As a first-time buyer, you should know that the cost of owning a car includes much more than a loan payment. And the cost of owning a car will vary according to what kind of car you buy! Take a look at our guide for a better understanding of the true cost of car ownership. We’ll even help you figure out how to keep costs down.
- Besides making a monthly loan payment, you’ll also have to consider the extra cost of gas, insurance, maintenance, repairs, taxes, and registration fees.
- You can estimate the true cost of owning a particular vehicle with an online car calculator.
- There are a few things you can do to lower your costs of ownership, such as refinancing or choosing an efficient model.
- Since a car depreciates so much in its first few years on the road, you can keep costs down by opting for a used model instead of a new one.
Besides your loan, what else do you need to pay for?
Before you drive home in a car, you want to make sure you can afford it. Common costs of owning a car include fuel, registration fees, insurance premiums, maintenance, and repairs. Costs will vary according to what kind of car you purchase. For example, a full-size truck will chug more gasoline per month than your average hybrid hatchback. Insurance premiums will vary according not only to the type of car you purchase, but also what kind of driving record you have. Even the cost of maintenance and repairs can vary according to model. Luxury models, for example, may cost more to maintain than non-luxury models. You may also need to pay parking fees, depending on where you drive. If you drive toll roads on a regular basis, you should incorporate these costs into your budget, too.
Car Ownership Calculator
Need a little help with the math? Sites like NerdWallet and Edmunds actually offer car calculators to help you budget your car ownership costs. It’s a good idea to do this research before you even begin test-driving new car options. That way, you know which models suit your budget before you get comfortable behind the wheel.
Lower Your Car Ownership Costs
There are a few things you can do to lower the cost of owning a car. For starters, make sure you do all the proper maintenance on your vehicle. Keeping your vehicle in good working condition can help curtail some major issues. Also, you should make sure to get any problems checked out before they get worse.
Next, you can shop around for a cheaper insurance policy. We certainly don’t recommend being underinsured, but you may be able to switch carriers or find a policy with a lower premium that better suits your needs.
To cut down on fuel costs, check out hybrid and plug-in hybrid models. You can even go completely gas-free with an EV. If you prefer to stick to a gas-powered vehicle, you can shop for one with a smaller engine and higher EPA ratings.
Shop around for the best APR on a car loan. If your credit score has improved recently, you may be able to refinance your loan to pay a lower APR, cutting down on what you pay for your loan overall.
Every vehicle will depreciate over time. That means its value drops, beginning when you drive it off the dealership lot. During the first five years of ownership, a new car’s value may drop by as much as 60 percent. Buying a used car can help you reduce the cost of car ownership, because the previous owner will have already paid for some of that depreciation.
Generally, you’ll pay less for a used car than a new one. And when it’s time to sell this used model, you likely won’t see as big a drop in value from what you originally paid than if you had bought it new.