The True Cost of Car Ownership
Whether you're buying a new or used car, make sure you’re aware of all the costs that will come with your new set of wheels. For many of us, a car is essential. Cars can be expensive, not just to buy, but also to run. Before you buy a car, it’s important to ensure you’re aware of all the costs that will come with it.
- Finance charges
The average expense is $669 per year, which assumes that you bought your car with a 10 percent down payment, with a five-year loan and average credit. The amount you pay will vary depending upon the size of your down payment, the length of your loan, and your actual credit. Learn more by using our simple auto loan calculator. - Depreciation
How much value the car loses each year is the single largest ownership expense. New cars can lose over 20 percent of their value in the first year, according to Edmunds. On average, depreciation accounts for about 48 percent of total ownership costs over five years. Depreciation is a vehicle's loss in value over a defined period. Used car prices are influenced by supply and demand, so they’ll depreciate more quickly if the market is flooded with used and off-lease cars for sale. Some models are known for holding their value over time, so look up the estimated depreciation of the cars you are considering on the J.D. Power website. If a certain car loses value rapidly at a specific point, say, in the third year, you might consider selling it before it hits that cliff. - Fuel Costs
On average, fuel is the second-largest cost of vehicle ownership, at 24 percent over five years. Fuel costs can really add up, especially for SUVs. Average fuel costs were $1,682 per year, according to AAA. Over five years, a family could spend $18,000 to fuel an SUV, compared to only $11,000 for a large sedan, according to Edmunds.com data. - Interest
The interest rate and the length of your car loan affect your total cost of financing. Interest is tied directly to vehicle price, and accounts for about 11 percent of five-year ownership costs. Auto loan terms have been getting longer, with six and even seven years being popular lately, and the average length is now a record 67.2 months. - Insurance
Insurers take into account a vehicle model’s accident history and repair costs, among other factors. For example, family-friendly minivans, which are typically driven by experienced, safety-oriented motorists, are cheaper to insure than high-end sports cars that are fast and expensive to repair, according to the Insurance Information Institute. Insurance rates vary from state to state, as well. - Maintenance/Repair
Maintenance and repair costs make up 4 percent of ownership costs over five years on average, according to data from Consumer Reports subscribers who responded to the online version of the Annual Car Reliability Survey. Don’t forget tires, which are sometimes forgotten until you need a new set. Tires with a 60,000-mile warranty will need to be replaced about every four years if you’re driving 15,000 miles a year. In addition to paying several hundred dollars for the tires, you’ll also pay installation costs of $60 to $100 or more. - Tax
Taxes cost owners about as much as maintenance and repair does. This includes state and local taxes, license, title and registration fees, and other fees. Nationally, they average $665 a year. When you’re ready to buy, our friendly staff can walk you through the process. Apply for an auto loan online today online today or stop by any of our branch locations to speak to a representative about your financing options.
Next Steps
- Do you want to learn how much your auto loans monthly payment will be? Try using our Auto Loan Monthly Payment Calculator.
- View our Auto Loan Rates to see what rate and term might best suit your financial needs.