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Car ownership can bring a lot of freedom and flexibility to your life — but it also comes with a financial commitment that lasts long after your car loan is paid off. If you’re looking to create a budget for your next car, take these factors into account when determining how much it will cost you in the long run. CarsFast Car Loans
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The average cost to own a compact car is estimated at $8,600 per year. However, this number can vary considerably. For example, according to the Canadian Automobile Association (CAA) a 2017 Honda Civic driven in Ontario could cost over $10,000 to operate annually.
This amount represents vehicles driven about 20,000 km a year and includes the cost of fuel, maintenance, repairs, insurance, fees, depreciation and loan payments. The loan payment alone in our example was estimated to be $345 a month.
However, these numbers are just averages. Your actual cost of car ownership will differ depending on how often you drive, where you live, what you drive and other factors. Use these numbers as a guideline when estimating your own annual budget.
The easiest way to calculate the cost of owning a new or new-to-you car is to look at online resources like the CAA Driving Cost Calculator. This calculator gives you a yearly estimate for different makes and models based on a 5-year long loan or lease.
It takes 5 factors into consideration — alongside depreciation — to give you an idea of how much it will cost to own a specific car.
Depreciation is a car’s loss of value over time. It isn’t an out-of-pocket expense like the other factors on this list, but it impacts the total cost of your car. In general, new cars lose over 20% of their value within the first year. And by the end of five years, a new car may lose 40% – 50% of its value.
Opting for a car that has a slower rate of depreciation can help you avoid becoming upside down on your car loan — meaning you owe more than your car is worth. And taking steps to reduce your car’s depreciation can help you get more money when you decide to sell it or trade it in down the road.
From opting for a used car to keeping up with maintenance, here are four ways to lower the cost of car ownership:
A car can cost tens of thousands of dollars over the course of five years. Using sites like the CAA Driving Cost Calculator to create a yearly budget can help you pick a car you’re able to afford in both the short and long term.
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