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What is the true cost of car ownership?

When you buy a new car, you are usually covered with a manufacturer’s warranty for the first few years. After that, vehicle service contracts, commonly called an extended warranty, are available so you can protect yourself from expensive repairs down the line.

If you buy a used car, it’s a great idea to invest in an aftermarket warranty like Vehicle Repair Protection shortly after since a used car will likely be more susceptible to costly repairs. It’s convenient to be covered when those breakdowns happen.

What are the benefits of owning a car?

For some, leasing a car may seem appealing. There are many upsides: When you lease a car, monthly payments are lower, you get to drive a new car in the first few years when they are less likely to have mechanical breakdowns, and you don’t have to go through the hassle of selling it when you’re ready to switch cars.

However, there are three main benefits of owning a car instead:

  1. You can drive the car as much as you want. Lease contracts usually have a limited number of miles that you can drive while under contract.
  2. A loan payment to own a car is more affordable than a lease payment over time. End-of-lease charges may add up to close to $2,000 in some cases. Since you’re driving a car that’s quickly depreciating for the dealership, what you’ll eventually pay when leasing a car is higher.
  3. There’s more value in owning a car the longer you keep it. Monthly lease payments don’t give you any returns in the end, but payments toward the ownership of the car do. That car eventually becomes your asset and you get a return on that.
The added freedom of car ownership is also a big plus. You can customize your car as you please and follow the basic maintenance schedule recommended in your owner’s manual without worrying about extra maintenance fees when you turn in your leased car.

The choice of owning a car

Along with owning a home, owning a car is one of the biggest financial commitments you’ll make throughout your life. A decade ago, Americans were on average owning about 9 cars in their lifetime. In the last few years, Americans have shifted toward switching their cars less often and keeping each of their vehicles for longer.

Maintenance and potential car repairs are just one of the many things to consider when you buy a car.

You may be able to get a car for $5,000 and feel that you’ve gotten a good deal but later find out you’ll have to pay way more in the long run than if you’d bought a new car from a low-end price range in the first place. The cost of owning a car comes from several factors.

What are the true costs of owning a car?

According to AAA, the average yearly cost to own and operate a car in 2020 was $9,561, including all costs. There are generally eight costs to owning a car that some car buyers don’t consider prior to their purchase. To be sure you’re making the right choice on your car, here are the costs you should consider:

  1. Financing price
  2. Sales tax
  3. Registration, license plates and title fees
  4. Dealership fees
  5. Car insurance price
  6. Gas
  7. Maintenance
  8. Repairs

How much does it cost to finance a car?

Unless you’re buying your car in cash, you’ll have to take out a loan. The charges are based on the interest rate, which is determined by:

Note: A larger down payment can lower your financing price.

Average price for new car financing vs. used car financing

According to Edmunds’ quarterly analysis of buying trends, there have been slight increases in new and used car financing prices in 2020 when compared to 2019.

How much is the average new car price?

Edmunds determined that down payments (the payment you put toward a loan) for a new car purchase were at an average of $4,734 and the total new car financing price was $35,373 for 2020.

The analysis shows that monthly payments averaged out at $581 per month.

  Q42020 Q42019
Term 69.9 69.3
Monthly Payment $581 $570
Amount Financed $35,373 $33,525
APR (cost you pay each year to borrow the money) 4.6% 5.5%
Down payment $4,734 $4,329
Edmunds. (2021). Retrieved 31 January 2021

How much is the average used car price?

The Edmunds study states the average down payment for a used car was $3,283 and the total used car financing price was $24,406 for 2020.

The analysis shows that monthly payments for a newly purchased used car averaged out at $437 per month.

  Q42020 Q42019
Term 68.1 67.5
Monthly Payment $437 $415
Amount Financed $24,406 $22,611
APR (cost you pay each year to borrow the money) 7.7% 8.3%
Down payment $3,283 $2,690
Edmunds. (2021). Retrieved 31 January 2021

How much is the sales tax when you buy a car?

The sales tax on your car depends on where you live. Every state has a different rate, ranging from 2% to 8%. Every state has a government website that can help you determine the sales tax. For quick reference, here is some information about the car sales tax in Texas.

How much are the registration, license plates and title fees when you buy a car?

It’s impossible to drive your car unless it’s legally registered under your name at your local DMV. You normally have to show proof of ownership (for example, your car title) and proof of insurance. The first time you register your car, you’ll get a new set of license plates.

The car registration may need to be renewed yearly or every few years (it varies by state). Every state has its own costs of registration as well. See the registration and title fees by state here.

How much are the car dealership fees when you buy a car?

