Total car costs

When it comes to the total cost of owning a car, some models are more expensive than others, and we’re not talking about just the sticker price — there are also hidden car costs that come with ownership. Outside of the initial purchase price, things like depreciation, insurance and annual maintenance all add to the total vehicle costs. Here are some key factors car buyers can use to calculate the true cost of owning a car.

Depreciation

Though your car may always be worth a million bucks to you, as it ages, the resale value decreases — sometimes significantly. This makes depreciation, or the value your car loses each year, a big cost factor when it comes time to sell it or trade it in. In fact, depreciation cuts the value of your car to about 40% of its initial value over the course of just five years.¹ Your car can depreciate even faster if there is an oversupply of your model, it has limited appeal or there are rebates on similar new models. Anything that may impact the desirability of your car, including the release of an updated model that costs the same price you paid years ago, can affect its resale value.

Interest on financing

Researching car financing options can pay off in the long run because most buyers opt for a 60-month loan. That means an entire half decade of accruing interest on an asset that typically costs tens of thousands of dollars. It’s also important to know that credit unions offer car loans, and they often have lower interest rates compared to conventional banks. While the national average rate for a 60-month loan on a new car is 7.21% at a bank, it’s 6.40% at a credit union.² That lower percentage can go a long way in helping you save significantly on your monthly payment.

Fuel costs

Fuel costs are an ongoing cost, so it’s important to consider them when calculating the true price of owning a car. Additionally, fuel costs fluctuate, so during times when we’re saying, “Gas prices have really gone up,” our commutes get expensive, and road trips get delayed. You can check the current daily Arizona average of gas prices by visiting AAA's Gas Prices Page. This tool also shows you average fuel prices for individual Arizona metro areas.

Car insurance

While not exactly a hidden cost of owning a car, it’s still crucial to consider insurance when calculating total car costs. Sports cars can cost more to insure than other vehicle types, but auto insurance companies also figure in your age, gender, driving record, credit rating and even the city and state you live in to determine your premiums. Before you purchase a new vehicle, give your auto insurance company a call to get an insurance quote to ensure you can afford the premiums.

Maintenance and repair costs

Automobile websites make it easier to equate how much it costs to maintain and repair one vehicle make and model over another. Kelley Blue Book and Edmunds.com have cost comparison tools, in addition to expert reviews, which identify the cars that will have you putting your mechanic on speed dial. You can also look into extended warranties, but that will cost you more green.

Taxes and registration fees

Arizona’s sales tax rate for cars is 5.6%.³ Some counties charge an additional percentage of tax, and still, select Arizona cities charge another tax on top of those two. Sales tax amounts are calculated based on the car’s value, so the more expensive the car, the more taxes you’ll owe. Arizonans also pay a title tax, plate transfer tax and registration tax. There is some good news, however. If you’re in the market for an electric or hybrid car in Arizona, you may be eligible for tax deductions for purchasing an EV or hybrid.⁴

The total car cost is something to consider when you are looking to purchase your next ride. It’s also important to uncover all the hidden car costs so you can estimate how much it will take to own your vehicle. Outside of the sticker price, accounting for factors like maintenance costs, fuel costs, insurance and taxes will help you understand how to budget for your purchase. Plus, by looking past the immediate expense and down the road into the next five years, you can add up the ongoing costs of your dream car and determine if it’s truly a ride you can afford.