Are you thinking of buying a car? First, you should know that owning a car is a significant responsibility that goes beyond the initial purchase price. So before you decide to be a car owner, understand the costs associated with owning a car, including routine maintenance and unexpected repairs. Most importantly, you must know when to save and when to invest in your car. Here are your car finances 101.
What You Should Expect From Owning a Car
Many people, especially those without cars, think the only significant cost of owning a car is fueling it daily. In reality, there are other costs and expenses of owning a car. In this car finances 101, we will look at the typical vehicle expenses. According to AAA’s Your Driving Costs Study, the annual cost of owning a car in 2022 was $10,728.
Gas Costs
Fuel costs are recurring expenses. I mean, your car won’t move without being fueled. These costs may vary depending on your vehicle’s make and model, fuel efficiency, and driving habits. For instance, you’ll consume less fuel if you drive in high gear.
You can minimize fuel costs by tracking your mileage, buying fuel-efficient vehicles, or adopting good driving habits. You can also switch to electric vehicles. For comparison, if you own a gas-powered vehicle, you’ll spend an average of 17.4 cents per mileage to gas up. On the other hand, an electric vehicle owner will spend approximately 4.0 cents per mile charging their vehicle at home.
Gas prices also vary depending on your state. For instance, California car owners pay an average of $4.88 per gallon, the most in all states. But generally, the more you drive, the more you’ll pay for gas.
Registration and Taxes
You must register your vehicle and pay applicable taxes—these are necessary expenses for any car owner. The costs vary depending on your state or region. Therefore, you must check local regulations and budget accordingly.
For registration, some states charge a flat fee for all cars, while others base their registration cost on the horsepower, age, or weight of your vehicle. According to Bankrate, car owners in Oregon incur up to $316 in registration fees.
Insurance Costs
Car insurance offers financial protection against theft, accidents, or damages. This is why almost every state and county has made car insurance a legal requirement. According to Bankrate, the average cost of full coverage vehicle insurance is $2,014 per year. However, insurance premiums vary depending on factors like age, driving history, location, and the insurance company you choose.
You can avoid unnecessary insurance expenses by choosing the right insurance company. For instance, get quotes from multiple carriers, compare their policies and coverage, and choose one that offers affordable vehicle insurance coverage. You may also consult an insurance specialist to discuss saving on your insurance and maximizing your coverage value.
Vehicle Maintenance and Repair Costs
Regular repairs and maintenance are essential for keeping your vehicle in optimal condition. This includes routine tasks like oil changes, filter replacements, brake services, and tire rotations. Some of the routine maintenance and repair tasks are relatively inexpensive. However, unexpected repairs like transmission or engine issues can be costly.
AAA estimates a medium sedan’s routine maintenance cost at 10.64 cents per mile. Your costs may vary depending on your vehicle type, the repairs needed, and the repair costs in your area. Tracking and budgeting for your vehicle repair and maintenance costs is essential.
Depreciation
While vehicles are durable, they don’t last a lifetime. Instead, they lose value over time due to depreciation. The rate at which your vehicle depreciates varies based on your vehicle’s make, model, location, mileage, and age.
According to AA, the average annual depreciation cost for a medium sedan driven 10000 miles yearly is $3,656. While you can’t stop your car from losing value over time, you can slow down the depreciation process through proper car maintenance.
Car Maintenance and Repair Work
One rule of car finances 101 is to always keep your vehicle in good shape through proper maintenance and repair. There are multiple tasks you can perform to keep your vehicle running smoothly. While you can DIY some maintenance and repair tasks, others need professional services. Therefore, you should know when to repair your car yourself and when to call a professional.
DIY Maintenance
You can serve money by performing simple routine maintenance tasks yourself. This includes replacing air filters, changing wiper blades, checking fluid levels, and inspecting tires for wear and tear. Regardless, you must still assess your skill level and consult your car’s manual before attempting complex repairs. Otherwise, you risk causing more damage to your vehicle while attempting to repair it.
Professional Repair Services
If your car requires complex auto repair services, it’s best to consider professional services. This includes independent mechanics, authorized dealerships, and specialized repair shops. Authorized brand dealerships offer brand-specific expertise, although their labor rates are high. Specialized repair shops and independent mechanics are more cost-effective, and most don’t compromise quality.
When choosing a vehicle repair shop or independent mechanic, ensure the technicians are experienced, certified, and licensed to handle your car. Also, find out if they offer a guarantee on their services (warranty). Most importantly, choose a professional that offers competitive pricing.
Significant Investments to Consider for Your Car
Part of understanding car finances 101 involves knowing the type of investments to make in your car. Although owning a car may come with many expenses, you can take steps to keep your expenses in check. These investments can enhance your vehicle’s performance, safety, and longevity. Here are some essential investments you should make.
Get Quality Tires
Investing in high-quality tires for your car helps improve handling, fuel economy, and overall safety. Therefore, research the right type and shape suitable for your vehicle before buying tires. Also, go for tires from a reputable brand known for longevity and quality. This way, you won’t need to replace your tires more often.
Additionally, do not mix and match tires on your vehicle. For instance, having tires of different sizes or from different brands can affect your vehicle’s performance and stability. This affects the quality of your ride as well as comfort and safety.
