Car ownership 101: the things you need to know

Car Ownership 101: The Things You Need to Know

Owning a car for the first time is a huge accomplishment. It’s also, as you could probably guess, a huge responsibility. Many first time car owners are surprised by the hidden costs of car ownership – the regular maintenance, insurance and registration, the car loan payments, all of the car fresheners you’ll buy before landing the right one.

And there’s also the work that goes into maintaining your new four-wheeled baby, from changing tires to checking the fluid levels and more. And that’s after you’ve figured out where the heck the latch is to pop the hood.

If there were any questions that you were too embarrassed to ask your mechanic – or let’s be honest, your parents – about car ownership, you’ll find the answers here.

Here’s a rundown of what we’ll cover:

Part One: Car Ownership Costs

• Calculating your car loan payment
• Cost of registration and insurance
• Budgeting for gas
• Check-ups and oil changes
• Tire rotation and changes
• Parking
• A few emergency operations

Car Ownership Maintenance

• Checking your fluid levels
• Keeping your tires full
• The importance of a regular wash
• How to jump a car

And we get it – as a new car owner, you don’t want to be reading through dry online guides that raise your anxiety by telling you all the things you’re doing wrong. If you wanted that, you could just read the manual or tell your mechanic that you’ve been driving around with a blinking emergency light for three months.

Instead, we’re here to tell you everything you need to know about car ownership from the perspective of people who have made all the mistakes and asked all the silly questions to the guy at the local auto shop.

In other words, we’re right there with you. Let’s get started.

Part one: Car Ownership Cost

Owning a car gives you a lot of freedom. That’s undeniable. But, yes, it comes at a price. The minute that you drive a car out of the lot, you’re going to see the value of your car drop and the expenses of car ownership rise.

But hey, in most parts of the US, you’ve got to have a car. So planning for the cost can help you budget accordingly. Let’s cover the basic costs of car ownership.

Cost #1: Car loan payments

Now, if you buy a used car without a loan or you’re inheriting a car from a family member, you don’t have to worry about this cost. Skip right along to registration and insurance.

But for many of us, buying a car with a loan payment plan is par for the course. So how do you know what a good deal is and what are the qualifications?

The breakdown of car loans is pretty simple. You get the loan through a financial institution or a car dealer, you pay part of the money up front, you agree to monthly payments and an interest rate, and then you pay back your loan monthly with interest. A few terms that you’ll hear during this process include:

• Down payment: the money that you pay up front
• APR: your interest rate. This stands for annual percentage rate
• Loan terms: this is going to tell you how much you’ll pay per month and for how long

When you’ve finished paying off your car, you can then throw yourself a little party because you are, officially, the owner. On the other hand, if you don’t make your monthly payments, well, you might have to pay late fees. And in severe cases, the bank or the car dealer can have your car repossessed.

But understanding how car loans work is the easy part. The hard part is trying to find the best rate. Making smart decisions now can help you find a reasonable monthly payment and the lowest interest rate possible.

There are a ton of loan calculators on the internet that you can use to estimate how much you can expect to pay. Using a car loan calculator won’t be 100% accurate, but it will give you a pretty good idea of what to look for when you’re talking to different financial institutions and car dealerships.

In addition to using a car loan calculator, here are a few other tips that will help when you’re looking for the best car loan:

• Start looking into banks and credit unions first, then see if the car dealership can offer you something better. Oftentimes, the car dealership car loan terms will be worse for you than if you were to go with a financial institution, but not always. So, it’s best to shop around, compare, and ask which loan provider can offer you the best deal.
• Make sure your credit score is good. A good credit standing can do wonders for your APR. Obviously, there’s no quick fix to improving your credit, but be prepared for some not-so-nice interest rates if you’ve struggled with your credit in the past.
• Keep an eye on the total loan payment, not just the monthly payment. It can be tempting to choose the loan terms with the lower monthly payment, but that can sometimes mean paying more over time.
• Read everything, and don’t accept conditional financing. Obviously, we all know to read the fine print, but if this is your first car loan, you might be wondering what to look for. Basically, you want to make sure that the contract protects you. Are you going to face fees for early repayment? Is there a variable interest rate that is going to make your payments increase over time? And what about conditional financing? This means that your loan provider could change the terms of your loan in certain situations.

At the end of the day, we can’t predict how much you’ll likely pay for your car loan. According to  Credit Karma, in the first quarter of 2019, Americans were paying an average of $554 per month for a new car and $391 for a used one. But again, it depends on a variety of factors such as the age and price of the car, your credit score, and the terms of your loan.

Cost #2: Registration and Insurance

Alright, maybe these costs should be explained separately. But, hey, if they are two of the three things that a cop is likely going to ask you for if you get pulled over (in addition to your license), why not bundle them here, too?

First, registration. This is a fee that you pay annually or every two years, and it can vary from state to state. In some states, the price for registration is as low as $20 and in others, it can top $100.

When you pay your registration, the department of motor vehicles (or equivalent in your state) will send you some bright stickers that tell the world that your registration is up-to-date. Along with the stickers, the DMV will send you a little slip of paper that you can stash in your glovebox. That’s what you’ll have to present if you ever get pulled over.

