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Car Facts: Buying the Better Way: Total Cost of Ownership

The NOT-SO-GOOD Way to Buy a Vehicle: 

Often when we buy a car we are focused on a car loan and the monthly payment amount. So much so, that some car dealerships use that to leverage you into a more expensive car – “we can get your payments down to…” Just remember that typically the longer the loan, the higher the interest rate, and the more money you will end up paying for interest. 

The BETTER Way to Buy a Vehicle: 

Go into a dealership knowing the total price you can afford and what you want to get for that price.  A great way to stick to your price is to get a pre-approved loan from the banking institution of your choice. Most of us can’t or won’t do it, however it may be better if you can pay for the car in cash, without a loan, because then a loan payment isn’t a concern.  

Down payments are important. If you don’t put a hefty one down, depreciation may bite you–check out this blog post for more information.  Car Facts: How Gap Insurance Can Save Your Rear End (of your car, that is.) – Better Financial Counseling Network

But a loan payment isn’t the only cost. Car insurance is typically what we think of next. Today, in most cases it is easy to get car insurance quotes from your current insurance company. So, it is a good idea to get quotes for the automobiles you are considering buying before you walk into a dealership – or before ordering via the internet. Times sure have changed!  The more expensive or unique the car, typically the more insurance will be.

Fuel costs. 

Today, it is hard to ignore fuel costs. If you want an unbiased source to help determine your fuel costs, you can find that at At this government site, there is a tool to compare vehicles’ fuel costs. Don’t forget to research if a vehicle you are considering requires premium gas. Of course, you can reduce fuel costs by buying a hybrid or electric car, but you’ll want to know how much charging those will cost and consider the higher initial cost of the vehicle itself. 

Maintenance and Repair Costs
Some vehicles cost more to maintain and have historical reliability problems–so do your research.  Many of the websites that you can go to today that help you with car shopping and car buying provide information on maintenance and repair costs. Once I’ve narrowed my choice of vehicle down I like to use multiple sites to compare their projected costs of ownership, particularly maintenance. Sometimes dealerships offer maintenance plans and extended warranties. Whether or not these are worth paying for can vary, so make an effort to analyze what they offer. In general, statistically speaking, most “extra” warranties aren’t worth the price you pay, particularly if you are borrowing to get the warranty. 

License & Registration & Taxes

Typically, the more expensive a vehicles the more you’ll pay for these costs.  These costs which vary by state. You can reduce sales taxes by buying less expensive vehicles. Often you can also use that strategy to reduce personal property taxes on vehicles if your state imposes those taxes. 


Depreciation is when your vehicle loses value over time. This often is a good reason to buy a pre-owned car. The first few years of ownership has the most depreciation. For me, if I’ve decided to buy a new car I don’t really factor in the projected depreciation because I expect to have the car so long that I’m not concerned about the resale value. But if you tend to keep cars 7 years or less, or if the resale value is really important to you then you probably should take a look at expected depreciation. It can vary considerably between both makes and models. 

Opportunity Cost

The more money you spend on a car, the more money that can’t be used for something else. Maybe if you get a less expensive car, you can put more money aside for retirement, for college, or for other goals. Make sure your car purchase fits with all your goals, not just your “car goal”. My wife and I have done this with all of our car purchases, which imposed some limitations on what we bought. We’ve still liked the cars and now, since “nicer” cars fit our plan well now, we have fewer limits on our car buying.  You can read about that at: .

The more you have prepped and researched for your car buying, the better off you will be. That includes making sure you understand the true costs of any car purchase and the true total cost of ownership. 

Happy Car Buying!


Cars & Homes are the most expensive purchases that you’ll make in a lifetime.  If you’d like some unbiased assistance from an accredited financial counselor, contact us for a free consultation. Contact Us. Our counselors Meet Us can help you determine the amount you can afford on these major purchases, while still allowing you to meet your other financial goals and dreams.   

Photo by Obi Onyeador on Unsplash

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