Most families in the U.S. need at least one car. You could make a strong case that most families need two cars. Have you ever stopped to really think: What is the purpose of your car, truck, or SUV? For nearly everyone, our vehicles are for commuting to and from work and driving around as a family. For others, they actually need their vehicle directly for their work, if they are a delivery driver or someone who works in construction or home repair. And a small portion of people need a certain kind of vehicle based on where they live or for activities they do, like hunting. Simply put: Our vehicles are primarily a means to get from place to place, a mode of transportation.
Since Rat Race Off Ramp is a personal finance blog, I look at long-term solutions to save money and build wealth, and this even applies to buying and owning a car. Today, I’ll go over a cost comparison for the cars we own in our family and how we use them, but first, I’ll quickly cover car loans, dependability, and maintenance.
Car Loans
If you’re going to take out a loan to buy a car, you should plan out your financial situation to see how much of a car payment you can afford. You will need to find a car with a car payment you can and want to afford. You don’t have to take a loan out with the maximum payment you can afford. Also, consider the length of the car loan (some are up to 7 years long now) and the trade-offs of having a car payment. You’ll have less money for saving and spending.
Dependability
Having a dependable car that will last longer and require fewer high cost repairs can go a long way toward driving the vehicle for a longer time and allowing you to put off your next car purchase. J.D. Power and Associates does an annual Dependability Study that studies vehicles sold in the United States. It is certainly something worth reviewing when you’re in the market for a new car.
Maintenance
On the maintenance side, performing basic vehicle maintenance at the manufacturer’s recommended intervals can help keep your car running better. These mainly include oil and oil filter changes, tire rotations, and changing the engine air filter. You should also know how your car drives and what it feels like. If you notice something is different (sounds, vibrations, etc.), you may want to ask a mechanic about it. If you head off a potential problem early, it could make the maintenance or repair cheaper by not allowing the problem to compound and cause other things to go wrong. Check out this article. It has an overview of the maintenance costs for different car makers over a 10-year period.
Cost Comparison:
Sport-Utility Vehicles (SUVs) now represent the mainstream vehicle for many Americans, especially families. But do you need two SUVs for one family? As I said in my last post, I have a Toyota Highlander, and it is a great car. Conversely, my wife drives a Nissan Versa Note. Primarily, my wife uses her car to commute to and from work. When we do things as a family, we take the Highlander. So let’s break down the costs for these two vehicles. This comparison will focus on the cost difference if she drove a SUV like my Highlander instead of her Versa Note. With that, let’s get started.
Car Registration
Every state is different, and luckily, we are on the cheaper end with our cars being registered in Florida. The Highlander costs $46.48 per year, and the Versa Note costs $28.48 per year. So the Highlander costs $18 more a year for registration.
Car Insurance
For our cars, our insurance is $1221.26 every year. The Highlander costs $628.90, and the Versa Note costs $592.36. The Highlander costs $36.54 more per year to insure, and that is based on our current insurance plans. I’d also expect the Highlander to cost more if insured as a commuter car, since it would be on the road much more during rush hour traffic.
Basic Maintenance Costs
For our oil changes and tire rotations, we go to a Brakes Plus. The image below shows the cost difference. The Highlander uses full synthetic oil, and we always rotate our tires when we get oil changed. The Versa Note gets a conventional oil change. We would get the ‘white’ service, so the Highlander costs $30 more for each oil change and tire rotation. We usually get three oil changes and tire rotations per year, so that’s another $90 per year in extra cost for the Highlander.
Tire Replacement
If you own your car for more than three or four years, you’ll need to replace the tires. We will do a comparison between two similar mileage rated tires from the same company. In this situation, we will use Cooper Evolution tires. For the Highlander, the Cooper Evolution HT is $156 per tire, or $624 for a set of four tires. For the Versa Note, the Cooper Evolution Tour is $73 per tire, or $292 for a set of four tires. So replacing the tires on the Highlander is $332 more than the Versa Note. For cost estimates, I’ll assume tires are replaced every four years, so that would break down to $83 per year.
Commuting Distance and Gas Costs
My wife’s commute is 12 miles where we live now, but it was 18 miles the last place we lived. So we will use the average and go with a 15 mile commute (30 miles round trip). For the calculation, I’ll assume 50 weeks of work or 250 commuting day, which comes to 7,500 miles per year for commuting. The Highlander gets about 24 miles per gallon (mpg) on the highway, and the Versa Note gets around 38 mpg on the highway. The Highlander would need 312 gallons of gas for commuting, while the Versa Note only needs 187 gallons of gas. The Highlander would consume an extra 115 gallons of gas to commute every single year. Assuming $2.50 per gallon of gas, that comes out to $287.50 per year in extra fuel costs if she drove the Highlander instead of the Versa Note.
Cost Summary
By driving a Versa Note instead of the Highlander as the commuter car, the annual savings come out to $515.04 per year.
| Cost | Highlander | Versa Note | Difference |
| Registration | $46.48 | $28.48 | $18 |
| Insurance | $628.90 | $592.36 | $36.54 |
| Basic Maintenance | $70 (x 3) | $40 (x 3) | $90 |
| Replacement Tires (every 4 years) | $624 ($156/year) | $292 ($73/year) | $83 |
| Commuting Gas Cost | $780 | $492.50 | $287.50 |
| Total | $1821.38 | $1306.34 | $515.04 |
What could you do with an $515.04 every year? If you saved that money every year ($42.92 per month) at a 7% growth rate, you would have $52,361.12 after 30 years. Or you could use that $515.04 to pay down debt faster. Your $515 in savings could also cover Amazon Prime ($119 per year), Disney+ ($6.99 per month), and Netflix ($8.99 per month), and you’d still have over $200 left.
Wrapping Up
Now, I’m not saying go out and buy the cheapest car with the best gas mileage. I’m just trying to show you that there are costs for owning a car you might not consider when buying a car, and that they can add up over time.
If you are in the market for a car, now might actually be a decent time to look at buying a car. With the car rental company Hertz recently filing for bankruptcy, they are liquidating a large portion of their rental fleet at pretty good prices, and forcing used car prices lower across the used car industry. If you are going to shop for a car, make sure you use “The Most Powerful Negotiating Tool When Buying a Car.”
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