Suspension and Handling Upgrades
Upgrading your vehicle’s suspension and handling improves its ability to corner and turn and minimizes body roll. The improved handling helps you stay in control, especially when driving in adverse conditions or at higher speeds. Additionally, suspension and handling upgrades minimize wear and tear. These upgrades involve upgrading components like struts, shocks, and sway bars.
Engine Performance Upgrades
Your vehicle’s engine is like the heart of your car. Therefore, you must ensure it functions optimally all the time. Never think twice about upgrading your engine to enhance performance. Engine upgrades help enhance your vehicle’s power and performance. These upgrades include an exhaust system, aftermarket air intake, and engine tuning.
Adding Safety Features
Vehicle safety features help keep you safe while minimizing accident risks. If you’ve bought a vehicle recently, you must have noticed it has multiple safety features, including lane departure warning, blind-spot monitoring, and a backup camera. These technologies help prevent costly repairs like auto collision repair.
If your vehicle doesn’t have these technologies, you can still add them to enhance performance, comfort, and safety. You might consider professional repair to address any underlying issues if the systems malfunction. For instance, if your air conditioning isn’t working, consider an air conditioning repair to address the issue.
Lighting Upgrades
Upgrading your headlights to high-quality lights can improve visibility and safety, especially if you drive at night. Consider investing in fog or auxiliary lights if you frequently drive off-road or in challenging weather conditions.
Protective Film or Ceramic Coating
Adding auto paint protection to your vehicle can help preserve its appearance for an extended period. Ceramic coating is a chemical polymer solution applied to your vehicle’s exterior to protect it from paint damage. The solution blends with the paint on your vehicle, creating an additional hydrophobic layer of protection. The ceramic coating doesn’t affect your car’s factory paint job.
An auto body center can help you apply a ceramic coating on your vehicle. The ceramic coating protects your vehicle’s paint job from harmful UV rays and chemical stains. Moreover, the coating gives your vehicle a glossy look, enhancing its appearance and potentially increasing its value.
Windshield Repair or Replacements
The windshield is one of the most essential components of your vehicle. Therefore, you should always ensure it’s in excellent condition. If your windshield develops small cracks or chips, consider an auto glass repair to address the issue and prevent further damage. If your windshield is damaged beyond repair, it might be best to consider windshield replacement as a car finances 101 safety strategy.
Frivolous Purchases to Avoid
According to car finances 101, you should not invest in anything that’s not essential for your car. However, many car owners, especially the young ones, splurge on fancy accessories or unnecessary modifications to enhance their vehicle’s aesthetics. Things like high-end stereo systems, cosmetic enhancements, and oversized rims may not add significant value to your vehicle, but they’ll hurt your wallet.
Car detailing services are usually expensive yet non-essential for car owners. Therefore, you should learn to differentiate between essential and non-essential expenses to minimize car ownership costs. So, unless you have enough cash to spend on frivolous purchases, avoid them by all means.
Smart Car-Owning Saving Tips
Based on car finances 101, you should cut your car expenses to minimize the cost of car ownership. How do you do that? Here are some tips to help you minimize car ownership costs.
Choose Your Vehicle Wisely
Car Finances 101 starts with choosing the right vehicle. Of course, there are various factors to consider when choosing a vehicle, including your preferences, budget, and lifestyle. However, choosing the right vehicle can lower the cost of car ownership.
So, when buying a new vehicle, consider the make and model, fuel prices, and average maintenance and repair costs. If you’re buying a used vehicle, consider the vehicle’s history and current condition. If you don’t know much about cars, have an experienced mechanic inspect the vehicle on your behalf before purchase. If you have an old car, you might consider cash for junk car to top up your car purchase.
Comparison Shopping
When shopping for anything, don’t go with the first option you get—that’s basic car finances 101. Instead, shop around and compare prices for various products or services. For instance, if you’re purchasing auto parts, shop around and get quotes from different repair shops. However, you still need to ensure you get quality auto parts for your vehicle.
The same applies to vehicle insurance. Insurance companies have different ways of calculating insurance rates. Additionally, they have various coverage options, each priced differently. Therefore, you should understand your options, compare quotes from multiple providers, and choose an affordable one.
Fuel Efficient Driving
Fuel costs are among the top contributors to car ownership costs. And with the rising fuel prices, the cost of owning will likely soar. However, adopting fuel-efficient driving techniques can help you save on fuel costs. For instance, avoid excessive idling, reduce unnecessary weights, and maintain a steady speed.
Consolidate Driving Trips
Generally, the more you use your car, the more maintenance and repairs it needs. This, in turn, increases the cost of car ownership. Therefore, you can minimize the number of times you drive your car and instead consolidate errands in one trip. Sometimes, you can use public transportation because it’s cheaper. The less you drive, the more affordable your car ownership will be—car finances 101.
Owning a vehicle comes with a fair share of expenses, from regular repairs and maintenance to registration and insurance costs. However, you can manage these costs effectively with careful financial planning, smart decision-making, and regular vehicle maintenance. Remember, your proactiveness and responsibility as a car owner will save you money and contribute to a safer and more reliable driving experience—that’s what we call car finances 101.
