From financing costs to maintenance, insurance, and gas, there's a lot that goes into owning a car. However, only ew people know the truth about the economics of car ownership.

Apart from the cost of purchase, there are several other factors that determine the eventual cost of a car. Knowing about these will aid anyone planning to purchase a car to be more financially prepared.

In this article, our goal is to answer some of the most asked questions about car ownership. We hope to broaden your knowledge about the economics of car ownership.

Let’s jump right in!

What's the average cost of a car in 2021?

According to Kelley Blue Book and True Car, the average cost of a new car goes at $46,000. Compared to used cars, a new car comes at a high price and higher insurance costs. All thanks to the pandemic, limited availability, and inflation.

How much does a car cost per month?

Based on reports by The American Automobile Association (AAA), in 2020, it cost $797 per month to operate an down a car, especially vehicles driven 15,000 miles every year. AAA considers costs of maintenance, depreciation, gasoline, insurance, and others. Let's consider some of these expenses and how they contribute to the overall cost of owning a used car.

Fuel: This plays a significant factor in the average cost of car ownership. On average, Americans pay 11.2 cents per mile which is about$1,681.50 per year. Depending on your driving conditions and gas prices, fuel expenses vary.

Insurance: Car insurance cost is another major variable in owning a car. Your age, driving history, city of residence, and marital status influences the cost of insurance. Nerd Wallet reports that the average cost of insurance in 2021 is $132.6 per month.

Maintenance: Whether new or old, cars need maintenance. Car maintenance costs, including tires, total $913 annually. However, this may vary considering your driving, car model, and how well you care for your car. It's pricier to repair a Porsche 911 than a Honda Accord. In addition, if your car is old and you live in rough terrain, you'll likely pay higher for maintenance.

It's not enough to make a car payment. You should find out about the cost of owning a car calculator. With a car ownership calculator, you can estimate your monthly auto expenses. The calculator factors in taxes, insurance, depreciation, financing, etc.

How to determine the cost of owning a car

Using the car calculator, here's how to estimate the true cost of car ownership based on the following factors:

Gas: To calculate the amount you spend on gas, you'll have to consider the miles traveled, fuel efficiency of the car and the average cost of gas in your area. You can enter the amount expended on gas in the calculator or divide the distance traveled every month by your car's fuel economy rating. Multiply the number by the cost of gas in your locality.

Registration, fees, and taxes: It's quite easy to calculate these expenses. Enter the annual cost of vehicle registration renewal on the calculator and divide by 12. You can add other miscellaneous expenses.

Depreciation: After a while, cars lose their values, affecting the total cost of ownership. In the first few years, cars depreciate to about 15% - 30%. If you want to reduce depreciation, it's best you opt for a used car. The cost of owning a used car is less compared to a new one. A used car comes with lots of perks, including low insurance rates and cost-efficient registration renewal. Whether new or used, owning a car can be quite expensive. Consider all your options and make informed decisions.

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