Car ownership is one of those rites of passage that most Americans look forward to from a very young age. It represents the freedom of the open road and the ability to go where you please and do what you want.
That is, of course, until you find yourself actually paying for said car. In fact, most people find out all too late that the real cost of owning a car go far beyond what you agree to pay at the dealership. In fact, USA today estimates that Americans spend approximately $9,000 per year to own a car, but what exactly goes into calculating that number?
Price and Interest
Most Americans can’t walk into a dealership and plunk down huge piles of cash to pay for vehicles outright. Instead, they finance. That means paying interest over the life of the loan that inflates the initial sticker price or agreed upon cost of the car several thousand dollars by the time the last payment is made.
Almost every U.S. state requires drivers to have auto insurance on the vehicles they own. If you have a loan on your automobile, insurance is required by the lender as well. This protects their interests in the car and satisfies the letter of the law in your state regarding your liability as a driver.
While the prices fluctuate greatly from day to day and type to type, you will need some sort of fuel to keep your car moving. Even electric cars require electricity to operate, something that also comes at a cost.
From routine oil changes to occasional repairs and tires, you will need to make frequent investments in your vehicle to keep it running. This also helps to preserve the resell or trade-in value when the time comes to make another purchase.
While a bigger issue in some cities than others, parking can be a huge part of the expenses related to owning a car. In New York City, for instance, parking garage rates vary between $250 and $652 per month.
Of course, the final factor that must be considered when estimating the true cost of car ownership is depreciation. That is the amount of value your car loses each year. According to Edmunds.com, vehicles depreciate nearly 20 percent the first year. By the end of the fifth year of ownership, that new vehicle is worth less than half what you paid for it.
The lesson here is that a new vehicle is an expensive investment and should be protected. Keeping all maintenance up to date and making sure you have the right insurance will go a long way in protecting your car and keeping you on the road for years to come.