A car is more than just a sticker price. It’s all too easy to compare cars by sticker price, but the real cost of owning a car involves much more than just that number on the tag. When you look at what it costs to actually own and operate a car, a little bit of savings up front can turn into a big expense on the other end.
However, the actual cost of owning and operating a car isn’t something you’ll find on the sticker. There are some commercial services that can provide you with a true cost figure, but you need to understand what goes into that number so that you’ll know what to do with that information.
Some of the expenses of owning a car have to do with use and maintenance of the car itself, including fuel, insurance, repair and maintenance costs. Others have to do with the purchase of the car, including depreciation, interest you pay on the car loan, car taxes and title fees. Others relate directly to car operation, such as the mpg rating you can expect to get with the car.
Let’s take fuel first. When you look at the expected miles per gallon of a car and multiply that over the expected life of the car, even a small difference in miles per gallon can end up being a lot of money. When you’re comparing vehicles, be sure to compare “apples to apples,” – meaning compare city miles to city miles and highway miles to highway miles. When comparing different cars, figure out your annual miles driven per year, then multiply that by five years. This will give you a reasonable figure to use for comparisons.
Next up, when it comes to financing, you’ll have to determine whether any particular incentives are offered with the purchase of the car. If Manufacturer A is offering a low interest rate, that could mean substantial savings, even if the initial purchase price is higher. The only way to know is to do the math. Any loan agreement should tell you exactly how much you’ll have paid in interest at the end of the loan term. In addition, it’s always a good idea to make the largest down payment you can comfortably afford and choose the shortest loan term you can to minimize the amount you pay in interest.
Finally, repair costs can be hard to predict. The best way to predict repairs is to look at the reputation of the car. Does the manufacturer have a reputation for building cars that are reliable and durable? Honda and Volvo come to mind in this case. Are parts readily available? Or do they tend to be more expensive to replace, as is the case with Volkswagen? Your best sources for these types of information are the Internet and your local mechanic. Mechanics and car owners are usually more than willing to share with you what their experiences have been when it comes to getting parts and repairing a particular make of automobile.
But why go to all this trouble? It’s simple – there’s no sense getting a good deal on the purchase of a car if you can’t afford to actually use the car. Think of it this way – you can buy a $20 pair of shoes or a $50 pair of shoes, but the $20 pair of shoes will last for one month before they need to be replaced. The $50 pair of shoes will last for four months – over a four month period, the $20 pair of shoes will actually cost you $80, while you would have saved $30 if you had bought the $50 pair in the beginning.
It’s the same thing with cars. Making a good choice in the beginning doesn’t necessarily mean spending more money, but there are times when looking only at the sticker price can leave you making a purchase that is penny wise and pound foolish.
