The True Cost of Car Ownership - Genisys® Credit Union

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The True Cost of Car Ownership

on 6/12/2024

Couple in car smiling at camera

When it comes time to buy a new or pre-owned car, the process is much easier today. You can search vehicles, negotiate prices, estimate trade-in values, and even secure financing without ever leaving the couch. Amidst these conveniences and the excitement of getting a new car, people often overlook certain costs associated with purchasing a vehicle.

Your finances will be affected by more than simply your loan payment. Other factors, such as insurance, fuel costs, and ongoing maintenance, should be considered. We’ll explore the true cost of car ownership and highlight additional costs you should factor in before signing on the dotted line.

Loan Payment

The first thing that comes to mind when preparing to buy a car is the monthly payment. After all, that’s the part that will consume most of your budget. While you might know how much you want or can afford to spend monthly, that number can fluctuate greatly depending on several factors. 

Here are aspects of financing your new vehicle that can impact your monthly loan payment:

Credit Score: 

Your credit history and score will play a significant role in determining your loan’s interest rate. If you don’t need your new car immediately, consider spending a few months improving your credit score. Even modest improvements could lower your interest rate and reduce your monthly payment.

Down Payment:

The more you put down on your new car, the less you need to finance. That’s an instant savings to you because you ultimately pay less interest on your loan. 

Trade-In Value:

Like your down payment, your trade-in (if applicable) will reduce the amount financed for your new car. Research your trade-in value before you visit the dealership to ensure they’re making you a fair offer. Every extra dollar you get for your trade is one less dollar you need to finance.

Add-On Products:

Dealerships will try to sell you everything they can regarding your new car. From rust and ding protection to extended warranties and upgraded floor mats, nothing is off-limits. Do your research beforehand, determine what you need or want, and factor that into your budget. Finance people will add these costs to your monthly payment because the increase seems marginal; however, most add-ons are unnecessary.

Taxes, Title & Registration:

Like add-ons, dealerships usually add these costs to the overall vehicle price. That means those expenses will become part of your loan, and you’ll pay interest on them. If possible, try to budget for these items ahead of time and pay them upfront to avoid extra interest costs.

If you have questions about how much you can afford to 

spend as a monthly payment, plug your figures into an online loan calculator or contact the credit union, and we’ll happily run numbers with you.

Fuel Costs

Depending on the type of vehicle you choose and your lifestyle, fuel could play a significant role in your monthly budget. For those with longer commutes to work, a more fuel-efficient vehicle will be ideal. 

Most carmakers and dealerships will note each vehicle’s average miles per gallon. Take this figure and estimate your monthly and annual fuel needs. You can calculate these expenses using the following formula:

(Miles Driven Per Month ÷ Your Vehicles Miles Per Gallon) x Price Per Gallon of Fuel = Monthly Cost

For example, imagine you drive 750 miles per month, and your vehicle gets 25 miles per gallon. Assume the current cost per gallon is $3.50. Your monthly expense would be:

(750 ÷ 25) x $3.50 = $105 Per Month

You can annualize that figure by multiplying it by 12 to determine your yearly fuel costs.

$105 x 12 = $1,260 Per Year

NOTE: If you currently have two vehicles, you’ll want to estimate both cars’ fuel costs to determine the impact on your budget.

If you plan to purchase an electric vehicle (EV) to lower your monthly fuel expenses, remember to estimate your new charging expenses. These will include:

  • Cost to install a home charging unit (if applicable).

  • Price to charge monthly (if using charging stations).

  • Additional electric bill charges (if charging at home). 

Insurance Coverage

One of the most overlooked costs associated with buying a new car is insurance. People regularly save money to buy their dream car, only to find out they cannot afford the insurance after the fact. 

Car insurance will vary greatly depending on the type of vehicle, its age, safety features, and more – including your personal driving record. Vehicles like convertibles or jeeps tend to have much higher premiums than sedans or smaller SUVs.

Begin your car search online. Once you have a vehicle in mind, look on the dealer website. They typically display the VIN (Vehicle Identification Number) of each car listed for sale. Call your insurance company, and they can usually give you an accurate quote based on the VIN. Even if it’s not the exact car you want, for example, the color is white instead of red, your insurance quote will be pretty accurate. 

Always obtain an insurance quote before you visit a dealership. The last thing you want to do is finance a new car, only to discover that the insurance costs are too high to fit into your monthly budget.

Regular Maintenance

The longevity of your vehicle relies heavily upon you staying on top of regular maintenance needs - another ongoing cost of car ownership. It’s critical for the health of your vehicle to keep your car up to date with recommended maintenance schedules. 

Some items to include in your cost estimate are:

  • Regular oil changes, fluid checks & refills 

  • Tire pressure checks

  • Tire rotations and alignment or possible replacement

  • Cleaning your vehicle regularly

Much of this regular maintenance can be done without adding extra costs to your budget. It’s very easy to learn how to check your fluids and tire pressure as well as clean your vehicle yourself. The more you can do, the more money you’ll have in your budget.

Buying a new car is exciting, and it’s easy to get caught up in the moment. However, purchasing a vehicle is a significant financial decision, and there are many costs that go into the equation beyond your monthly payment. 

If you have questions about the car-buying process, stop by and get pre-approved. A pre-approval from the credit union ensures your loan fits into your monthly budget and gives you the upper hand in price negotiations. To get started, please stop by any of our convenient branch locations or call 248-322-9800 extension 5 to speak with a team member. 


© Genisys Credit Union and, 2024. Unauthorized use and/or duplication of this material without express and written permission from this site’s author and/or owner is strictly prohibited.  Excerpts and links may be used, provided that full and clear credit is given to Genisys Credit Union and with appropriate and specific direction to the original content.

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