Cars are an investment. The average used car runs for about $20,000. A new car, on the other hand, will cost approximately $37,000, Kelley Blue Book (KBB) reveals.
Whether you choose to purchase your car used or new, do not forget about the costs associated with maintenance, repair, and upkeep. According to Business Insider, “The US average annual spending on motor vehicles, parts, and gasoline is $2,473.”
As you begin the process of buying your first car, budget for all car related expenses, including the down payment, registration, maintenance, and more.
Here is an overview of all car related expenses — including some you might not expect.
The Initial Cost, Routine Inspections, Car Maintenance, And The Expense Of Gas
Expect plenty of car related expenses for the months and years to come. Before breaking down the costs of inspections, maintenance, and gasoline, start by determining exactly how much you will spend on your vehicle.
As a general rule, many experts recommend spending no more than 35% of your yearly income on your first vehicle. To keep it conservative, drive that cost down to just 10%. If you want to aim for somewhere in the middle, 20% of your annual income is a good compromise. “At a salary of $50,000, you can spend $10,000 to $15,000 which should be plenty for a basic used sedan under 100,000 miles,” Money Under 30 explains.
Second, take advantage of free online tools to calculate your down payment and monthly car payment. Using tools like Bank of America’s Auto Loan Calculator or Cars.com’s Car Loan Calculator, you can determine your monthly payment by plugging in the price of your new vehicle, the amount of money you plan to put down, and your estimated interest rate.
You must register your car to legally drive on the roads, so make sure to factor registration costs into your calculations as well. The costs of registering a vehicle vary by state. Some states ask for as little as $8, while others require $225 registration fees. Vanity plates cost extra.
After covering all of the initial costs, there are maintenance and upkeep costs to think about. The costs of car inspections vary, but plan to spend an average of $150 to $250. An overwhelming 90% of U.S. households spend nearly $3,000 on gas per year, or about $250 per month. You can bring these costs down by purchasing a vehicle with a high fuel efficiency rating, or purchasing fuel wholesale if applicable. In general, wholesale gasoline suppliers sell fuel to retailers who then sell it to you. If you work a government job or in another private-sector job, you may be able to purchase gas directly from wholesale distributors as well.
Finally, even a brief overview of car related expenses would be remiss without talking about maintenance and repairs. “According to a study by AAA, a new car’s routine maintenance and repairs could cost an average of $1,186 each year,” The Balance writes. Do not forget to budget for them! As with most car related expenses, this figure varies. Generally speaking, smaller cars will cost less to maintain, while larger cars will cost more.
At a minimum, plan for oil changes, a new battery, brake pad replacement, windshield wiper replacement, and new tires or tire rotation. It is also wise to check your vehicle’s specific manual for car maintenance tips. Most manuals will list what maintenance is recommended for your vehicle. Add these items to your list.
Remember, staying on top of routine maintenance will save you money in the long-run. The average repair may set you back $500 to $600. The American Automobile Association (AAA) recommends performing routine maintenance, saving at least $50 per month for emergency repairs, and finding an auto mechanic you trust to keep costs low.
Insurance Costs and Coverage
What about car insurance? According to Business Insider, the average U.S. driver will spend $199 monthly — or $2,388 per year — on car insurance. “The state you live in, the level of coverage you’d like to have, and your gender, age, credit history, and driving history will all factor into your premium,” Business Insider continues.
Insurance is one of the many necessary car related expenses, but it does not have to break the bank. Follow these strategies to keep your insurance costs low:
- Shop around. The costs of car insurance can vary greatly. Going with the very first rate they quote you can leave you paying too much. Know that rates vary by state, company, and the type of coverage you want. It is legally required for you to have basic liability coverage to drive in most states. Comprehensive coverage will cover costs even if the damages are not related to a car crash. These damages may include vandalism, damages from falling objects, flood, theft, fire, and wind.
- Take a safe driving course. A safe driving course will teach you how to avoid accidents, drive confidently and defensively, and help familiarize you with any state-specific laws. At the end of the course, you will receive a certification of completion. Present that certificate to your insurance company for an average of 5 to 15% off.
- Enroll in voluntary programs. Nowadays, insurance companies have several optional programs that can potentially save you money. Installing a dashcam can save you up to 20%. Proceed cautiously. Only some insurance companies offer discounts for dashcams, and some companies may use them as evidence against you.
A more modern take on the same idea involves downloading and installing an app that tracks your driving habits. By constantly running this app in the background, some insurance companies offer impressive discounts — sometimes as high as 50%.
