The financial cost of owning a car doesn’t begin and end with its purchase price, or the price you pay in interest on an auto loan. In addition to those, the true cost of car ownership includes its depreciation (the “silent thief” that reduces the resale the value of your car), fuel costs, auto insurance, maintenance and repairs, and taxes. Understanding and budgeting for these factors, as well as taking the necessary steps to maintain your car and keep it running efficiently, can save you a significant amount of money and time.
Our infographic describes several cost factors that add up over the lifetime of your car. They include:
- Depreciation: As soon as you drive your car off the lot, its value decreases, or depreciates, down to its wholesale price. Over the lifespan of your car, the cost of depreciation slows, but it still amounts to thousands of dollars and results in a resale price much lower than the original purchase price.
- Fuel Costs: Fuel is a significant cost factor for car owners, although the actual amount you will spend will depend on your vehicle’s fuel efficiency.
- Insurance: Be warned: cars with a low price tag may require higher-priced insurance. The cost of auto insurance is determined by the policy holder’s age, place of residence, and driving record, and it may increase accordingly, especially in the event of an accident. Thankfully, the color of your car has no bearing on the cost of your insurance.
- Maintenance and Repair: After sales tax, which will vary depending on where you live, maintenance and repair costs are the lowest costs, but they can still be significant factors when purchasing a car. Your warranty won’t cover every part and every repair, and some coverage may be at the discretion of the car’s manufacturer and warranty provider. When reviewing any factory warranty, be sure to read the fine print.
What Does This Tell Us?
Car owners are keeping their cars for longer than they used to: 10 years or more is a recent average estimate. Resources including the American Automobile Association and Consumer Reports provide estimated annual ownership, operating, and carrying costs for a vehicle. A car’s operating costs include fuel, maintenance and repair, and auto insurance, all of which will increase over the lifespan of your vehicle. Depreciation, interest, and sales tax are carrying costs and actually decrease over time.
Car owners can save a significant amount of money by simply maintaining their car so it runs smoothly and efficiently. Learn when and how to change out your car’s air filter, belts, and battery. Keep an eye on your tires and consult your car’s manual to determine when they should be rotated. And be sure to use the proper fluids for the maintaining and operation of your car, including engine oil, coolant, brake fluid, and — of course — gasoline.