The Real Cost of Owning a Car

cost of owning a carWhen most people go car shopping they only consider the actual purchase price and forget about all the other costs of owning a car.  But the truth is all those additional costs may be greater than the price of the car itself.  Before you run off and buy more car than you can afford, consider these often forgotten costs of owning a car.

Finance Charges

Unless you have enough cash on hand to buy the car outright, you’re going to need to borrow the money.  That means you’ll be paying interest which will inflate the cost of the car.  Shop around for financing before you go to the dealer so you have more leverage in negotiating with the salesman.  Your local bank or credit union will often offer a better deal than you’d get at the dealer.

Sales Tax

Ahh, you’d better not forget this one since it can add a significant chunk of money to the cost of buying a car.  Tax rates vary by state, but here in New Jersey we pay 7 percent sales tax on purchases. That means a $20,000 car will cost an additional $1,400 in sales tax.  Ouch.

Vehicle Registration Fees

This is the amount charged by the state to cover the cost of registering your car, assigning a title, and issuing license plates.  Costs vary from one state to the next and can range anywhere from $30 to several hundred dollars.


You need liability insurance on your car in case you’re found to be at fault for an accident.  You’ll probably want to add comprehensive and collision coverage too unless the car is older and not worth much.  How much you pay depends on lots of factors including where you live, your age, your driving record, and which insurance company you purchase your policy from.  Rates may vary from a few hundred bucks to several thousand dollars per year.  It pays to shop around when buying car insurance.

Look at all these extra costs…and you haven’t even driven the car off the lot yet! Now let’s talk about some of the operating costs that come with a car…


Many people seem to forget about gasoline when considering the real cost of owning a car, but your car won’t get you very far with an empty tank.  Again, how much you spend on gas will depend on lots of things including your local gas prices, the fuel efficiency of your car, how many miles you drive, traffic patterns, and your driving habits.  My 2003 Camry is used for little more than driving to and from work, but it’s 40 miles each way.  I fill up about once a week and pay around $200 a month for gas.  And that doesn’t include my wife’s minivan.  During the week she uses it to drop the kids off at school and activities and for running errands.  It’s also our primary car on weekends.  I figure we spend another $150 a month keeping the minivan gassed up.


Fortunately tires aren’t a regular expense as they can be expected to last several years under normal driving conditions.  But the cost of replacing them is great enough that they deserve their own section.  Tires are not cheap.  Replacing a full set of four tires can run you anywhere from $600 to $1200 on an average car.  Be prepared.

Regular Maintenance

In addition to gassing up, there are the regular maintenance tasks required to keep a car running smoothly.  Oil changes, tune-ups, and topping off of fluids should not be forgotten.  Failure to do regular maintenance may end up causing more expensive damage.  Car batteries need to be replaced every few years too.

Major repairs

Regular maintenance can be a nuisance, but major repairs can destroy your budget and eat away at your emergency fund.  Brakes, belts, and hoses will need to be done at some point and even minor repairs get expensive very quickly. If you’re really handy you may be able to fix some things yourself (when my air conditioner stop blowing cold air I did some research on YouTube and fixed it myself for the cost of a $16 part!)  but most of us have to rely on trained professionals who don’t come cheap.


I listed this one at the end because not everyone is affected by it regularly.  I don’t pay for parking at home or at the office, but I do occasionally get stuck paying for a parking meter or garage when traveling.  If you live in a major hub like Manhattan, parking will add hundreds of dollars a month to the cost of owning your car.

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Mike is a freelance writer and blogger who specializes in finance and parenting topics. He is a dedicated husband and father of three who is obsessed with creating multiple streams of income and building wealth so he can achieve true financial freedom for his family. Like what you're reading? Subscribe to our free RSS feed and follow us on Twitter.

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  1. says

    I think that cars are a waste of money, and that’s why I drive an older paid-off model. The insurance is fairly cheap and I don’t have a car payment or interest. I’m going to drive it until the wheels fall off.

  2. says

    I think that SO many people (myself included) forget about the sales tax part of a car, especially if you are buying a car directly for someone and not a dealer which could lead to trouble down the road. It is a large number depending on your purchase price and certainly something that needs to be part of the budget before you pull the trigger on your car.

  3. says

    I’ve ditched my car back in 2011. I have not looked back. I haven’t done the math in terms of how much I spent owning a car. I had a luxury one too. I didn’t have to worry about maintenance because it was part of the package which included oil changes.

    One missing part are parking/speeding/other types of tickets. This all depends on the individual but I’ve spoken to so many that spend on average $200 a year on parking tickets. Especially those who live in cities like NYC or San Francisco.

  4. says

    It alllllll adds up – and pretty quickly too. My partner’s car broke, so we’re just going to get by with one car until we leave indefinitely in two months. This is something people should bare in mind when they start complaining about taxi fees, too…

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