True Cost of Owning a Car: How to Avoid Making a Beginner’s Mistake

In this car-obsessed culture, owning a set of four wheels is every man’s dream. But a dashing ride comes with a steep price tag and even steeper hidden charges. So before whisking out your wallet and making one the biggest purchase of your life, here’s what you need to know

First-time buyers often make the mistake of miscalculating the true cost of a four-wheeler. However, aside from the selling price, there are other actual figures you have to factor in—the unrevealed fees upon purchase and costly day-to-day expenses perpetually strapped to a car-owner.

What Type of Car Should You Buy?

What car best suits you? When choosing a model and brand for your first vehicle, take in mind that it must cater to your practical needs and everyday requirements in terms of size, space, and performance.

The price tags on cars vary depending on their model, brand, and size.

Small-sized family cars are the most affordable automobiles in the market today. Compact yet comfortable, this is the ideal first car for Americans because of its affordability, fuel-efficiency, and urban life suitability. This type of vehicle is sold at around $17,000 to $21,000. Toyota Corolla, Nissan Sentra, and Honda Civic are just a few examples of this beloved family class.

If you have your eyes set on a more spacious ride, midsize cars fit the bill. These vehicles, priced at around $22,000 to $25,000, are known for their fuel-saving capability, impressive portability, and driving performance. Popular midsize four-wheelers are the Chevrolet Malibu, Honda Accord, and Hyundai Sonata.

Meanwhile, Sports Utility Vehicles (SUVs) are all the rage because of their fuel economy and extensive cargo capacity. Subcompact SUVs such as the Nissan Rogue Sport, Mazda CX-3, and Jeep Renegade are advertised at $21,000-$26,000. You might also want to consider compact SUVs, which are slightly priced higher at $24,000 to $28,000. Ford Escape, Kia Sportage, and Subaru Forester are just a few examples of this sporty category.

However, if you’re looking for a car with incredible engine power and seating capacity, make sure you are ready to pay up for a midsize SUV. Newly released models like the Chevrolet Blazer, Volkswagen Atlas, and Hyundai Palisade are valued at $26,000 to $35,000.

Minivans are also ideal options for someone looking for advanced cargo capabilities and maximum driving safety. The features of a minivan are perfect for out-of-town trips and everyday family use. The top-rated models for this category are the Kia Sedona, Chrysler Voyager, and Honda Odyssey. You can get these all-wheel drives for $28,000 to $36,000

Small to midsize luxury vehicles, on the other hand, cost $39,000 to $55,000. Audi A4, Volvo S60, and Lexus GS are just a few standouts in the luxury car market. These premium automobiles might break the bank, but with their sleek design, state-of-the-art technology, and increasing market value, you will surely get your money’s worth.

Remember that the vehicle of your choice must fit your lifestyle and, of course, your income.

How Expensive is a Car?

You might have the money now to bring home a shiny new ride, but being a car-owner is more costly than you think.

Research suggests that the annual cost of owning a car without bank assistance is approximately $6,000, which is roughly $500 a month.

If you decide on paying it up via auto loan, the yearly cost of a 60-month loan acquisition is approximately $2,000 on a fair credit. This is at least $200 a month. Similar to the mechanics of bail bonds, you can settle your loan in an agreed-upon timeframe.

Aside from car ownership cost, having your own ride entails allocating a fixed budget on gas. Households in the United States spend roughly $370 a month on refueling their cars, committing 9% of their income.

You also have to pay for the regular maintenance of your four-wheeler for an average of $99 every month. This includes engine mending, oil changing, and tire repair. However, some secure at least a three year’s worth of factory warranty. This saves owners the hassle of paying frequent maintenance dues.

There are also miscellaneous fees you have to consider as a car-owner. You are expected to pay a registration fee yearly, which is dependent on your area of residence and the market value of your car. Moreover, you have to set aside money for car insurance, which is often compulsory. The type of vehicle, owner details, and other factors will be considered in selecting insurance coverage for you.

Can You Really Afford It?

counting money

Before finally making a major purchase, there’s one more thing you should look into.

According to a Finance Expert, do not shell out more than 10% of your annual income on a vehicle. This so-called 1/10th Rule will prevent you from making a mistake of buying a car that you cannot actually afford and might struggle to pay off.

Understand that this does not mean that a low to average annual income will prevent you from buying a car. This only means that you must gauge your financial capability accurately.

Keep in mind that you have to make certain adjustments to avoid casting a heavy burden on you and your family. You still have financial freedom but with limitations.

Though getting your hands on a set of wheels can be tempting, the point is you should not spend beyond your means. The smartest choice you can make is to calculate the overall costs and determine whether you can easily sustain that kind of lifestyle.

A car is not an article of clothing or a classic paperback that you can immediately purchase on a whim. To make a wise financial decision, whisk out your calculator, and determine whether you’re ready to make that big purchase or not.

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