Calculating Car Ownership Costs: How Much You Spend and How to Save
January 20, 2021
Cars don’t come cheap. We all know this. Aside from what it costs to own a vehicle, owners also have to think about insurance, maintenance and gas, and other costs. Even with the cheapest clunker, car owners expect to spend some money maintaining their vehicle. Few of us go to the trouble of finding out what it costs to own a car. I was amazed at how much I’ve been able to save since I started tracking my spending.
The U.S Bureau of Labor Statistics reports that it costs $9,576 per year to keep the typical vehicle on the road. Crunching the numbers further, the cost is broken down to $4,054 from the purchase, $1,968 in gasoline and other motor oil costs, and $3,554 for miscellaneous expenses for maintenance. Further statistics from the American Automobile Association (AAA), presented on the annual “Your Driving Costs” survey, summarize costs such as license, registration, insurance, maintenance, gasoline, and depreciation for different vehicle models with the average cost up to $8,849.
Such numbers are likely to send a shiver down the spine of would-be car owners. I felt the same way the first time I found out, but that wasn’t going to stop me. The good news is that tracking car expenditure comes with some benefits. What’s more, I have practical ways to keep costs down.
How to Calculate the Costs for Your Car
It’s easy to type in your car model and let the calculator do it for you, but this does not give a true reflection of your expenditures. I recommend that you do the math yourself using your actual expenses. It’s the surest way to find out how much I’m spending on my car.
Car owners that keep track of their fuel costs are a step ahead in working out the expenses that come with driving—key in the exact amount you use on gas on the calculator. I also track how much I spend on fuel by finding out the total miles I’ve driven over the past month and dividing this with my car’s fuel economy rating. I then multiply the result I get by the current fuel price.
Taxes Registration and Other Fees
I found this to be the easy part of finding out how much my car costs me. Add recurring expenses to the amount you spend annually for registration renewal, and you have a figure for fees and miscellaneous spending.
Repairs and Maintenance
You won’t have to pay for repairs out of pocket if your warranty is still valid. The typical warranty goes for three years, covering 36,000 miles. Car owners paying for repairs might have to spend about $99 a month on tires and maintenance. The usual care done on a car includes tire rotation and oil changes done thrice each year, or at 5,000-mile intervals.
I always tell car owners to have some money set aside to cater to repairs whether or not they arise each month. That way, you are always prepared whenever your car needs some servicing.
The Cost of Depreciation
Cars lose value as we use them, and this reflects on the total cost of ownership. Depreciation is estimated to erode 20% to 30% of the car’s value in the first year of ownership. Over the next five years, the vehicle may depreciate by 15% to 18% according to used cars’ current prices.
I went online to find out the resale value for my car. This let me compare the current price that my car goes for against my cost of buying. Knowing the resale value, I decided to keep the car seeing as I was getting pennies on the dollar at current prices.
How to Save on Your Biggest Costs
I would advise car owners to start like I did, with the big-ticket items. Car insurance is one of the areas where car owners can save significantly. After doing some research online, I found a cover with reasonable monthly premiums. It’s amazing how much I save in a year just by choosing a slightly lower-priced insurance cover.
New income streams are always welcome. Leasing my car is one way to make some money that helps me handle car trouble whenever I need to. Using public means of transport to move around is another way I make savings. I recommend you use public means more often. Besides the savings, it’s a worthy break from driving.
I got better at cost-cutting when I started tracking my savings. Remember, the better you get at tracking your spending, the better chances you have of saving your money. Staying on top of your car costs over time also lets you know whether you need to be thinking of selling your car or keeping it for longer.