When purchasing a vehicle, a car’s dealership sticker price is just the beginning of the costs you’ll encounter. A study from AAA estimates the cost of new car ownership is $9,282 annually or $773.50 a month. AAA estimates small sedans are the least expensive to own with an annual cost of $7,114, while half-ton pickups are the most expensive racking up $10,939 in costs. How do these expenses add up? For you to be prepared fully to own a car, we’re counting down the real—and perhaps unexpected—costs.
1. Fuel Costs
Fuel costs are one of the largest single costs of car ownership outside of financing payments. And the difference between a small sedan or hybrid and a gas-guzzling pickup truck can be thousands. To estimate, take the average number of miles you drive each month and divide it by your prospective car’s fuel economy rating. If you don’t know the rating, you can find it on FuelEconomy.gov. Then multiply that number by the average price of a gallon of gas in your area. Keep in mind that experts are anticipating that gas prices will rise in 2021.
2. Insurance Premiums
Before you drive your new car off the lot, you’ll need to have it insured. Monthly insurance premiums can vary greatly based on your driving history, credit score, and the type of vehicle you’re purchasing. For example, you can expect to pay more to insure a sports car than a family-friendly sedan. When shopping for a car, it’s wise to consult your insurance provider (or shop around) so you can account for the insurance costs when planning your purchase. If you’re on a budget, you may consider a used car (at least a year or two old) because insurance costs will be less than on a new vehicle.
3. Maintenance and Repairs
If you’re buying a new car, you shouldn’t encounter many repair costs because it should still be protected by the included factory warranty—usually three years or 36,000 miles. However, even for a new car, you should expect $99 a month for items like oil changes, tire rotations, and other regular maintenance. If your car isn’t under warranty, you’ll need to dig deeper to anticipate the cost of repairs. Kelly Blue Book and Edmunds.com can guide you on what to expect for cars less than five years old.
Remember to include your annual cost of registering your car with the New Mexico Department of Motor Vehicles in your cost calculations.
Although depreciation won’t figure into your monthly costs, it should be included when calculating the true price of ownership. Cars lose value over time, particularly during the first year when they lose 20% to 30% of their value. To anticipate your car’s resale value, you can look it up on a site such as Kelly Blue Book. There are a few strategies you can use to manage depreciation, including buying used (since used cars have already depreciated drastically after the first year), leasing, avoiding customization (those creative add-ons may not result in a good resale value), and proper maintenance, including keeping records of this work.
Edmunds.com offers a calculator to help you anticipate the true costs of car ownership.
We hope these tools help you make better informed buying decisions! And when you’re ready to buy, contact State ECU to begin financing your vehicle purchase.