 TITLE: What Are the True Costs of Car Ownership? CONTENT: How to Calculate the Total Cost of Owning a Car\n-----------------------------------------------\nThe true cost of owning a car is much different than your monthly loan payment. To calculate a vehicle's real cost of ownership, consider the following expenses:\n*   **Financing costs**: The interest on your car loan can add significantly to the total cost of ownership. A longer loan term may lower your monthly payments, but you'll ultimately pay more in interest than you would with a shorter loan. According to Experian's State of the Auto Finance Market for the second quarter of 2020, the percentage of new car loan terms lasting 72 months—and even longer—has increased since the same quarter in 2019. Even with a lower interest rate on the loan, a lengthy term can drive up your interest costs significantly.\n*   **Car insurance**: States generally require drivers to buy a minimum level of car insurance; most drivers purchase more than that to protect themselves and their vehicles. If your car will be financed, your lender will almost certainly require you carry a level of coverage above what's legally needed. Before you buy a new car, visit car insurance websites to get an idea of how much the vehicle will cost to insure. If you have recent accidents or serious moving violations, your insurance premium could be very costly.\n*   **Maintenance and repairs**: Factory warranties on new cars cover repairs—typically for a certain number of years or miles driven, whichever comes first. Although some luxury cars' warranties include free scheduled maintenance such as oil changes, most car warranties do not, so you'll need to budget for recommended maintenance. Keep in mind that as your car gets older and the number of miles on it climbs, it's likely to need more maintenance and repairs. If you drive a lot, you'll need more frequent maintenance as well.\n*   **Fuel or electricity**: Whether your new car is gas-powered, electric-powered or a hybrid, you'll need to take fuel or electricity costs into consideration. You can estimate costs if you know how many miles you drive per year, the average cost of gas or electricity, and the car's efficiency.\n*   **License, registration fees and taxes**: Dealers generally roll these costs into your car loan when you buy the car. After that, you'll pay license and registration fees to the state each year; these gradually decline as your car depreciates in value. According to AAA, in 2019 licenses, registration and taxes cost an average of $753 annually.\n*   **Depreciation**: A new car typically loses a big chunk of its value in the first year and continues to depreciate by about 10% annually after that. Depreciation costs car owners an average of $3,334 a year, according to AAA. If you want more detailed estimates of a car's value, use a car valuation service such as Kelley Blue Book or Edmunds. END