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Car Ownership Costs Beyond the Price Tag: What to Expect
When buying a car, most people focus on the sticker price, but the total cost of owning a car goes far beyond that initial figure. While the purchase price is a major consideration, ongoing costs like insurance, maintenance, depreciation, and financing can add up quickly. Understanding these hidden expenses is crucial for making a smart financial decision. Whether you’re buying new or used, being aware of the true cost of owning a vehicle can save you from unexpected financial strain down the road.
Depreciation
Depreciation represents the value loss of a vehicle from the moment it’s purchased. A car’s value often drops as soon as it’s driven off the lot, and this affects both new and used vehicles. While you don’t pay depreciation directly, it’s important to account for it if you plan to sell your vehicle in the future.
Luckily, calculating depreciation is straightforward. At the CarEdge Research Hub, we provide updated depreciation data to give you a clear picture of your car’s value over time. Check out depreciation rates for your car to make more informed decisions.
In rare cases, vehicles may increase in value due to high demand, such as collector cars. But for the majority of cars, depreciation is inevitable.
Insurance Premiums
When you purchase a vehicle, you will be required to purchase insurance. If you are financing a vehicle, it will be mandatory that you get full coverage insurance. If you purchase a car and pay it in full, you can choose to get liability insurance. Full coverage is going to cost more due to the comprehensive coverage that you get compared to liability insurance. Insurance policies can cost anywhere from $50 up to $300+ per month depending on the vehicle, the type of coverage you get, and your recent driving history.
For those with speeding tickets or accidents on their record, insurance costs may be higher. Always get insurance quotes before purchasing a vehicle to ensure you can afford both the car payment and the insurance premium.
Maintenance & Repairs
Maintenance and repairs are inevitable parts of car ownership, and these costs can vary depending on the make, model, and age of your vehicle. Regular maintenance like oil changes, tire rotations, and brake checks are essential for keeping your car in top condition and can help you avoid costly repairs down the road.
To reduce long-term costs, follow your vehicle’s maintenance schedule and consider setting aside an emergency fund for unexpected repairs, such as transmission or suspension work. Some repairs are unavoidable, but taking proactive steps can minimize expensive breakdowns.
See average maintenance costs for your car at the CarEdge Research Hub
Financing
When financing a car, interest can significantly increase the total cost of ownership. The longer the loan term and the higher the interest rate, the more you’ll end up paying. Let’s break it down with an example:
Imagine you finance a car for $30,000 with a 5% annual percentage rate (APR) over 60 months. Over the course of the loan, you would pay about $3,968 in interest, bringing the total cost of the car to $33,968. If you extend the loan term to 72 months, you’ll pay an additional $1,043 in interest.
To minimize the cost of interest, consider opting for a shorter loan term and shop around for the lowest APR. If possible, improve your credit score to qualify for better rates. Additionally, making a larger down payment can reduce the total loan amount, helping you save on interest over time.
Compare refinancing rates all in one spot
Other Costs of Vehicle Ownership
There are a few other expenses that you should take into consideration when it comes to owning a car. State registration fees are a great example of a yearly fee you can count on paying each year you register your vehicle. This will vary state by state, so check with your local DMV to see what your current state registration fees are. Many states levy ‘property taxes’ on vehicles based on the value of the car. These vehicle property taxes can add up to a few thousand dollars per year for luxury vehicles and expensive trucks.
Tires are another maintenance item that can add up over the years. These days, a set of four quality tires can cost $1,000 with installation and disposal fees. Tires increase in cost with larger and more uncommon sizes.
A Car’s Total Cost of Ownership Can Vary Widely
In conclusion, the total cost of owning a car goes far beyond the initial purchase price. Key factors like depreciation, insurance, maintenance, and financing charges can significantly impact your overall expenses. Some cars depreciate faster, others come with higher maintenance costs, and interest rates on car loans can add up over time. Be sure to evaluate all these variables when determining whether a vehicle is the right financial decision for you. By understanding the true cost of ownership, you can make smarter, more informed choices.
