Figuring Out the True Cost of Car Ownership
Written by Lee Wyatt (last updated March 30, 2012)
When you think about getting a new car, what is it that you usually think about in terms of the price? For many people, they will only think about the cost that shows up on the sticker, while a few may think about that price in addition to whatever the loan will cost. Unfortunately, most people don't stop to think about what the true cost of a car is. Surprisingly, figuring out the true cost of car ownership isn't all that difficult and will typically only require a little bit of math on your part. Here's how you can figure out the cost yourself.
- Interest. Look at the interest rate that the bank will be charging, how much of your monthly payments will be covering the interest, and how much will be going directly to the principle. This information should be spelled out directly in the paperwork that you sign from the bank, but let's go with a little example. Let's say that you are purchasing a car for $9,000 to be paid over five years, you can expect to pay around 1/3 of the borrowed amount in interest. That will bring the total cost (initially) up to $12,000.
- Insurance. Another amount of money that you really need to consider in the true cost of a vehicle is the price of insurance. This will vary dramatically depending on the type of driver, and the type of insurance required by the bank. If you are required to have full insurance, and don't really have a horrible driving history, you can expect to pay roughly another $5,000 just on insurance.
- Fuel cost. This particular cost is totally dependant on the type of driving that you do. If you are an average driver then you can expect to fill up your gas tank about every two weeks (roughly). If you have an 11 gallon gas tank (and going with the current cost of gas) you can end up paying an additional $38.50 (or more) every two weeks. Assuming that there is no change either way in gas prices over a year, this would add up to an additional $1,001.00 each year.
- Maintenance. Besides paying for gas, simple maintenance can run you more than you would expect. For example, if you had absolutely no problems, and only needed to change the oil on your car every three months you can expect to pay about $800 (20 months over the space of five years, and $40 each time). This isn't a real realistic amount though since you can expect to pay for brakes being changed at the least. This would bring the total amount of maintenance to at least $1200.
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