7 Most Expensive Aspects of Owning a Car

Did you know that car ownership costs are the second largest expense in American homes? The average American household spends 15% of its budget on car ownership and operating expenses, according to the Bureau of Labor Statistics. Second only to the cost of home ownership, car owning and operating expenses are a significant drain on family finances. The average American household spends more on maintaining a car than on food or pension and social security contributions. There are many contributing factors to the cost of car ownership. Some are unavoidable. Others, you can work to contain.

1. Car Repairs

Car repairs can be one of the more costly aspects of owning a vehicle. Before contracting with a repair shop for work, assess whether you or a family member can do the repair. When you know that you can’t do the repair yourself, do your homework.

Calculate the cost of each repair on websites where you can plug in the make, model, and year of your car, your zip code, and a description of the car repair, for example RepairPal or AutoMD. Both sites will calculate the repair costs by matching your needs (make/model/year, zip code, and repair) to a database of more than 400,000 accredited repair shops. The cost of DIY repairs is also provided. RepairPal and AutoMD are both available as iPhone apps. RepairPal is in the Android market too.

When a repair shop assesses the cost of repairing your car, the price is determined by three factors:

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Labor rate

The single largest expense for car owners is labor. If you are a Mr. or Ms. Fix-It, the breakdown of the vehicle is an easy fix. Find a spare Saturday, buy the parts, roll up your sleeves, and get to work fixing the vehicle. For the rest of us, receiving an estimate of the repair costs from a shop can be a frightening experience.

The labor rate is based on the repair shop’s per-hour labor rate and“book time,” according to AOL’s Maintenance Editor, Tom Torbjornsen. Each repair person may have a different per-hour rate of pay.

Car owners should be aware that book time is the average amount of time it should take to do a car repair or perform routine, scheduled maintenance on a vehicle. Book time is based on the time it would take a factory technician to do the repairs, plus a built-in time cushion because your car mechanic may not be as highly skilled as a factory-trained mechanic. The car repair shop should complete the repair within book time, but some jobs will take longer or shorter depending on what the mechanic finds after he starts working on the car.

The labor rate will also be determined by where you live. Prepare to pay more in the city than in a rural area. The average rate per hour ranges from a low of $25 to a high of $150. Specialty repair shops will typically have higher labor rates than a local repair shop.

Parts

After looking at labor costs on the car repair estimate, the next item to look at is parts. The price for a part at a retail store is far less than the price to buy the part at a repair shop. Repair shops mark up the price of the part by as much as 30%, according to Torbjornsen.

Overhead

Whether a repair is small (oil change) or large (complete transmission overhaul), labor costs can be high. Maintenance and car repair shops also have overhead costs, just like any other business. These overhead costs include, but are not limited to, the rent or mortgage on the repair shop, the wages for staff, heating and air conditioning of the repair shop, and the costs of equipment and technology.

But there’s more to worry about than just car repairs. Some costs of buying a car you just can’t avoid.

2. Depreciation

Once you drive the car off the lot, your car will never again cost what you paid for it. Whether you buy the luxury, high-end model or a bargain-basement buggy, your vehicle will depreciate in value. As a car owner, the depreciation will amount to over 40% of the total ownership costs over a five-year period, according to Consumer Reports.

Not all vehicles depreciate at the same rate. A less expensive car may be cheaper in the short term, but may not retain its value. More expensive, luxury cars may cost more to maintain, but these cars may last longer and retain their value better. Use the Kelley Blue Book to find the true value of your vehicle.

3. Tuning

Ever wonder what that sticker on your car window is really for? It is placed there by the mechanic not only as a reminder for you to get an oil change, but as a way to prolong the life of your car. Consistent car maintenance, either DIY or at the shop, will reduce costs.

With regular tune-ups, the average car owner could save 25% to 33% in gas costs, for a total savings of $50-$100/year. So while you may need to spend some money up front, this cost may actually end up saving you money.

4. Oil and Filter Changes

While your car may not need a 3,000-mile oil change, check your owner’s manual, talk to a mechanic, and calculate when you need to change your oil. Newer cars are designed to go longer between oil changes. Regular, scheduled oil changes can save you from $50-$100/year, according to Generation X Finance’s Jeremy Vohwinkle.

And don’t forget about the air filter. A filter clogged with dirt, grime, and who knows what else reduces gasoline mileage up to 10%. Use an air hose to remove dirt or replace it yourself. Generation X Finance reports that regular checking and replacement of air filters will save you about $130/year.

5. Tires

By inflating your tires to proper pressure, you can improve gas mileage. Check tire pressure periodically to increase how long tires last. By using the wrong-size tires, your gas costs will rise. Balance and rotate your tires once a year. Out-of-balance tires can wear out shock absorbers and damage the vehicle’s suspension system.

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6. Fuel

Studies show that premium gasoline fuels offer no benefit. Unless the manufacturer recommends using a high-octane gas, stick with the less expensive gas. Budget your fuel costs in and out of town by using a site or app, like Gas Buddy.

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7. Motor Vehicle Insurance

Before choosing an insurance company to protect your car, research what is out there. Rather than relying on a catchy commercial search the web for the insurance company that will meet your needs.

A quick click on the car comparison quote calculator, on a site like Insurance.com, will show what the vehicle you are planning to purchase will cost to insure. While that sporty, red Mustang may be the car you want, look first at the reliability and safety rating of the car, and then calculate the estimated insurance rate before you purchase the vehicle.

Look at your deductible. If involved in an accident, the deductible is the amount you will need to pay before the insurance company will pay out on your claim. Do you own a home, multiple vehicles, or even a boat? Negotiate with the insurance company for how much insurance will cost if you move all policies to the same company.