December 22, 2016
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Owning a car is a necessity for most people, unfortunately, it can be a costly necessity at times. Between monthly insurance payments and frequent maintenance costs, taking care of a vehicle can put a substantial dent in your wallet. If you're looking for new ways to reassess costs to meet your budget, you may want to find out the true cost of maintaining your car. How much is the most you could spend? What would be the least amount you could spend? It's time to take a closer look at the true cost of your car and what could be spending instead.
At first glance, it seems like a good plan to buy to choose the cheaper car over the moderately priced car. Over time, you may find yourself shelling out more money for the cheaper car. There are several factors to consider when uncovering the true cost of car ownership: fuel, insurance, and car repairs. If you're making finance payments on the car, you also need to consider the cost of growing interest. Those who plan to trade in their vehicle for another at the end of the term may want to consider adding depreciation value to the list.
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What Is The True Cost Of Maintaining Your Car?
- Car Depreciation
Car buyers who finance their cars will need to add depreciation at the top of their list. On average, a car loses it's valued by 65% over a five-year period. In order to calculate depreciation, you need to factor in the car model's sticker price and include the discounts offered to lower the total cost. Try using this online car depreciation calculator to start.
- Auto Insurance
Everyone pays for auto insurance, but not everyone pays the same price. Insurance companies determine each driver's insurance rates by age, city, state, car, and driving record. Every insurance company has a different method of determining prices and some companies charge more than others. If you think you may be paying more than necessary for your current car insurance, you may want to get quotes from competitor companies. State fees and taxes are mandatory and will add up the overall costs, but it only takes up a small fraction of the entire true car cost.
Gasoline is another expense to factor in. Like insurance, you can factor in fuel costs as an ongoing expense. Depending on your car and it's gas mileage, you may end up paying more to run the vehicle. If you own a crossover or SUV, you're probably paying a lot for gas.
- Repairs & Maintenance
Although repair/maintenance costs are not something you should expect to pay on a frequent basis, they can still add up over time. The longer you own a car and the older it gets, the more you can save money. However once the car has reached its 10-year mark, it may end up costing more just to repair it over time, especially if the car's parts become obsolete.
- Car Brand
Another key factor to consider when assessing the true cost of maintaining your vehicle is the brand. Some automakers are known for making cars that are expensive to repair. A recent report from car repair website YourMechanic shared their own data on which cars were more pricey to repair. Surprisingly (or maybe not so surprisingly), it's the luxury brands like BMW and Mercedes-Benz that produce the most costly-to-own cars. Scion and Toyota were the last two on the list, indicating their affordability. The total ten-year estimate cost for repairs on a BMW is $17,800 and for a Mercedes-Benz is $12,900. By contrast, the total ten-year estimate costs for repair on a Scion is $6,400 and Toyota is $5,500.
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Once you've gathered all the aforementioned information, you can determine the true cost of owning your vehicle during a 5-year period. Simply add up all your extra costs and then add up the depreciation (see above on how to calculate depreciation) to find the true cost of owning your automobile.
Without a doubt, owning and maintaining a vehicle is a real investment. For many people, all the extra expense of operating their car, SUV, or truck is well worth the cost. That said, it never hurts to assess the current amount you're spending on your vehicle, especially if you are looking to make budget cuts or you are considering a new car purchase. It pays to stay on top of your expenses no matter what your financial situation may be.