If you’re considering purchasing a new or used automobile, it’s important to realize that your total costs of ownership will go beyond the price tag. In fact, the average automobile owner will spend thousands of dollars a year to drive their automobiles. According to AAA study released last year, the annual cost to own, operate, and maintain an automobile in 2015 was $8,698. This number is actually down two percent from the previous year, but it does go to show that a car is an ongoing investment or expense depending on how you look at it. Let’s review where your money is going and see if there are ways you can reduce these costs to keep more money in your pocket. It might even mean reconsidering the type of automobile you purchase.
Fuel: The cost of gasoline and diesel have gone down the past few years, but a motorist can still expect to spend an average of $1,700 a year on fuel. If you wish to lower these costs, you may want to consider the type of car you wish to purchase and choose one with top fuel efficiency or ones powered by alternative energy sources like EVs.
Depreciation: When you buy a car, it will unfortunately go down in value after it leaves the lot. The marketplace has a glut of used cars as more individuals are purchasing new cars. This glut creates less demand, lowering the value of used cars. In 2015, depreciation costs went up 4% to nearly $3,700.
Finance Charges: If you plan on financing your automobile, you can expect to spend hundreds of dollars a year in financing charges. This will depend on the type of car you purchase, the price tag of that automobile, the amount of money you put down, and your credit score.
Registration/License Fees: After paying the licensing and titling fees at the time you purchase the vehicle, each year, you will need to renew your registration to legally drive your automobile in your state. Failure to do so within the required time frame, can result in late fees, citations, and more. You can either pay at the state DMV office or use an online service provider like eTags.com if you don’t feel like waiting in line or can’t get to the office during business hours.
Insurance: Automobile owners spend nearly $1,200 a year on auto insurance. There are a number of factors that will influence these costs though. Where you live, age, gender, previous driver history, the type of car you drive, credit history, and other criteria can all affect how much you spend on insurance each year.
Maintenance/Repairs: In order to maximize the lifetime and performance of your automobile, you will need to pay for preventative maintenance costs and any necessary repairs. This will obviously differ depending on the type of work required for that year, but AAA estimates that drivers spend nearly $800 a year on maintenance and repair costs. Owners may be able to reduce these costs significantly by following an organized maintenance schedule.