When you own a car, several ordinary auto expenses can catch you off guard if you’re not prepared for them. An extended car warranty is one of the most common ways to handle unexpected costs better.
Overlooked Expenses of Car Ownership
1. Extended car warranty + deductibles
While many new cars come with some warranty coverage, it’s often only for a limited time and doesn’t cover everything. Purchasing an extended warranty for your used car can help with significant repairs as your car ages. Extended car warranties can cover considerable maintenance, like the engine, transmission, and electrical system, and smaller items like the air conditioning and audio systems.
While an extended warranty may not cover everything, it can help reduce the financial burden of unexpected automotive repairs. You will be expected to pay a deductible on your claim before you can get your repairs done. This isn’t highlighted or discussed when you sign up, so be sure you understand the claim process and set aside the cash for your deductible in case you need to use it.
2. Routine Preventative Maintenance
Even if your car is new and under warranty, there are still maintenance and repair costs that you’ll need to be prepared for. Your deposit will not cover all repairs, and many routine maintenance items like oil changes and tire rotations are not typically included. Be sure to factor the cost of unexpected repairs and regular maintenance into your budget to avoid being caught off guard.
3. Insurance premiums, deductibles, and add-ons
Your car insurance is another typical auto expense that can be pretty costly. You’ll be required to have insurance for your car in most states. Insurance premiums will vary based on several factors, including your driving history, car type, and where you live. If you’re involved in an accident, you’ll also need to pay your deductible before your insurance covers any damages.
Your insurance policy may also be where you purchase access to roadside assistance and towing; these will often come with other benefits but will be charged to your insurance policy as a separate service.
3. Fuel Costs
Of course, you’ll also need to factor in your car’s fuel cost. Fuel costs vary significantly depending on your vehicle and how often you drive it. If you have a long commute or live in a rural area, you may spend more on gas than someone with a shorter commute or who lives in a city.
If you choose to invest in a hybrid or electric car, you’ll still need to budget for the increase in electricity and any special equipment for your power station. If you decide that traditional gasoline is a better option, you’ll want to shop for your car with that in mind and search for something with better fuel efficiency for your needs.
One of the most significant auto expenses is depreciation. It depreciates as soon as you drive your car off the dealer’s lot. Most cars lose 20% of their value in the first year after purchase.
While this may not be an immediate expense, it’s essential to factor in your car budget. When you’re ready to sell or trade-in your car, you’ll likely get less for it than you paid initially due to depreciation.
5. Tags, License, and Registrations
You’ll need to keep your car registered with your state. The registration cost can vary depending on your car’s weight, age, and value. The cost of tags, licenses, and registration can add up quickly, so be sure to factor it into your budget.
Auto expenses can be a significant part of your budget. Before purchasing, consider all the costs associated with owning and operating a car. By doing so, you can avoid being caught off guard by unexpected expenses. While some auto expenses can be expected, many can catch you by surprise. Be sure to factor in all the potential ownership costs when budgeting for your car to avoid being caught off guard.
Planning and Budgeting for Secondary Car Expenses
A car is a significant investment, and there are a lot of associated costs that come with ownership. In addition to your monthly car payment, you’ll need to factor in insurance, gas, routine maintenance, and depreciation.
You must include these easily overlooked expenses in your budget while tending to your money management tasks. Here are some tips to help you with this:
1. Review your insurance policy regularly
Your car insurance is a significant expense and can fluctuate over time. Review your policy regularly to ensure you’re still getting the best rate possible.
2. Compare gas prices in your area
Gas prices can vary significantly from one location to the next. Compare gas prices in your area and budget accordingly.
3. Stay on top of your car’s maintenance needs
Routine maintenance is a necessary cost of ownership, but it doesn’t have to be expensive. Stay on top of your car’s needs to avoid costly repairs down the road.
4. Use public transportation when possible
If you live in a city, consider using public transportation to save on gas and wear-and-tear on your car.
By taking these steps, you can ensure that you’re prepared for all the associated costs of owning a car. With some planning and forethought, you can avoid being caught off guard by unexpected expenses.