Most dealerships will charge you extra fees for processing, preparing documents and preparing your car (ie. providing you with a car wash and oil check). If you’re having your car delivered from the manufacturer, there may also be another fee. The fees can range from less than $100 to several hundred dollars.

Remember: Dealership fees are negotiable, so you should try to discuss them with your salesperson to reduce the costs.

How much is insurance when you buy a car?

Though most states require car insurance, not all states require it at the time of registration.

However, EVERY state requires you, by law, to pay the price for damages to another person or property in a car accident. Most drivers choose to buy car insurance and all 50 states have different minimum car insurance requirements. Most car insurance policies will cover:

  • Your responsibility during an accident that resulted in bodily harm to any person involved or their property
  • The cost for treatment of injuries, which include rehabilitation and wages lost if injury impairs ability to work
  • Damages to your car from an accident or theft

How is an insurance rate calculated?

Every car insurance company determines their prices differently, but the general factors that go into your rate are the following:

  1. Your age
  2. Your gender
  3. Your geographic location
  4. Your driving record
  5. How often you expect to drive throughout the year
  6. Your credit history
  7. The type of vehicle (the more expensive the car, the more expensive it is to insure it)
  8. The type of coverage (you have a choice on coverage options, the limits and how much you’ll pay as a deductible)

How much is gas going to cost?

Gas prices are based around the general price of crude oil, the state and federal tax rates, and the supply in the state you live (some states or regions have easier access to gas due to location, thus making it cheaper). Other factors that may influence the cost of a gallon are the specific gas station’s operating costs, employee wages, rent payments.

Take a look at the average gas price in the U.S. here.

Note: The type of car you drive along with your driving habits will also determine how much you’ll be spending on gas. Larger cars have higher gas costs, and driving aggressively (weaving in and out of traffic and slamming on brakes) affects the price too.

How much does car maintenance cost?

Regular car maintenance can keep your car running smoothly for years to come. It’s less expensive in the long run to follow the correct car maintenance schedule than to suffer the high costs of big repairs later on.

Your car’s owners manual will tell you exactly what services your car needs and how often to do them. Based on automotive websites like Repairpal and money expert websites like TheBalance, the basic maintenance services you’ll need on your car and the general prices are as follows:

Service Recommended Estimated cost
Oil and filter change Every 5,000 to 7,000 miles $20 - $100
Tire rotation very 5,000 to 8,000 miles $35 - $45
New tires Varies $50 - $300 per tire
Windshield wiper blade replacement Every six to 12 months $50 - $80
Engine air filter replacement Every 20,000 to 60,000 miles $20 - $75
Brake pad replacement Every 30,000 to 50,000 miles $100 - $350
Remember: Always follow your owners manual recommendations and beware of services that are recommended to you unnecessarily (or before they’re needed). Dishonest dealerships and dishonest car repair shops are notorious for upselling. By inciting fear and telling you your car needs more maintenance than it actually requires, drivers often end up paying way more than they should.

How much do average car repairs cost?

A recent study by CarMD determined these are the top ten U.S. locations with the highest prices paid (on average) per repair each time the check engine light is on:
  1. California ($414.24 per repair, on average)
  2. District of Columbia ($410.16)
  3. Georgia ($409.92)
  4. New Jersey ($403.43)
  5. Virginia ($403.19)
  6. Hawaii ($402.91)
  7. North Carolina ($402.86)
  8. Colorado ($401.55)
  9. Connecticut ($401.55)
  10. Utah ($399.42)

Apart from a check-engine light repair, common repair costs are on average about $500 to $600 each time you take your car into the shop, according to AAA. Big unexpected repairs like alternator or transmission replacements can cost between $1,000 and $3,800.

Unfortunately, many Americans don’t have the money readily available for such a sudden, costly expense. Planning ahead for these sorts of repairs can insure you won’t have to dip into your savings or borrow from friends and family to cover the bills. A vehicle service plan is a great option to afford getting those repairs taken care of as soon as they happen, not when you can afford them.

What is Vehicle Repair Protection and how does it reduce your cost of car ownership?

Uproar.car’s Vehicle Repair Protection is a new kind of extended warranty that can cover your repair bills and reduce your cost of car ownership. On a simple, low-cost monthly subscription, you get comprehensive coverage for car repairs big or small. Paying a set amount each month keeps within budget and unlike similar coverage, like an extended warranty, there are no long term contracts.

The Essentials, Good and Great plans give you the freedom to choose exactly the plan you want. You get to choose the number of components covered, the annual claim limits and any extras.

Why should you consider Uproar.car’s Vehicle Repair Protection?

The benefits of Uproar.car make it the best and most convenient coverage available anywhere, and it’s truly risk free:

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