The Lifetime Cost of a Car May Surprise You

If you’ve ever bought a dog, you know that the breeder or shelter fees are just the tip of the iceberg. Vet visits (both planned and unexpected), medicine, sitters, food and toys all factor into the cost of pet ownership over the years. As for cars, the lifetime cost of a car is much more than the invoice price you pay at a dealership.

Of course, different cars have different price points for both MSRP and maintenance. In addition to your vehicle’s invoice price, these key factors will help you calculate a more accurate lifetime cost for your new ride.

The lifetime cost of a car includes total interest rate payments

Consider the interest rate you’re getting on your lease or loan. Determine how much that equals over the course of your payment period. For example, if you’re buying a $40,000 car with an interest rate of 6%, you’ll pay $200 in interest each month. Click here to use Investopedia’s equation for auto loan interest. 

Paying your car bill biweekly instead of monthly will help reduce your overall interest payments. This is because you’ll wind up paying the equivalent of 13 monthly payments in a year instead of 12. Plus, interest accrues monthly, and paying biweekly means it will accrue at the lower remaining balance each month.

Next up: Car insurance

Insurance is key if you want to be a responsible vehicle owner (plus, it’ll save your butt down the line if anything goes awry).

The average car insurance costs in 2021 vary by state. However, the national average is $133 per month. Keep in mind that this is for someone with good credit and a clean driving history. The annual rate increases from $1,592 per year for any discrepancies. For example, you’ll pay closer to $3,114 after getting a DUI.

There are ways to lower your insurance costs aside from switching from full coverage to minimum required coverage, but you’ll likely need to take proactive steps to do so.

The price of fuel factors into the lifetime cost of a car

Consider how much you drive during your commute (if at all) and how many miles you expect to cover each week for personal trips. Multiply this mileage by the total amount of weeks in your car’s lifetime to figure out how much you might spend on gas.

Gas prices fluctuate, but you can base your calculation off the monthly average cost for 15,000 miles per year of $146. You may spend more or less than this, but it’s good to give yourself a starting point.

If you’re buying an electric vehicle, factor in the price of electricity. Find out how many total kilowatt-hours (kWh) it takes to fill up your battery. Then, find out the rate for a kWh. In the US, the average electricity rate is about $0.14. The Tesla Model 3 Long Range AWD has 82 kWh capacity, so 0.14 x 82 = $11.48 per battery fillup. This should get you 353 miles, or close to a tank of gas for your average sedan, which can go about 412 miles. 

Figure out your car’s range and how many miles you plan to drive in a year. Then, you’ll have your fuel or charge costs.

Maintenance and repairs play a huge role in the lifetime cost of a car

The maintenance and repair costs will change depending on how long your warranty is good for (some car owners opt for an extended auto warranty).

Consider that you’ll pay for an oil change twice a year (base the cost off of paying for the service or just buying the oil and parts and doing it yourself). Then, there’s milestone repairs such as brakes and tires. You’ll also need new windshield wipers every year and it’s a good idea to keep your car clean (especially during winter) to avoid exterior or underbody damage. 

Reference your car’s handbook to see which maintenance you’ll have to tackle at different milestones, then leave a good amount of wiggle room for additional costs and unexpected repairs.

Preventative auto maintenance will drastically improve your lifetime costs, so don’t skimp out in the moment.

Taxes, registration, fees and all that other good stuff

You need to pay for your motor vehicle registration each year. This includes taxes as well. You may also have parking costs associated with your vehicle.

Finally, depreciation

How many years do you expect to hold onto your car for? Take an educated guess and search your vehicle model’s depreciation rate. You’ll be able to find out how much you can sell it for in the future. This will be a nice write-off on the overall lifetime cost of a car.