxes and fees – This category includes state and local taxes, license, title and registration fees, and other fees. Nationally, they averaged $665 a year, according to the American Automobile Association (AAA).
6. Insurance – To estimate car insurance, insurers take into account a vehicle model’s accident history and repair costs, among other factors. Of course, your driving history is also a factor they consider too.
For example, family-friendly minivans, which are typically driven by experienced, safety-oriented motorists, are cheaper to insure than high-end sports cars that are fast and expensive to repair, according to the Insurance Information Institute. Insurance rates vary from state to state, as well. You can see rates using NerdWallet’s car insurance quotes tool.
7. Depreciation – How much value the car loses each year is the single largest ownership expense, according to AAA. New cars can lose over 20 percent of their value in the first year, crazy though that might seem.
Used car prices are influenced by supply and demand, so they’ll depreciate more quickly if the market is flooded with used and off-lease cars for sale. Some models are known for holding their value over time, so look up the estimated depreciation of the cars you are considering on Edmunds or Kelley Blue Book websites. If a certain car loses value rapidly at a specific point, say, in the third year, you might consider selling it before it hits the limit.
8. Interest/financing – We talked about this a bit already. The interest rate and the length of your car loan affect your total cost of financing. The longer you finance a car, such as 7 years vs. 5 years, the more you will pay overall. Of course, the longer term you have, the less your monthly payment will be. That is what gets most people. You pay less now monthly, but when the long term is over your car is not likely worth much.
It may or may not be better to finance your car at a bank vs. at your car dealership. You’ll have to ask both parties first how much their rates are and be sure to read the fine print.
So, taking all of this into consideration, you can quickly see that owning any car is expensive. You can expect to pay $500 – $750 a month or more when you factor in everything.
You should seriously consider purchasing a used car (even just 1 or 2 years old), because you will save money. Just try and get one with the warranty still in place.