Skip nav to main content.
MSFCU logo and Homepage link
Contact
Education

Costs of Car Ownership

Ready to hit the road in a new ride? You’re in the right place. Here you can get up to speed on the actual cost of buying—and owning—a vehicle. The sticker price is just the beginning. There is interest, insurance, gas, maintenance, and more to consider. Let’s get started.

When making your purchase, anticipate these one-time costs that are associated with the overall purchase price of the vehicle:

  •  Down payment upfront amount contributed to the purchase price of an item bought on credit. This is the money you can put toward the cost of the car. It may come from savings or by way of a trade-in vehicle. Paying as much as you can afford upfront will help lower your monthly payments and cut your finance charges. For example, if you put down $5,000 toward a $20,000 car, you’ll only have to finance $15,000. That could save you $747 in interest over the life of a 48-month loan with an interest rate of 7%.
  •  Sales tax varies by state and is generally a straight percentage of the vehicle’s sale price. For instance, a 5% sales tax on a $10,000 car purchase would cost $500. Depending on your state, this amount may be paid directly to the dealer or is due when you register the vehicle.
  •  Property tax may be due at purchase, depending on the taxation rules of the state you live in. Those additional taxes could include county or other local taxes and state property tax on the vehicle. (Note that these taxes may also be assessed annually.) You may be able to roll these into the total amount financed with your lender.
  •  Other charges and fees include vehicle license and registration fees, titling fees, charges for dealership documentation, and credit application, all of which may be payable at purchase.
  •  Optional insurance and services may be offered when you purchase a vehicle. While not necessary, you may find they fit your situation. Types of insurance offered may include payment protection, total loss coverage, and guaranteed asset protection loan protection that covers the difference between the outstanding loan amount and the actual cash value if it’s declared a total loss. Coverage (which helps protect the difference between what the car is worth and what you owe on your loan if the car is totaled). You may consider extended warranties, vehicle maintenance services, or mechanical breakdown protection. You also have the option of purchasing such services from a third party, which could provide cost savings.
  •  Vehicle inspections are another cost consideration if you’re buying a used vehicle. It’s always important to have a used vehicle inspected by a mechanic you trust to make sure you understand its condition before you buy. Some states also require periodic vehicle inspections for emissions or safety.

Monthly and Ongoing Costs

Understanding the monthly and other ongoing costs of owning your vehicle will help you budget effectively and avoid surprise costs.

  •  Besides the sticker price, loan payment is often the most apparent vehicle cost. It consists of the total loan amount plus interest rate, broken into monthly payments over the loan term. Many car buyers can’t afford the entire bill upfront or prefer to keep savings intact, which is why auto loans come in handy. An auto loan allows you to borrow the cost of the car and pay it back over a set period—generally three to five years.
  •  Car insurance is required by law in most states. Rates vary based on many factors, including your driving record. Speaking with your insurance agent about the vehicle(s) you’re considering is the most accurate way to gauge this cost.
  •  Maintenance costs are also essential to consider when deciding on a vehicle. Below, we dive into these costs, such as gas, oil changes, rotating tires, and car washes. Depending on where you live, you may also need to perform emissions or other testing as required by law.
  •  Registration fees cover the state’s cost to register your vehicle assign it a title free of liens (legal claims) and legal questions about ownership of the property, and issue license plates. It can often be rolled into the loan amount and handled by the dealer.
  •  Annual taxes due each year on your vehicle vary widely from state to state and even from region to region. Check if your area charges property or other ongoing taxes on vehicles.

Maintenance Costs

The average cost of car repairs nationwide is $354 per year, and the combined cost of repairs and routine maintenance make up four percent of the total cost of owning a car, according to a recent Bankrate car cost study. So it’s worth digging into the types of costs you can expect.

A new vehicle generally has fewer mechanical issues than a used one and may be covered by a warranty for a certain period. However, even new vehicles can have troubles that aren’t covered by your warranty and require general maintenance, such as oil changes. For used vehicles, you may need to consider more frequent repairs.

If you are considering a luxury vehicle, it’s vital to estimate your maintenance costs, which are often higher. You’ll probably find yourself paying more for routine maintenance like oil changes and tires, as well as using a costlier grade of gas. It will also cost more for insurance and damage repairs.

Average Ownership Expenses

There are six key expense types that go into the total cost of owning a car. Generally, the total average cost per year decreases the longer you own the car.

48% Depreciation

23% Fuel

11% Interest

10% Insurance

4% Taxes

4% Maintenance and Repair