Is It Better To Sell Or Trade-In Your Car? 10 Considerations To Help You Decide
It’s time to say goodbye to your old reliable car, but should you sell it privately or trade it in? Both options have their pros and cons, but with the right approach, you can minimize financial losses. Here are 10 tips to help you make the best decision.
10 Car-Selling Tips To Consider
1. Don’t name your price first
If a salesperson asks how much you want for your car, don’t give them a number. Let them make the first offer to avoid limiting your potential trade-in value. If asked, let them know that your primary interest is minimizing your net cost, or trade difference, after an allowance for your trade. Avoid providing any firm numbers, despite their repeated attempts to enquire, as they will be resolute in getting you to throw out the first number.
2. Tax benefits of trading in
Trading in your vehicle at the dealership can save you on sales tax. When you trade-in, you subtract the value of your car from the sales price of the new one, and you only pay sales tax on the difference in value. For example, if your trade-in is worth $20,000 and your state has a 5% tax, you could save $1,000 compared to selling it privately.
3. Don’t clean the car too early
If you’re just browsing, don’t clean out your car beforehand. A spotless trunk signals you’re ready to buy, potentially weakening your negotiation position.
4. Watch out for the higher offer trick
Dealerships may offer more for your trade-in but mark up the price of the new car. Don’t be fooled by the dealer that simply offers you the highest price for your car, as they may be getting you on the other side. Always look at the total cost.
5. Fix the obvious issues
If selling privately, get the obvious repairs fixed up front, and perform the routine service, like an oil and filter change. If your vehicle needs obvious repairs, private buyers will discount its value by at least 2X of the cost of the repair, as they will be concerned that it can’t be fixed, or that repairs will end up being more costly. Buyers don’t want to inherit a problem; they want a car that they can drive home with confidence, and is trouble-free.
6. Check your car’s history report
Run a vehicle history report before selling. Surprises on a report could deter buyers or lower your asking price. If you’re the original owner and have never had any problems or accidents, it’s possible to skip this step.
7. Organize vehicle documentation
Present your service records and manuals in an organized manner to instill buyer confidence. If you have them, make sure to include the vehicle registration, window sticker and any operating manuals that you received, so that you can present them to any possible buyer.
8. Trade where it makes sense
If your trade-in doesn’t match the dealership’s typical inventory, expect a lower offer. If you are at the BMW dealership, and you’re looking to trade in your 10 year-old Corolla with 120,000 miles, don’t expect a good offer. They won’t want your car, and will sell it straight to a wholesaler. Keep this in mind when thinking about a trade-in.
9. Meet in a public place
For safety, meet prospective buyers in public spaces like designated safe meeting zones rather than your home.
10. Pay off loans before selling
If possible, pay off any loans before selling. Having a clean title in hand, goes a long way towards resulting in a seamless transaction, versus having to get a bank involved. Sometimes banks will take weeks to send you a title that is free of liens, and that is enough to sour a lot of car deals. Similarly, make sure that you ask the private buyer how they intend to pay for the car.
Conclusion
Selling or trading your car doesn’t have to be stressful. By fixing minor issues, getting paperwork in order, and strategically timing your sale, you’ll increase your chances of getting a good offer. The more certainty you provide the buyer, the more they’ll be willing to pay. Learn more about resale values with CarEdge Research.
CarEdge Launches Deal School: The Free Car Buying Course To Save You Thousands
Car buying can be overwhelming, but Deal School is here to help. CarEdge, led by father-son duo Ray and Zach Shefska, has updated the internet’s #1 free car buying course for 2024 and beyond. Designed to empower consumers, Deal School teaches buyers how to navigate the car buying process with confidence, saving money in the process.
👉 Enroll in Deal School for free
What’s Inside Deal School?
