Do you want to be Car Poor? True Cost to Own (6 Point Guide)

Some people see the sticker price and often assume that’s all the money they need to cough up to own that car; unfortunately there are other factors that play into total cost of ownership that can lead to being car poor.

“Car Poor” is when someone ends up spending to much on their car, leaving them little money to do basically anything else.

Even if two cars have the same initial sales price, it does not mean they both would cost you the same over the life of the car. Along with initial purchase price there are other factors that weight into the true cost of ownership, we are going to dive into the 6 important things you should consider when buying a car.

Factors That Impact True Cost of Owning a Car


Purchase Price

The initial sale price is the first thing typically noticed about a car, for most people this is the standard on which they base their ability to afford the car. Purchase price is a very important component to your car buying decision, it should be considered the first step in the process and not the only deciding factor.

Ways to reduce your car purchase price include:

  • Use online websites such as and to shop around for the best purchase price
  • Look for tax credits if considering a hybrid or electric car
  • Visit dealerships at the end of the month, they may be close to meeting their monthly bonus quota could be more willing to lower the price on your car to get there
  • Negotiate – at least a little 🙂


The average new car payment in 2017 was $510 with an average loan length of 69 months. Remember, in exchange for the bank lending you the money for your car, they expect back the money lent, plus interest. Those interest payments count towards your overall cost of ownership for your car.

Depending on your credit score interest rates can range from 2-20%, which can be upwards of $10K of interest payments in addition to the car purchase price.

Ways to reduce your interest payments:

  • Clean up your credit score
    • Monitor your credit score with and pay down large debt balances
  • Get a co-signer on the loan
  • Have a down payment for the car — having to borrow less (given the same loan period) will reduce the amount you would pay in interest.
  • Shorten your loan length
  • Shop around for best interest rates
    • Traditional Banks
    • Credit Unions
    • Online Loans
    • Car Dealerships


Depreciation is an interesting concept, one that is not exact and shifts over time – essentially once you buy a car it begins to lose value as soon as you drive it off the car lot. Most cars lose value (unless they are rare collectibles), but some lose value faster than others.

Most new cars lose around 20% of their value just in the first year.

If you are like me, and have ever tried to trade a new car within 1-3 years of owning it, you know what it feels like to be on the wrong side of depreciation.

Some tips to help avoid deprecation as best you can:

  • If buying new, look for cars with high resale values (those tend to deprecate less than others over time)
  • Consider buying a used car (even a 1-3 year old car can save you 30% or more off the initial new car sticker price)
  • Keep your car longer to reduce the effects of deprecation

Maintenance and Repairs

This is a very important factor to take into account when buying a car, while new cars typically come with a warranty for repairs, maintenance costs are less likely to be covered. Also, if you plan on keeping your car over 3 years, then repair costs could add up quickly.

A recent AAA survey showed that 64 million American drivers would not be able to pay for an unexpected car repair bill without going into some form of debt.

Maintenance and repair bills include oil and other fluid changes, tires, and typical wear and tear items; these all play a factor into the total cost of ownership.

Some ways to help avoid the high cost repairs could be to purchase an extended warranty and/or stick to cars that have quality consumer report scores.


Insurance coverage is required by law in a majority of states and are typically priced out regionally.

If you are considering a specific car, you can check insurance prices with your current provider before buying to see the financial impact. (Rates may vary by car type and whether the car is used for daily diving verse weekends only.)

We would recommend getting at least three separate quotes on car insurance when buying a new car, in fact – every few years you should shop around again for better prices. What we’ve seen is that many insurance companies continually raise rates each year on their existing customer base to help offset the expense of winning new customers by offering them special low rates.


Fuel costs range varying on vehicle type, but all in, the average new car fuel cost per mile is 10 cents; or about $1,000 to $1,500 per year.

Going with an electric or hybrid would likely save you considerably on fuel costs, as opposed to a V8 truck. However, fuel is just one component of total cost of ownership, so all factors should be weighted in accordance to your priorities. Some of the electric or hybrid cars might be higher cost upfront, but with fuel cost savings and possible tax credits; they could be a good long term purchase financially.


Note: Registration and Taxes are not named specifically in these sections, we do not feel, over the long run, they are major components to consider for a true cost to own.


ThinkRich Tip: “Keep Total Car Expense Below 15% of Gross Income”


In regard to True Cost to Own, what do you look out for when considering purchasing a new or used car?

1 thought on “Do you want to be Car Poor? True Cost to Own (6 Point Guide)”

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