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5 min read published September 15, 2022
Written by Allison Martin Written by
Allison Martin’s work began over 10 years prior to that as a digital content strategist. She’s been published in numerous prestigious financial outlets, including The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Credit.com.
Editor: Rhys Subitch Edited by Auto loans editor
Rhys has been editing and writing for Bankrate from late 2021. They are passionate about helping readers gain the confidence to take control of their finances through providing clear, well-researched information that breaks down complicated subjects into digestible pieces.
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While the cost of a car can guide you to the brand and model that’s suitable for you, it’s not all that you must keep in mind before buying the car. Maintenance and repairs, fuel automobile insurance, as well as annual registration renewals must also be taken into consideration when choosing which vehicle is most suitable for your budget and needs. How to estimate the true cost of car ownership To determine the true cost of car ownership, you’ll need to consider many factors, including repairs and maintenance costs for gas registration taxes, and fees as well as depreciation. If you do your research in advance you won’t be frightened by the long list of costs and you’ll know that you can truly afford the car you drive from the parking lot. Maintenance and repairs Scheduled car maintenance will cost you less than $100 per visit though that price will rise with older cars. You can determine the average costs based on your car’s make, model and mileage. While today’s cars can go over 5,000 miles between scheduled maintenance visits It’s not a good idea to delay maintenance visits in order to save some money on the cost of car maintenance. You should always adhere to the manufacturer’s maintenance schedule in your owner’s manual to get maximum life out of your vehicle and make sure that the manufacturer doesn’t invalidate your new car warranty. Car insurance Although not all 50 states have their drivers purchase car insurance, for most drivers, it’s an essential factor when determining the actual cost of car ownership. Car insurance can help you save hundreds of thousands of dollars in the event of a collision and the average car owner is responsible for . The most effective method to estimate your auto insurance costs is by looking at quotes from several firms. The price of your insurance may vary according to your age, accident history and mileage per year or gender, your vehicle, and much more. Cost of gas the gas pump varies due to demand, taxes and even the location. However, as a prospective car buyer, you can prepare for the expected cost by analyzing the fuel efficiency of your vehicle on . A « good » gas mileage for nonhybrid cars hovers around 20-30 miles per gallon. However, electric and hybrid vehicles can reach 50-100 miles per gallon or more according to . Also, you should consider the fuel octane and type of fuel needed. A vehicle that is highly-performing will require premium gas with higher octane that could affect your monthly budget. But, you can still save on fuel by searching for the best prices prior to making a stop at the gas station. Taxes, registration, and fees when you purchase a vehicle, there will always be additional charges when you’re ready to make the purchase. The main three are the vehicle registration fee, taxes for documentation, along with sales tax. The cost of registration varies from state to state; in some states, registration costs are lower than $100 per year but other states charge closer to $200. This cost is also influenced by the price, age and weight of your vehicle. The documentation fee covers paperwork that comes when you purchase a brand new car. A lot of dealerships utilize this as a way to get extra money. Some states impose a documentation fee that ranges from $100 to $200, however, many states do not regulate documentation fees. Check your state’s rules before time to be ready to negotiate if the number is too steep. Sales tax also varies according to state. The residents of California can expect the highest 10.25 percentage tax for their car, however, buyers in Michigan are taxed at 6 percent. Calculating the tax rate of your car can help you avoid a surprise when signing the contract. Depreciation is the rate that it decreases in value over time. It is the amount that is what it’s worth now compared to the time you bought it. This is a crucial aspect because you may be losing money if you own a vehicle with a high depreciation rate. It can assist you in determining the rate of depreciation for potential vehicles over a five-year time span as certain cars appreciate more rapidly than others. The general rule is that new cars depreciate faster than used cars. How to minimize your vehicle costs In addition to conducting your research prior to signing an agreement There are a variety of everyday ways to reduce the cost of your vehicle once the car is yours: Avoid driving too fast: Speeding, rapid acceleration and sudden braking all decrease your car’s gas mileage. Limiting your speed to the limit- or slightly below — will help you save money at the pump. Select a reliable mechanic Shop around with a few mechanics and read online reviews before choosing one. A relationship with a reputable mechanic will guarantee fair prices. Keep to the maintenance schedule: It can be tempting to skip regular maintenance and visits to the service center however following the manufacturer’s suggested schedule can prevent your car from crashing. In addition, you may save money on repairs. Take a defensive driving course: Many insurance companies offer discounts to drivers who successfully complete online defensive driving courses. Don’t overdo the air conditioning by using the air conditioning when not needed could significantly impact the fuel efficiency. When it’s possible, roll down the windows instead of cranking up the temperature. Shop around for auto insurance: Some providers offer far lower rates for auto insurance than other providers. Take your time and shop around for the best deal for you. Map out your routes: laying your routes in advance can reduce unnecessary trips, curbing the cost of fuel. Earn rewards from gas purchases Utilize loyalty reward programs that are offered by select credit card issuers and gas stations. Experts advise that you spend no more then 10-15 percent of home pay on a car loan. Also, you must consider maintenance costs for the car, which should not be more than 7 percent, bringing the total to between 17 and 21 percent of your take-home salary. How to save from your auto loan Shopping around to find the can also help you minimize car ownership costs. Before you begin the search, you should check your credit score to see where you stand as lenders use it to determine the rate they will offer you. If you don’t think your credit is to standards, obtain a copy of your credit reports from the three largest credit bureaus — Experian, TransUnion and Equifax and look over the contents. Make a dispute if you notice errors and identify the areas of your credit report you need to work on that may cause your credit score to go down. If your score isn’t quite satisfactory and you’re in need of a car loan now, is also an option. The next step is to look up rate quotes to discover the best rates on financing. Many lenders will let you apply online without hurting your credit score. Additionally, you can also utilize these rate quotes to help you are negotiating a purchase price at the dealership. If you’re ready to apply for an loan, select the lender who has the best terms that will allow you to sign the contract. Be aware to note that the greater the loan duration, the higher cost of interest you’ll be paying even if you make a more affordable monthly payment. The bottom line Car maintenance costs, insurance and other fees can put you in a difficult financial position if you’re prepared for them. Plan ahead and review your budget to make sure you can truly afford the vehicle you’re looking to purchase. Be sure to verify this before applying for an loan to get the best rate on financing. Learn more
Allison Martin’s career started over 10 years prior to that as a digital content strategist. She’s been published in several leading financial outlets such as The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Credit.com.
Edited by Rhys Subitch Edited by Auto loans editor
Rhys has been editing and writing for Bankrate from late 2021. They are dedicated to helping readers gain the confidence to take control of their finances with clear, well-researched information that breaks down complicated topics into bite-sized pieces.
Auto loans editor
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