ExecutiveChronicles | The True Cost of Owning a Car | This is a time when everyone is looking for ways to reduce the everyday costs of living and driving a car can be one of the largest hidden expenses of all. If you are new to vehicle ownership you may not realize that the annual cost of a car is estimated at $10,742.
That is a lot of money and it should be clear why you will need to manage your cash well to accommodate it. Here are some of the reasons why a car is expensive and ways of reducing the burden.
Buying It
The first expense is that of actually buying the car. According to figures from the Bureau of Labor Statistics, car purchase costs average out at around $4,394.
That is a high price for most people and trying to buy a car outright will blast a pretty big hole in your finances, at least in the short term. Fortunately, there are alternative purchasing options.
If you do not have $4000 set aside in your account to cover the full cost of buying a car, you can finance the purchase instead. That means you borrow the cash from either a bank or car dealership and pay it back in installments plus interest.
The interest is often a fixed annual rate of something like 5%. It means paying more overall than buying outright but makes the cost more affordable in the short term.
Running It
Unfortunately, buying a car is only the first part of the expense. Annual vehicle running costs can be as much as the purchase price.
Running costs include the price of motor oil and gas, insurance, as well as making sure things like the tires are in good working order. If not, they will need to be replaced so that it is road-worthy.
So, let’s break down these different costs and look at how you can reduce them.
- Gas
One way to cut the amount you pay in gasoline is to use one of the free apps that list the lowest price providers by area. Another is to look for gas stations away from highways and main roads, as these have been found to charge more.
Reducing your road speed will also mean you burn less gas. Slowing down by 10 mph can mean gas savings of as much as 25%.
- Insurance
The best way to reduce the car insurance premiums you have to pay is to be a good, safe driver and to keep a clean credit score.
- Tires
Tires eventually wear out and have to be replaced and a set of new tires can cost up to $1000. If that is too steep for you, a rent-to-own plan is an alternative.
Basically, that is just another term for financing and involves paying some of the cost up front and the rest over a period of months.
Repairing It
The final factor in the cost of owning a car is repair costs. Vehicles sometimes break down and need to undergo professional work.
Sometimes people try to lower their running costs and end up incurring larger repair ones. One example of that is driving with an almost empty tank of gas to save on the costs of it.
That is a bad idea because it will overwork the fuel pump and lead to an expensive repair.
The best way to keep unforeseen costs like repairs to a minimum is to take your car in for regular maintenance checks. These will identify any problems before they become really serious, which is the point when you will get hit with a big repair bill.
Owning a car costs money, but it is possible to run it cost-effectively if you are smart about it. Driving sensibly will save on your insurance and repairs, while a good financing deal can make a purchase and running costs affordable.
