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Budget for These Commonly Overlooked Car Ownership Expenses

Woman Signing for Car

All it took was one final test drive to convince yourself that you'd found "The One" — the perfect vehicle. It meets all your specs, including color, style, and safety features. And with financing in order, you're ready to grab the keys to your new (or new-to-you) vehicle. But before you sign on the dotted line, slide into the driver's seat, and drive off in your new ride, slow down and double check your budget. 

The cost to own your vehicle extends beyond the dollar amount you've paid or financed. According to AAA, the overall average cost to own and operate a new car in 2020 was $9,561.  Their calculations include:

  • Depreciation
  • Finance charges
  • Fuel costs
  • Insurance premiums
  • License, registration fees, and taxes
  • Maintenance costs, repairs, and tires

Some costs are beyond your control, such as depreciation. Others, like license, registration, and taxes, may already be included in the purchase price. While the monthly payment likely fits your budget, other ownership costs might surprise you. 

Review your budget to ensure you've earmarked enough money for these commonly overlooked expenses.

Finance Charges

Exploring your financing options could save you hundreds of dollars in interest charges over the life of the loan. If you’re buying a used vehicle, check to see if the lender offers the same rates for older models. Some lenders reserve their best rates for cars and trucks that are less than three years old.

Are you interested in a new vehicle? Shop around for the lowest interest rate possible and bypass long-term loans to save the most money on financing. If you only qualify for higher interest rate loans, consider refinancing your auto loan once your credit score or financial situation improves. Lowering your financing costs can help lighten your monthly expenses with smaller loan payments. 

Purchase your next vehicle through Credit Union of Colorado's Preferred Dealer Network, and you can receive an additional .25% off the loan's interest rate. The discount applies to members who purchase a vehicle through a select group of dealers in Colorado and finance with us.

Fuel Costs

Gas prices fluctuate for a variety of reasons. While demand, global economic conditions, and seasonal changes influence how much you pay at the pump, there are two things that won't change: the size of your gas tank and the fuel economy of your vehicle. Smaller cars and hybrid vehicles will continue to have lower fuel costs when compared to full-size SUVs.

Visit fueleconomy.gov to perform a side-by-side comparison of at least three vehicles and discover how your dream car compares to different models. The comparison tool provides the tank size and estimates the cost to fill it as well as your annual fuel costs. It even lets you know how your chosen vehicle compares to the average new vehicle.

Maintenance Costs, Repairs, and Tires

Some vehicle expenses, like maintenance costs, repairs, and tires are difficult to compare even among similar vehicles with the same sales price. For example, Bill and Bob each buy a $25,728 sports coupe with the same financing arrangements. Bill is a traveling salesperson who prefers to drive instead of fly, and Bob uses his car to travel within the city where he lives. Over a 5-year period, Bob's car will cost more than Bill's due to increased maintenance, repairs, and tire replacement.

You can check your 5-Year Cost to Own estimate by visiting the Kelly Blue Book (KBB) website. There, you can enter the make and model of a specific vehicle or you can check out an entire vehicle class to find out which vehicles in the class have the lowest cost to own. KBB also factors in depreciation and other costs and provides a detailed explanation of the expenses.

Insurance Premiums

Most lenders require financed vehicles to carry collision and comprehensive insurance in addition to the minimum liability coverage required for your state. The additional coverage protects the lender if your vehicle is stolen or totaled in an accident and makes it possible for them to recoup the amount remaining on the loan. 

Often called "full coverage," adding collision and comprehensive coverage means you'll pay more than if you only had liability insurance. It's possible to keep these insurance costs to a minimum by exploring discounts that are often available for members of certain groups and organizations. You might even lower your insurance costs by remaining accident-free for a set period. Always ask your insurance agent about any discounts you may be eligible for.


Prepare your budget for the true cost of vehicle ownership by considering more than the sticker price. Then, put your car in gear and drive off into the sunset knowing you made a good choice for your finances.
 

Article by Tracy Scott