The Real Cost of Owning a Car in Houston

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New car shopping can be equal parts exciting and challenging. Finding a car that meets your expectations while remaining within your budget can be a bit tricky – especially when you begin to consider the add-on costs that increase its price beyond the sticker value.

According to a recent study of total car ownership rates across all 50 states, Texas places near the middle of the pack, with an out-of-pocket annual cost of approximately $3,078, not including depreciation. Costs such as vehicle taxes and related fees, as well as gasoline costs, came in below the national average, helping to lower our overall expense.

Still, the study didn’t factor in considerations such as the length of your commute; DowntownHouston.org estimates city commuters travel an average of 21 miles per day to work, making fuel consumption (and costs) a real possibility for many area drivers.

Out-of-Pocket Costs + Depreciation = Total Cost

According to Kelley Blue Book, the total cost of car ownership can be broken down into two basic components: Your out-of-pocket costs and the car’s depreciation over time. The former include such costs as fuel, state taxes and fees, maintenance, and repairs. Meanwhile, the latter is important because it measures how much of the car’s value is being lost every year.

In sum, experts suggest that the factors you should consider when estimating the total cost of owning your vehicle over a typical five-year horizon include:

Purchase price: The price you pay for your vehicle is likely the single largest component of your overall cost. Buying a used vehicle or negotiating for a lower price on a new car can lead to savings.

Taxes, License and Fees: CarMax.com offers a useful tool to help you calculate these costs; this is especially useful for used vehicles. For example, a mid-range car purchased in Texas costing $15,000-$17,250 could see fees totaling approximately $1,175-$1,325, according to the calculator.

Finance Costs: The interest rate and length of time you’ll be making payments can impact your total cost of financing a vehicle, since higher interest rates and/or longer repayment periods can increase the total paid for your vehicle. Check out this calculator from Kelley Blue Book for an estimate of your finance costs.

Insurance Costs: Various factors can affect your car insurance premiums, so talk to an insurance agent for more information.

Repair and Maintenance: Rare, antique or luxury vehicles may require specialty care or parts and may thus have higher repair and maintenance costs. Standard vehicle owners should keep in mind the usual maintenance costs, such as oil and tire changes, tune-ups, cleaning, and so forth.

Fuel: Your total costs for fuel will depend on a number of things, including your commute length and how much you otherwise drive, your area’s gas prices, and your vehicle’s mileage per gallon. Calculate your estimated MPG at FuelEconomy.gov.

Depreciation: The total cost of car ownership includes depreciation, or the loss in value of your vehicle as it ages. Edmunds’ True Cost to Own calculator can help you understand the impact of depreciation on your vehicle.

The decision to buy a car is a highly personal one that depends on your needs, preferences and budget. Try using an online calculator to help compare costs for buying new versus used and to help you determine the overall impact of a vehicle purchase on your finances.

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