The True Cost of Owning a Car

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by RateGenius

Purchasing a car is a big investment, but how much is it really costing you?

Whether you live in a place where public transportation isn’t an option or you just want to buy your own car for long road trips or the work commute, it can be easy to forget that a vehicle costs more than its sticker price. Some other fees and expenses come with the cost of ownership.

From the cost of financing a car to the ongoing costs of keeping your vehicle in working order, the costs of ownership aren’t always clear when you sign a loan contract.

So, what is the true cost of owning a car? How much are you really paying?

Review this comprehensive guide to the costs associated with owning a car, whether you want to finance it or purchase it outright.

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What’s Included In the True Cost of Owning a Car?

Your car is an investment, but how much did it cost, and was it worth it? In 2019, the average annual cost of owning a car — driving about 15,000 miles per year — was $4,641. Your annual mileage can influence your costs. If you drive more, you’ll have higher fuel and maintenance costs.

What all is included in that cost, though? Are there any steps car buyers can take to reduce their annual expenses?

Vehicle Purchase Price

Even if you purchase a vehicle with cash, there are additional expenses that increase the cost of your car before you ever leave the dealership. These costs increase the actual sticker price of your vehicle, and they aren’t optional in most cases.

Common purchase price expenses include:

  • Interest charges: Financing a car will add interest and APR charges to the sale price. It also adds other fees associated with loans, like documentation fees and prepayment penalties. Late payments can result in returned payment fees, late payment charges, and additional interest charges, too.
  • Title and registration: You’ll need to pay for a title transfer when you purchase or finance a vehicle. You’ll also be responsible for the registration fee. There are inspections and emissions testing in some states, too. Generally, you pay for registration and inspection fees every year you own the car.
  • Sales tax: Though this will vary by state, in most places, you’ll be responsible for sales tax. This is added to the total sale price of your vehicle, which increases the amount you finance if you’re taking out a loan. You might have access to tax deductions for certain environmentally friendly cars.
 Money-saving tips:  Shop for the lowest auto loan rates and finance a new vehicle that is under your budget to keep your costs and down payment low. If you already have a loan but aren’t happy with what you’re paying, consider refinancing your car loan to lower your rates and monthly payment.

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Vehicle Maintenance

Regardless of the type of car or truck you get and how well you drive, you’re going to have expenses for keeping your vehicle in working order. Some of these are ongoing expenses while others come up over time and with use. Those expenses are:

  • Routine maintenance: Even if you only drive a few thousand miles a year, you still need to perform routine maintenance. This includes oil changes, tire rotations, brake pad replacements, and more. Find a reputable auto shop so you can establish a consistent maintenance schedule.
  • Unexpected car repairs: The best cars with the most routine care still have unexpected problems. Those problems can range from a minor dead headlight to a major transmission complication. You can purchase GAP waivers and vehicle service contracts to offset these expenses.
  • Safety and part recall: The good news is that you don’t generally have to pay for safety and part recalls if you take your car to the right place, but you do lose the time and cost of traveling. It’s important to stay on top of these for safety reasons.
 Money-saving tips:  If you’re confident in your technical skills, figure out how to replace certain parts to keep your costs low. Take advantage of safety and part recalls so you can divert those funds elsewhere.

Car Insurance

Except for very few states, car insurance is a requirement. However, if you financed your vehicle, chances are your lender will require you have coverage and may even have specific requirements.

Insurance rates keep going up too, increasing 30% since 2011. You can find ways to lower your insurance premiums, though. Here’s what you need to compare when buying car insurance:

  • Minimum coverage costs: This varies by state. Most states require some type of coverage for bodily injury and property damage.
  • Full coverage expenses: Most auto lenders require you to carry full coverage insurance, which includes comprehensive and collision. You also want this to protect your assets. If you file a claim, you’ll need to pay a deductible before your insurance steps in to cover the rest of the expenses.
  • Price of additional features: Every car insurance company offers additional features like rental reimbursement, towing packages, and roadside assistance. These typically add additional costs to your premiums. You might have them with your lender too, so check before purchasing.
 Money-saving tips:  Bundle your auto insurance with things like homeowners or renter’s insurance for discounts. Higher deductibles will lower your monthly costs. Finally, don’t be afraid to shop around for a new insurance company every six months or when your policy expires. Rates are changing all the time.

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What Are Other Common Costs of Owning a Car?

This already seems like a seemingly exhaustive list, but there are some other costs you need to consider about car ownership. These costs change as you use your vehicle and have changes in your lifestyle.

Fuel: Gas or Diesel? 

Aside from doing a car maintenance cost comparison, it’s a good idea to figure out what your monthly fuel expenses will be. If you drive a lot, you’ll want to consider a fuel-efficient vehicle to save money. However, consider the cost of maintenance for these vehicles, as well. They might increase your costs.

It’s hard to plan for the cost of gas or diesel in three or four years, but you can estimate how many miles you drive and how many miles per gallon you get. This can help you track budget changes over time.

Upgrades: Professional or DIY? 

Some people purchase vehicles that they plan to use for more than just driving to work on a well-maintained highway. If you need a vehicle that can go off-road for a job, you’ll want to consider that in the cost of your vehicle. That includes the cost of the upgrade and any future repairs.

Professional installations can be expensive, but they might also come with guarantees. On the flip side, knowing how to repair your own vehicle can be a significant perk for people who travel by car a lot.

Accessories: Babies or Pets (or Both)?

You probably didn’t think about this when you bought your car — or decided on a baby or pet, for that matter — but you’ll need specific car accessories to travel safely with either one. Child safety seats are a requirement in all states, and you’ll need one (or several) over the years. This means at least one upgrade.

While there are rarely any requirements for safety restraints for pets, it’s a good idea to have a crash-rated harness and seatbelt tether to prevent your pet from flying around in an accident.

In 2019, the average annual cost of owning a car — driving about 15,000 miles per year — was $4,641.

What Are the Costs of Owning a Used Car?

At this point, you might be wondering about the costs of owning a used car versus a new car. Used cars generally have lower purchase prices because they’ve already depreciated in value. However, they come with additional costs that you want to consider before investing in a new vehicle.

If you do want a used car, here’s what you need to consider:

  • Interest rates: Even with the best credit, the interest rates are higher for used car loans. They get significantly higher for subprime auto loans. This means you’ll want to lower your loan amount to reduce your monthly payments.
  • Vehicle maintenance: If you purchase a used car that is older, you might have higher maintenance costs if you need to replace any parts. This also applies to foreign vehicles that aren’t very common. Labor costs can increase for specialty cars, too.
  • Prior damage: You want to know as much about the history as possible so you can determine if there have been any accidents. It’s a good idea to have a third-party mechanic look over the vehicle and give you feedback on whether everything is well-maintained or not.

You can generally get some kind of vehicle history report to understand the ownership and accident history of a car. In some cases, these reports can include details of the vehicle’s service history, including oil changes and filter replacements.

Can I Lower My Total Cost of Owning a Car?

Aside from the money-saving tips in the guide, you want to look for ways to reduce your ongoing fuel costs and keep your interest rates down on any loans. You also want to drive carefully to avoid any hikes in your insurance premiums.

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About The Author


A better way to refinance your auto loan. RateGenius works with 150+ lenders nationwide to help you save money on your car payments. Since 1999, we've helped customers find the most competitive interest rate to refinance their loans on cars, trucks, and SUVs.

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