When you get ready to buy a car, there are quite a few important decisions to make. Will you need a small, gas efficient car for commutes, a family vehicle, or a truck? What is your budget? What color do you prefer?
Once you have decided which vehicle you desire, discovering what you are able to afford can seem to be more than a bit complicated. You might be able to get car payments that are affordable, but the costs do not begin and end with a car payment.
You will also have other costs that can include insurance (and at a minimum, you will need liability car insurance), registration fees, costs for the tag, gas, and more.
Before you start car shopping, it is a good idea to take a quick peek at some of these costs just to make sure they don’t catch you off guard.
You will need to have insurance before you drive the car off the lot. This is especially true if you are financing your car. You don’t have to take the first insurance policy that you come across, though.
You can slash your monthly bills easily by checking around to compare prices for your car insurance. Just make sure that you are comparing similar coverages. Also, be sure to only get the coverage you need and don’t go overboard with it. There is no point in insuring a $5,000 used vehicle for $50,000.
Let’s say you are buying a new car. Most of the time, you will need to have at least 10% down payment if you will be financing it.
You might have average credit and will be financing the car for a period of 5 years. One of the hidden costs of owning a car that is financed is the finance charges themselves.
The overall amount that you will pay will depend on your credit score, how long the loan is for, the amount you are financing, and what your down payment is. The average yearly cost for finance charges is just under $700.
Does your car require premium gas, diesel, or regular unleaded? What kind of gas mileage does it get? According to AAA, average fuel costs are $1,682 yearly.
However, this will vary depending on what type of car you have. If you look at data supplied by Edmunds.com, over a 5 year period, a family might spend $18,000 on fuel for an SUV. That same family might only spend $11,000 in 5 years if the vehicle was a large sedan.
It can be easy to overlook tires. That is, until you need new ones. The estimated average yearly cost of tires is $147 according to AAA.
Tires that have a warranty that is good for 60,000 miles will typically need replacing on a 4 year basis if you drive roughly 15,000 miles each year. On top of the price that you will pay for the tires themselves, you will also need to pay as much as $100 to have them installed.
Repairs and Maintenance
Do you know what the cost will be for the maintenance that is recommended by the vehicle manufacturer? This includes things like tire rotations, oil changes, testing, and battery inspections.
Beyond that, what types of repairs might be necessary and what will their cost be? Typically, maintenance and repair costs for a year tend to average around $767.
Fees and Taxes
These costs include things like local and state taxes, registration and title fees, license costs, and other fees. These average $655 yearly across the nation and that doesn’t include things like city stickers, parking stickers, and more.
If you look at data provided by AAA, you will come to find that the single biggest expense for owning a car has to do with depreciation. In the first year alone, a vehicle can lose as much as 20% of its value. That is for new cars.
The prices of used cars are more heavily influenced by supply and demand and as such, they can depreciate even more rapidly during those times when the market gets flooded with off-lease and used cars for sale.
As you can see, there are quite a few hidden costs to owning a car and you will need to take all of them into account when you get ready to buy one.
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Views presented in the article are those of the author and not of ED.