You’ve done your research, found the car of your dreams, and now you’re grinning from ear to ear behind the wheel of your new car. Congratulations! Buying a car can be one of the biggest purchases of your life, so you want to make sure that your budget can handle the long-term financial demands. To help make sure you’re not blindsided by unexpected costs, create a car budget by planning for the following car costs. We’ve provided some suggested average amounts for each category, but the amount of money you will need to budget will likely differ depending on your unique circumstances.
Doing routine car maintenance, like changing the oil and air filter, rotating the tires, and staying on top of minor repairs, can help your car run smoother and last longer. AAA estimates maintenance costs at around 4 cents per mile driven, which is about $622 a year if you’re driving 15,000 miles. This means your budget should set aside $50-60/month for this line item. When you know where to go, though, it’s easy to find free car maintenance services and diagnostics.
It’s illegal to drive without insurance or proof of financial responsibility, so car insurance isn’t a cost you should avoid. Depending on the type of insurance coverage you select, your insurance history, and the make and model of your vehicle, car insurance could be a big chunk of your car expenses. The AAA cost estimate for car insurance for a married 47-year-old male with a good driving record, driving a small sedan (e.g. a Honda Civic), living in a small city, who commutes only 3-10 miles/day to work, with a policy that includes bodily injury liability limits of $100,000/$300,000 and comprehensive and collision coverage with a $100 and $500 deductible respectively is: $981. Talk to your insurance company about creating a customized payment plan that better fits your budget and compare prices across insurance companies to make sure you’re getting the best deal you can find.
Registration, fees, taxes
You may be able to postpone certain cosmetic or maintenance expenses for your car, but you can’t put off state taxes, fees, and any required emissions testing. AAA estimates that the annual cost for a small sedan at $480/year, or $40/month. As these are usually annual fees, set aside a bit of money each month in anticipation of the lump payment. To calculate the state mandated fees for your vehicle, talk to your local DMV or county clerk’s office.
Spend less of your budget on gas by having a more fuel efficient car. According to the U.S. Department of Energy, a vehicle that gets 30 MPG will cost you $638 less to fuel each year than one that gets 20 MPG (assuming 15,000 miles of annual driving and fuel cost of $2.55/gallon). Over a period of five years, that 30 MPG vehicle would save you $3,188. To get a better idea of how much you could spend on gas in a year, try fueleconomy.gov’s fuel cost and savings calculator. Stretch your gas tank by following these tips for improved fuel efficiency.
With the national average regular gas price hovering around $2.18/gallon, it could be even easier for you to pay for car insurance this year. Less of your income being spent at the pump means you have more money to put towards life’s other necessities.
Calculate the total cost of ownership
If you’re a real stickler for exact numbers, you can use Edmunds.com Car Ownership Calculator to help you get a better idea of the long term costs of owning your vehicle.
Most important of all, congratulations on your new car and enjoy the ride!