How Much Does It Really Cost To Own A Car?

You are about to start your first job, and the excitement is building. You are ready to purchase that vehicle you’ve been dreaming about. Before you walk out that door, stop, and let’s talk about how much that car ownership is really going to cost you.

For most people, our cars are our second biggest expense after housing, so being aware of its true cost is important.

Anytime I talk about cars, I remember the first car that I owned; a red Nissan Sentra when I was in college. I loved that car with my whole heart, until another driver hit it from the back when I was on my way to my first job out of college. The whole ordeal was not fun. Luckily, the following morning, I only had to worry about horrible whiplash. Of course, my small red car got totaled, so I spent weeks dealing with insurance companies, getting a rental car, and going car shopping.

Now, let’s talk about what it really costs to own a car.

Car Payment

If you do not purchase your car completely with cash, then you have to budget for the monthly car payment. You also cannot forget the taxes and fees that they tack onto the sticker price you see on the car at the dealership. This varies by state, but taxes and fees at the time of purchase can easily add another $600 or more to the final price quote.

Car Insurance

Before you drive the car off the lot, you are required to have car insurance. The cost of your car insurance will depend on the type of car you have, where you will park the car, your driving history, and so much more. There is a lot to consider when choosing the right insurance, so be sure to do your research first. You never want to be underinsured or have a lapse in insurance. One day, I will tell you the story of the time I was fined $500 for lapse in insurance.

I love this article on tips about car insurance. It covers basic components of car insurance and the best way to save money when purchasing car insurance.

Two car insurance companies I have personally used over the years are Allstate and Geico.

Inspection/Emissions Test/Registration

These come around annually, so you have to plan for them. These expenses are the perfect candidates for sinking funds. A sinking fund is a fund in which you set a certain amount of money aside, either monthly or biweekly, to save towards an expense that will happen in the future. Trust me, sinking funds will save your sanity when those bills inevitably come around.

Tolls/Parking/Gas

These expenses are common cost to car ownership. Make sure you plan for them in your budget. If you live in an area that has tolls, like I do, be sure to sign up for EZ-Pass to reduce cost and save time.

Parking Tickets/Speeding Tickets

You might think you are the most careful driver, but think again, because this can happen to anyone. A few months ago, after having a wonderful time in the city with my oldest daughter, we came back to the car to find a parking ticket on the windshield that contained a hefty fine of $105. You can imagine my confusion, and that of the couple parked behind us. We all read the street signs thoroughly, or so we thought. Unfortunately, we missed another sign, and ended up with a ticket.

Now it’s time to create a line in your budget called, “Money I Didn’t Know I Had to Spend”. Just kidding! You don’t actually have to, but at the same time, you do. You always have to be prepared for these nuisances when you own a car.

With speeding tickets, I would advise that you avoid them at all cost. It is simply for your safety and the safety of other drivers on the road.

Insurance Deductible

Yes, you heard that right – insurance deductible. Things happen when you own a car. You might have a fender bender, or a pebble might simply find its way onto your windshield. Ask me how I know that? It’s no fun when it happens to you, and you have to spend money yet again. Please don’t drive around with the cracked windshield, because it gets worse and more expensive to fix, and you can also get a ticket depending on what state you live in.

So, what is insurance deductible? When you purchase insurance, you have to select a deductible. The deductible is the amount you pay when you file an insurance claim, before your insurance pays the rest of the claim.

For example, if you have to fix your windshield for $400, and your insurance deductible is $250, then you pay $250 out of pocket, and your insurance company pays the rest.

Maintenance

I saved the best for last. If you have ever owned a car, you know how quickly car maintenance costs can sneak up on you. 

Yes, there are a few maintenance costs that you can plan and save for, such as oil change etc. There are others that simply sneak up on you, and I have a $528 invoice from about 3 weeks ago to prove it.

My advise – sinking fund. Having a sinking fund for car maintenance has always been a life saver for me. Try this strategy, and when that time comes, you will be the happiest car owner. Put away $25, $50, $100 or any amount you can afford per pay check in a separate account. It might not seem like a lot to you now, but it adds up fast. 

If you don’t want to open a separate account, and you use YNAB like I do, you can simply add a car maintenance category. If you use a notebook or spreadsheet to track your expenses, don’t forget to include car maintenance in your budget.

I love cars, I really do, but I also believe they can be a money pit if you don’t plan properly. Always plan for the true cost of car ownership before you purchase one. Don’t forget to include all expenses in your budget.

See my Guide to Purchasing Your First Car.