Deal School consists of four comprehensive units made up of 22 individual lessons, each designed to prepare you for every step of your car buying journey. Here’s a breakdown of what you’ll learn:
- Finding Your Vehicle: Discover how to assess your needs, set a realistic budget, and choose the perfect new or used car.
- Getting Ready for the Dealership: Get expert advice on what to research and bring to the dealership to set yourself up for success.
- How to Negotiate Your Car Deal: Unlock strategies to negotiate like a pro, whether you’re leasing, trading in, or buying.
- Navigating the Finance and Insurance Office: Learn how to avoid costly mistakes by understanding financing options and F&I products.
Each unit concludes with a quiz to test your knowledge and ensure you’re ready for real-life negotiations. With CarEdge’s Deal School, the car buying process is not only simplified, but consumers also gain the confidence to negotiate smarter deals, keeping more money in their pockets.
What’s New in Deal School?
In addition to refreshed lessons with updated information and brand-new recorded lessons with Ray Shefska, Deal School 2024 introduces a free e-book filled with proven strategies to help you get the best deal on your next ride. This e-book is packed with insider knowledge, giving you a major advantage before stepping foot in a dealership. Print it off, take it with you, and shop for your next car with confidence.
Learn Car Buying Like a Pro
CarEdge’s Deal School is the go-to resource for anyone looking to buy a car with confidence. You’ll learn everything from car-buying secrets to mastering the art of negotiation and understanding financing. Once you complete the course, you’ll be ready to secure the best deal on your next vehicle purchase.
👉 Sign up for Deal School today and start saving – It’s FREE!
122,000 New Cars Are In Hurricane Milton’s Path: What It Means For Car Prices
As Hurricane Milton barrels toward Florida’s Gulf Coast, the automotive industry is bracing for significant losses. Over 122,000 new cars are parked in the storm’s projected path across Central Florida, with landfall expected on October 9th. While residents focus on evacuating, thousands of cars will be left behind to face damaging winds and floodwaters. Here’s a closer look at which automakers and regions will be most affected by Milton, from Tampa Bay to the Space Coast.
Ford, Toyota, Hyundai have the most inventory in the Tampa area.
In the greater Tampa metro area alone, over 35,000 new cars are for sale, many of which are at serious risk of damage from storm surges predicted to reach up to 12 feet. Considering that about half of Tampa sits lower than 20 feet above sea level, storm surge will pose a major risk to all, not just cars. Local economies will feel the impacts for months to come. When it comes to the car market, Hurricane Milton could throw a wrench in year-end car sales that normally ramp up come November and December.
These are the major car brands with the largest new car inventory in the Tampa area:
These numbers reflect the total new car inventory for a 30-mile radius extending out from St. Petersburg, Florida as of October 7, 2024. Given these numbers, the Tampa area is facing potential losses that could impact local dealerships for months to come. In fact, Florida inventories and sales are so significant that Hurricane Milton could impact some automaker’s bottom lines.
See local car market data with CarEdge Pro
Luxury brands to be hit hardest
While the overall number of luxury cars in Milton’s path is lower, the percentage of their total U.S. inventory at risk is staggering. Brands like McLaren, Alfa Romeo, and Aston Martin have some of the highest proportions of their national inventory in Florida, making them particularly vulnerable:
- McLaren (8.7% of total US inventory)
- Alfa Romeo (6.2% of total US inventory)
- Aston Martin (6.1% of total US inventory)
- Maserati (5.5% of total US inventory)
- Lincoln (5.4% of total US inventory)
With luxury vehicles making up a smaller market share, the impact of losing even a few hundred cars could cause significant disruptions for these high-end brands.
Will Hurricane Milton Impact Car Prices?
With a one-two punch from hurricanes Helene and Milton, the Southeastern US will be recovering for months to come. With the possibility of thousands of cars totaled from flood damage, the car market in Florida will be most impacted. In the short term, new and used car prices could jump as available inventory shrinks and car dealers look to make up lost profits.
