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The Total Cost to Own a Car

When buying a new or used car, you’re going to focus a lot on the cost of the vehicle itself. But what you can afford to buy might be different than what you can afford to own. It’s important to think about all the aspects of car ownership before driving that vehicle off the lot.

Here are some top issues to consider:

Financing: When shopping around for auto loan rates, look for the best rate and the best monthly payment structure that suits your needs, but also keep in mind the total cost. If you can put more money down or decrease the length of your loan, you can save yourself more money overall. 

Taxes and fees: These include state sales taxes as well as license, registration and title fees, which all vary by state. The easiest way to estimate these costs is to check out your state and city’s vehicle registration department website - the names vary - which will list the fees. You can also contact the department if you need help. Remember that you have to renew the car’s registration each year, a cost that generally varies from $25 to more than $100, depending on where you live. Keep track of when your registration expires to avoid late charges and fines.

Fuel: Take note of not only the gas mileage, but the kind of gas recommended for the vehicle. The savings may not be considerable - unless you’re comparing an SUV to a sedan - but because gas accounts for the largest regular expense for your vehicle, you want to look out for potential savings. Avoid a car that calls for premium if you don’t want to pay extra at the pump.

Insurance: Insurance costs vary from car to car and driver to driver. Though the car you’re driving may not make a huge difference in insurance premiums, it’s a good idea to check insurance rates with different cars. Choosing a car that is targeted by auto thieves means you’ll pay a higher insurance premium. You can pay auto insurance monthly or annually, but if you pay annually you might want to budget monthly for the large lump sum.

Maintenance and repairs: Experts recommend budgeting about $100 to $150 a month to cover maintenance costs. While you will not typically spend that much money maintaining your car, it will help you incrementally save for big repairs, which can cost thousands and hit at any time. At some point, parts will break down and you will have to shell out thousands of dollars in repairs - but how much and when these costs will crop up is a big question mark, especially if you buy a used car. Check vehicle reports on the model you’re interested in and compare to other similar models - some cars cost more to repair than others.

Depreciation: While every car loses value, some lose value at a faster rate than others. A Honda Civic loses about 18 percent of its value in its first year, while the classic Lincoln Town Car loses about 30 percent, according to Edmunds.com. You can research how much your car might depreciate online. However, depreciation really only becomes a factor if you want to resell or trade-in the car down the road, or if you get into an accident while you’re still paying off the car and don’t have GAP insurance. If you plan to drive your car into the ground, depreciation may not mean that much to you.

Options: If you’re buying a new car, keep in mind that the base price often doesn’t come with options. These can be as simple as power windows and locks or advanced as an overhead DVD system. Check to see what the base model offers and how much each option is.

To get a more specific idea of the ownership costs, there are dozens of guides and calculators online to help. Try Edmund’s True Cost of Ownership calculator, Nada Guide’s Cost-To-Own calculator or the American Automobile Association’s “Your Driving Costs” guide.