- Look for an insurance plan that includes roadside assistance. If you find yourself unexpectedly needing a new vehicle key or even stuck on the side of the road with a flat, these costs can add up. Towing your car costs an average of $75 to $125, and that’s for relatively short distances. By contrast, adding the service to your insurance plan can cost as little as $3 to $5 per month. That means, if you end up using the service once, it is well worth the cost.
Remember, a large part of car related expenses is insurance coverage. Get quality insurance at a low rate by shopping around or taking a defensive driving course.
If You’re Arrested at The Scene of a Car Accident
Some car related expenses are obvious ones — others not so much. The truly savvy driver will set aside money for emergencies, including the unexpected. Sometimes, that may include paying the costs associated with being arrested at the scene of a car accident, like the cost of a bail bond service and/or legal representation.
Of course, none of us plan to be arrested while driving. Unfortunately, a good deal of U.S. men and women do take unnecessary risks that can lead to arrest. “More than 4 million U.S. adults admit they drink and drive at least sometimes, a number that adds up to more than 121 million times someone who has had one too many is on the road each year,” NBC News reveals. Inevitably, some of those drivers will be involved in a crash.
If you find yourself among them, contact a bail bonding service about your release. How does the bail bond process work? When you work with a bail bonds agent, he or she will post your bail for collateral as well as a small fee, typically 10%. As long as you attend your mandated court hearings, you will receive your valuables or collateral back from the bail bond agency. They keep the 10% to pay for their services. A bail bonds agent can expedite your release as they often have established relationships with local courts and sheriff offices.
After your release, it is often wise to work with a lawyer. Some car related expenses come up unexpectedly. Have some savings set aside for all emergencies, no matter what they may be.
Out-Of-Pocket Expenses
As with being arrested on the scene, there are some other car related expenses that may catch you off guard. These expenses may include paying for a car accident lawyer or repairing car related damages that are your fault.
Even if a car accident is not your fault, it may be in your best interests to work with a car accident lawyer. Unfortunately, the goal of the insurance company is to pay out as little as possible. If your medical bills are quickly adding up, it is wise to team up with a lawyer to ensure that you receive all the compensation you are due. Lawyers are helpful for big claims, slowly processing claims, or complex claims, like claims for drivers or passengers who had a pre-existing condition prior to the accident.
Another expense that may catch you off guard is a damage inadvertently caused by your vehicle. These range from the obvious — like hitting another car while backing up — to the not-so-obvious, like damaging property. If your car leaks oil or gas onto the manicured lawn or fake grass where you are parked, for example, you may very well end up paying for new, artificial grass installation to make amends.
The Inside of a Car
When taking stock of car related expenses, too few drivers think about the interior of their car. There are many possible ways to tear, stain, and otherwise damage the inside of your car. Perhaps you’ve recently visited your hair restoration specialist or recently invested in interior house painting. While these are important ventures, should you get hair products or paint in your car, or you simply have young, messy kids, chances are your interior will get dirty or endure spills and other messes.
For tough stains and significant damages, you will need to work with a professional car cleaning service. These services range from an average of $50 to $150. The price varies based on the extent of the cleaning job as well as the size of your vehicle. Shop around for the best cleaning or detailing price, or search marketplaces, like Groupon, for specials or discounts.
Growing Your Vehicle Collection
After factoring in all car related expenses, some of us find that we have the means to afford more than one vehicle — and the desire or need for more than one vehicle, too. If that describes you, consider the costs of owning more than one vehicle and work out how and why that makes sense for you. Here are a few things to consider.
- Get a vehicle that meets different needs. If you currently own a small, four-door sedan, consider the potential of a larger vehicle. Many couples purchase an SUV as they add to their family. Others purchase a truck for practical purposes. If you continually find that a truck may be helpful for moving or for carrying large objects, like ladders and plywood, it may be worth your while to make that investment.
- Purchase a different type of vehicle. Mix it up a little. If you already have a sedan and/or SUV and that’s all you need, consider purchasing another vehicle altogether. For example, talk to motorcycle dealers about their best prices. Motorcycles tend to be decidedly economical when compared to new or used cars. The average motorcycle will run about $5,000 — or $10,000 on the high end. People also tend to drive their motorcycles less and spend less on fuel.
- Make sure your home is able to accommodate all your vehicles. Is your home large enough for two vehicles? Is it big enough for an SUV and a motorcycle? If your garage feels cramped, consider expanding the garage and buying garage doors. An extra spacious garage will also give you additional storage for patio furniture and lawn equipment during extreme weather or during cold winter months.
If you are on the market for your very first vehicle, it is important to plan for all expenses, including the down payment, total cost, and additional car related expenses, like gas and emergencies. Carefully put together a budget to avoid nasty surprises.