As Florida car shoppers move north in search of undamaged inventory, the demand for new cars in the neighboring states of Georgia, South Carolina, and Alabaman may push prices higher. Unfortunately, recent events have taught us that car dealerships don’t hesitate to add ‘market adjustments’ to MSRPs when demand exceeds supply.
For those outside of the Southeast, it’s unlikely that car prices will be impacted by Milton. However for Floridians, a tough car market is about to get even more challenging.
Car Buying in Florida: A Tough Market Just Got Worse
Florida has long been known as one of the toughest states for car buyers. Uncapped documentation fees that average around $995—three times the national average—already make buying a car in the Sunshine State a costly affair. Florida also tends to have tighter inventory than other states. With the added destruction from Hurricane Milton, car buying could become even more difficult and expensive.
Post-hurricane recovery efforts could see dealerships facing inventory shortages, leading to inflated prices and markups above MSRP. With demand likely to outstrip supply, shoppers may also encounter more aggressive dealer fees in the months ahead. It’s times like these when a cap on dealer fees sure makes sense. Unfortunately, Florida is one of the only states without one.
What to Expect After Milton
Hurricane Milton is shaping up to be one of the most devastating storms for Florida’s automotive market. With thousands of new cars in the storm’s path, dealerships and automakers are likely to experience financial strain. If history is any lesson, this will inevitably trickle down to consumers. If you’re considering buying a car in Florida in the near future, prepare for higher prices and limited options as the state recovers from the storm.
For those in immediate need of a vehicle, buying a car out of state may be a better option as local inventory shrinks. As multiple storms hit the Gulf Coast, car buyers will need to cast a wider net to find deals and avoid potential markups.
Can You Avoid Car Depreciation? One Way To Minimize Loss Of Value
Car depreciation is what makes cars a bad investment—they always lose value over time. If we could sell our cars for what we paid, we’d be collecting them like baseball cards. But the reality is, 99.9% of vehicles lose value, just like rust on an old car.
Cars aren’t investments—they’re tools for transportation. On average, a new car loses 20% of its value in the first year and 40% by year three. Imagine buying a house for $500,000, only for it to drop to $300,000 in value three years later—that’s the same financial hit you take with many new cars. Here’s a closer look at what car buyers should expect with depreciation, and how to avoid the worst of it.
Is Depreciation Inevitable?
When you buy any new car, depreciation can’t be avoided. On average, new cars will lose around 20% of their value after one year of ownership. After that, they may lose about 15% more per year until the four-year mark.
However, not all cars depreciate equally. As an extreme example, we’ve seen low-mileage luxury cars and EVs lose over 50% of their value over just three years. The good news is that it doesn’t have to be this bad.
The worst depreciation happens in the first few years for a new car. By avoiding a brand-new vehicle and buying one that’s 2-5 years old, you can dodge the steepest drop in value. Let someone else take the loss! When you buy a gently used car, you will lose far less money to depreciation if you decide to sell your car in the future.
Smart Shopping Pays Off
When it comes to new car depreciation, the numbers don’t lie. New car depreciation is unavoidable. A new car costing $40,000 can easily lose $16,000 in value over three years, costing the owner over $400 per month in depreciation. But if you buy that same car at three years old for $24,000, you’ll only lose $7,500 in value over the next three years—less than half the depreciation cost.
New 100% FREE car research tools mean that you have more ways than ever to see which cars depreciate the fastest. Check out the free CarEdge Research Hub for up-to-date car depreciation data.
Conclusion: Weighing the Trade-offs
Yes, there’s something special about driving a brand-new car. But unless you really love that new-car smell and pulling off those safety stickers, a slightly used vehicle offers the best bang for your buck. Be smart, shop wisely, and use our tools to find the best value on the market. Use the tools available today with CarEdge’s Research Hub – it’s 100% free data!
