Financially Ready: Preparing for the Financial Side of Owning a Car

According to the latest statistics available from Statista, there were 283.4 million vehicles registered in the US at the end of 2022. While this might be a few years out of date, we can assume that there are more now – and you might be considering becoming one of that number.

However, you do need to think about the costs that are part of car ownership – and that goes beyond the purchase price. Cars have regular maintenance and general costs that you will need to pay, from fuel and insurance through to tires and repairs, so making a solid financial plan to cover this is the smartest way to be prepared.

The AAA recently released a report on the cost of owning a car in America. It was found that the average cost of car ownership annually, not including purchase price or any loan repayments, was $12,297. That works out at $1,024 per month and can be more than 20% of a driver’s income.

Let’s get into it.

Purchase Price

New cars are expensive. The average price of a new car is around $40,000. For new drivers, or those on a budget, used is a better choice.

Decide on your price range, whether you are going to get a car loan to finance it or whether you are looking to pay cash, and shop around for the best deal. The finance deals are very popular and can also be used when buying tires through tire finance. If you can take someone that is knowledgeable about cars with you when you go to look at vehicles that will help too.

Fuel

The average American, driving 15,000 miles and using regular unleaded gas between May 2023 and May 2024 paid about 14.9c per mile. That’s $2,235 annually. Gas prices change almost daily, so it is one of the hardest costs to quantify.

EV

While you might save on fuel costs with an electric vehicle, there are specific costs that need to be covered instead.

You’ll need to consider:

· Installation and maintenance of charging equipment in your home

· Ongoing cost of electricity and increase in bills.

· Charging while out of the house and incurring costs while you are waiting for your vehicle to charge.

Tires, Maintenance, and Repairs

If you buy a car with warranty, then some costs for maintenance will be covered, but you need to consider replacement tires and set aside some funds for repairs.

Tires are the only part of your vehicle that comes in contact with the road, and tires can affect everything from ride handling to fuel costs and especially safety. You might want to look into tire finance to help here, but if not the average cost for maintenance, tires and repairs monthly is $126.

Insurance

Insurance is a requirement in almost every state, and for full coverage the annual cost on average is $1,715 annually.

Remember that this price is affected by different factors including:

· Type of car

· Type of coverage

· Your age

· Your driving record

· Where you live

Registration and Taxes

While the cost of fees and taxes relating to the registration of your vehicle will vary across states, the average cost of this is $815 annually.

Failure to comply with registration and taxes is likely to result in trouble with the law, so it is something you really need to consider.

Depreciation

While this might seem like a strange thing to add to a list of costs – as it is not a payment that you have to make – the value of the vehicle you are driving will drop the longer you own it and the more you drive it.

Cars tend to depreciate faster in the first two years from production, but the average annual depreciation for vehicles in the US is $4,680, so that is something to consider.

Planning your cash flow, saving before you buy, and sticking to a budget will help you be financially prepared for owning a vehicle.

Disclaimer:

CBD:

Qrius does not provide medical advice.

The Narcotic Drugs and Psychotropic Substances Act, 1985 (NDPS Act) outlaws the recreational use of cannabis products in India. CBD oil, manufactured under a license issued by the Drugs and Cosmetics Act, 1940, can be legally used in India for medicinal purposes only with a prescription, subject to specific conditions. Kindly refer to the legalities here.

The information on this website is for informational purposes only and is not a substitute for professional medical advice, diagnosis, or treatment. Always seek the advice of your physician or another qualified health provider with any questions regarding a medical condition or treatment. Never disregard professional medical advice or delay seeking it because of something you have read on this website.

Gambling:

As per the Public Gambling Act of 1867, all Indian states, except Goa, Daman, and Sikkim, prohibit gambling. Land-based casinos are legalized in Goa and Daman under the Goa, Daman and Diu Public Gambling Act 1976. In Sikkim, land-based casinos, online gambling, and e-gaming (games of chance) are legalized under the Sikkim Online Gaming (Regulation) Rules 2009. Only some Indian states have legalized online/regular lotteries, subject to state laws. Refer to the legalities here. Horse racing and betting on horse racing, including online betting, is permitted only in licensed premises in select states. Refer to the 1996 Supreme Court judgment for more information.

This article does not endorse or express the views of Qrius and/or its staff.

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