When designing a spending plan or budget it is important to consider all costs associated with owning a vehicle. Often these can be hidden or we do not stop to consider them. Even an older vehicle with no monthly payment and an excellent driver with low insurance rates may cost as much as $4,250 a year to operate.
A more expensive vehicle has higher monthly payments if financing, while a larger vehicle has higher fuel costs, especially as the cost of gas increases.
Even if you change your own oil there are costs associated with this twice a year (or more) task. In addition, as your vehicle ages with more mileage on the odometer, maintenance costs increase and tires need to be replaced on a regular basis. Repairs are the occasional items that need to be changed out such as a radiator or a cracked windshield. Costs may also include an insurance deductible due to an accident. There sometimes comes a point when maintenance costs to keep a vehicle on the road may exceed the vehicle’s value.
Registration costs at the Department of Motor Vehicles in your state depend on the age and value of your vehicle, although a small portion of this fee may be tax deductible. Tickets for infractions, while not generally an annual cost, prove that none of us are perfect. Parking tickets, speeding tickets, failure to come to a complete stop among others, all add up.
Insurance premiums can be a major cost depending on the value of the vehicle, the coverage and the deductible you choose. If you are accident-prone then your insurance rates reflect that. Your state will dictate the legal minimum coverage. Each insurance claim has “points” which allows the insurance company to raise your rates for three years until those points drop off your record. A ticket will also add points to your record. Don’t forget the add the costs of traffic school to avoid points to increase your insurance rates. Paying your insurance premium monthly will cost you about 10% more than if you pay annually.
When buying a vehicle, apart from the above costs, there are other things to consider. Do you need a vehicle that size? Are you buying it for the occasional ski trip (consider renting for that short period of time)? Are you keeping up an image (does it matter what others think)? Are you buying that vehicle to help with the environment (are there better ways to help)? Do you need a vehicle (consider car share alternatives as well as electric bikes, scooters, public transit, taxi and taxi-equivalents)?
Take a hard look at your lifestyle. If you are considering relinquishing a vehicle, park it for a while over different seasons and see how practical that option can be. Consider downsizing your vehicle, if you want to save on gas, insurance and registration. A more radical change is moving to an urban area where a vehicle is not a viable transportation option. Everyone’s situation is unique, change is not for everyone but maybe it is for