The Price of Car Ownership: The Costs to Consider Before Making a Purchase

Securing our first car is one of the most exciting purchases any of us will ever make. When the time comes, we tend to only think about the price of the vehicle, only to be faced with a host of other costs once the transaction is complete.

Ask anyone who's been on the road for a few years, and they'll tell you that cars can sometimes feel like a bottomless money pit! However, many of us couldn't live without them, so it's necessary to look into your own situation before making a decision.

To keep you up to speed with the expenses of owning a vehicle, check out our practical breakdown of costs below.

Price of Purchase

First and foremost is the actual price of the vehicle you plan to purchase. If getting on the road is a priority but you're on a limited budget, this is an area where you can cut costs. 

The price tags on cars vary significantly depending on their make, model, age, and engine size. Unsurprisingly, older, second-hand cars are much more affordable than newer models, and cash payments will be cheaper in the long run than taking out a loan.

Apart from a handful of states, such as Oregon, New Hampshire, and Delaware, sales tax of up to 8% will also be added to the total cost of each car. 

Insurance

Similarly, insurance premiums differ substantially based on several factors. Some of the things insurance companies will consider are your age, driving record, car model, and credit history.

These aren't the only variables that will affect your insurance premium. Your location also plays a role, and insurance costs can be remarkably different in states like Maine and Idaho than in Florida or New York.

Additionally, the type of coverage you want can increase or decrease how much you need to shell out for insurance. Most states require at least liability coverage, but more comprehensive alternatives are better, albeit costlier, options.

Tax

Approximately half of the U.S. states apply annual car taxes, known as auto property tax.

If you live in a state enforcing these taxes, you can pay anywhere between around $20 and upwards of $1,000. The rate you'll pay will depend on the state you live in and the value of your vehicle.

These taxes are minor in some cases, but they can add a sizeable sum to car-running fees in states like Virginia and Mississippi.

Fuel

One of the car-related costs we encounter most frequently is undoubtedly paying for gas. This is one expense the majority of us can't avoid, and it's difficult to determine how much it'll set you back per week or month. 

Fuel prices can fluctuate, and the more you rely on your car, the more these varying costs will affect you. Unfortunately, there's not a whole lot any of us can do about these prices, but it's something to keep in mind before making a purchase.

Those of you leaning towards an electric car won't need to worry about this, but you'll have to total up the costs of installing a charging point and paying for electricity.

Maintenance and Repairs

Maintenance costs are among the most challenging to estimate, as there's no telling what kind of problems may or may not arise with your car.

It's often said that newer vehicles require much less maintenance than older models. While this is true in some respects, there's no guarantee that a brand-new car won't run into some kind of trouble. Depending on what repairs your car needs, it may cost more to replace damaged parts of a new or high-value vehicle than it would for an older model.

New tires and oil changes are inevitable after a number of years, but other issues can be much more unpredictable.

Driving Lessons and License

It's easy to overlook the costs involved in obtaining a driver's license and the price of lessons, but they can add up pretty quickly.

Even if you're confident getting behind the wheel, you'll likely want to attend at least a handful of lessons before sitting your test. On average, driving schools run classes for between $50 and $100, but some charge markedly more.

Thankfully, the price of a driver's license will only need to be paid every couple of years. Some states only require renewals every eight years and charge less than $20 to do so, but the cost of your first license is usually higher.

Registration

Car registration fees can seem rather straightforward, but they differ quite a bit for various reasons.

Typically, these fees range between $30 and $50 a year. Numerous factors impact the total registration costs, but the most common things to consider are your state and car's value, weight, and age. In some states, the initial registration fee for your car can be high but drops as you renew your vehicle annually or biannually.

Oregon and Florida are among the most expensive states to register your car in, while Arizona and Mississippi are some of the cheapest.

Miscellaneous

Cars can incur a myriad of other costs, including parking fees, tolls, and car inspections.

Of course, paying for parking and tolls will affect some drivers more than others, but it's important to bear in mind that these can accumulate rapidly.

Yearly car inspections are mandatory in all but 13 states, so these costs are unavoidable for most. Depending on where you live, you should expect to pay somewhere between $50 and $200. Many states also require an emissions test, but this is generally included in the total cost of the inspection.

Does the Cost of Owning a Car Outweigh the Benefits for You?

Aside from buying a home, a car is among the most expensive things we'll ever pay for. Like everything, the cost of running a vehicle has been on the rise for some time now.

While car ownership offers a range of benefits, it's imperative to consider whether they're worth the expense for your specific circumstances.