Knowing how much it will cost you to own a car can help you determine what type of car you can afford.
So let us look at some car ownership costs that you need to take into account when budgeting for a new car.
The average cost of fuel per mile is about 11 cents. However, this is just an estimate. Your fuel costs can go up or down depending on the gas prices. How much you spend on gas annually depends on:
- How much fuel your car guzzles per mile
- Road conditions
- The price of gas in your area
Per year, the average cost of car insurance is about $1,000, but this depends on the type of vehicle you own, driving history and where you live. Your insurer may also factor in your age, credit history, age, and marital status when calculating the insurance rate.
Assuming you intend to borrow a loan to buy a car. If you put a down a 10% down payment, your average expense per year will depend on the type of car you are purchasing and the length of time you are required to pay off the loan.
Essentially, the amount you may be required to pay will depend on the down payment amount, credit history, and the length of the car loan.
Many people hardly ever consider depreciation when buying a car. But it is a cost because the value of a car depreciates over time. According to experts, the value of a car drops the moment you start driving it. This value continues to drop by 15% every year. These are just estimates, but the depreciation amount depends on the car model, the condition of the car, and the total mileage.
Estimating how much it may cost you to maintain a car can help you determine the type of car to buy. Maintenance costs vary from car to car. But you can reduce your maintenance costs by treating your car right. Taking your car for an interim or full service every 6 months can lower your maintenance costs drastically.
Fees and taxes
Car registration and license fees vary. The cost of these depend on where you live. There is also a sales tax to consider when budgeting for a car. The amount of tax you pay depends on the total cost of the car. However, these fees and taxes reduce as the car’s value depreciates.
Estimate how much you will pay for car repairs once your car warranty expires. Most car warranties offer coverage for a period of 5 years. The warranties cover electronic systems, engine problems, suspension, and transmission and fuel. So get an estimate of how much it would cost you to pay for such repairs and factor this cost into your car budget.
The actual cost involved to own a car depends on whether you plan to buy a new or used car as well as the type of car you want to buy. But keep in mind that these costs reduce as the value of the car depreciates.