Now, how about insurance? Like car loans, insurance prices are calculated person-by-person. A few factors that will determine your monthly insurance payments are your age, the kind of car you drive, your credit score, and your location. There are also some discounts for good students and military members.

When finding an insurance company, it’s always a good idea to shop around before settling. But how can you know what to look for? Like car loans, car insurance plans have a whole list of industry terms that you’ll have to become familiar with:

• Premium: This is the money that you pay to your insurance company regularly, either monthly or every six months.
• Deductible: This is the amount of money that your insurer will not pay in the case of an accident. For instance, if you were to get into an accident and the damages are $2,000, your insurance company will cover everything except the deductible. So, if your deductible is $400, you would get a check for $1,600. That $400 is money that you pay out of pocket.
• Limit: This is the max amount of money your insurer will pay in an accident.
• Collision insurance: This is insurance that will only cover the damages of an accident.
• Comprehensive insurance: This will cover an accident, plus other situations like theft or extreme weather.

In general, an insurer will provide you with payment options. If you go with a lower premium, then you’re likely going to have a higher deductible. What that means is that you may save money month-to-month, but in the case of an accident, you’ll end up paying more out of pocket.

According to the Zebra, Americans pay an average of $1,502 per year for car insurance. That’s about $125 per month. According to their statistics, premiums can be four times as high for kiddos between the ages 16 and 19 (a whopping $435 per month) than it is for people ages 50 to 59 (about $108 per month.)

In Maryland, the monthly average is as low as $70, while Maine is close to $200.

Clearly, there are a lot of factors that will go into your unique insurance costs. So take a bit of time to look for the best price, think about whether you want to pay a lower premium or a lower deductible, and drive safely so that you’ll hopefully never have to file a claim.

Cost #3: Budgeting for gas

When you first buy a car, it feels like the world is your oyster. Drive down the block to Target? Why not! Impromptu road trip across state lines? What a dream!

Sadly, though, after those first couple of months of filling up your gas tank way more frequently than you thought you would, you might start thinking more about the cost of gas and your gas usage.

Let’s talk about some averages and other stats. At the time of this publication, AAA had calculated that the US national gas price average was $2.61 per gallon. But, as you can probably guess, that can vary widely by state (and by day.) The most expensive gas prices right now are in California, where drivers are paying an average of $4.00 per gallon. And over in South Carolina, they’re only paying about $2.27.

Quick side note: why do gas prices vary so widely by state? Well, we don’t have time to take a deep dive, but suffice to know that it has to do with state taxes, competition, and fuel blends. States like CA require gas to be more environmentally friendly, which can drive up the price.

No matter where you live, the cost of gas adds up. You can really feel it on the weeks that you’re running around doing a bunch of errands and all of a sudden your gas tank is low. Again! With that in mind, there are a few ways that you can make your car more fuel-efficient, especially as a first-time car owner.

• This is a no-brainer: buy a fuel efficient car! A few years back, new car owners were driving around old cars given to us by older family members or that we had found for cheap on Craigslist. Before this era of fuel-efficient cars, it was really a struggle. If you’re able to buy a fuel efficient car as your first car, do it! Even if it’s a bit more expensive now, you’ll save money over time at the pump.
• Drive steadily. Your car will be more fuel-efficient if you don’t have a lead foot. Accelerate gradually and brake gradually. It’s a simple idea but it can help your engine make better use of that expensive gas in the tank. Relying on cruise control is a great way to make sure that you’re not accelerating and braking more than you have to.
• Keep the interior clutter-free. If your car constantly looks like you’re about to move to another state with the number of things you have packed into it, you’ve probably got too much weight and clutter hanging around.
• Check your tire pressure. Low tire pressure can make your car less fuel-efficient. Who knew?
• Try not to sit in idle. It may not seem like your car is doing much, but even sitting in park requires gas consumption.
• Replace the air filter regularly.

In addition to these simple tips, you’ll find that just being more aware of your gas consumption can help you spend less. For instance, you might think about all of the errands that you have to do at the beginning of the week and then group them based on location. That way, you’ll spend less time driving back and forth, and you’ll save a bit of money!

You can get a better sense of how much to budget for gas by utilizing an online gas calculator tool. These are great for longer trips, but you can also figure out how much you’re likely to spend on trips back and forth to work and the grocery store. The US Department of Energy has a great  fuel economy trip calculator to get you started.

Cost #4: Check ups and Oil Changes

Just like you need to make regular appointments with your doctor or dentist, your car needs to be seen by a professional every so often. Unless you’re a mechanic yourself or you have a very generous mechanic friend, you’ll have to factor in these regular checkups to the cost of car ownership.

But, how often?

That’s going to depend on your car. The age-old advice of taking your car in every 3,000 to 5,000 miles for an oil change is outdated. Modern cars can go anywhere between 7,000 to 10,000 miles without one. So, make sure that you read your owner’s manual for the correct information on your car.

As a first-time car owner, you might be thinking, “Okay, well, what even is 3,000 or 7,000 or 10,000 miles in terms of time? How frequently can I expect to need an oil change?”

This can be anywhere between 3 to 12 months. There are some cars, such as some Toyota models, that claim you’ll be good for the whole year. In general, older cars will typically need more frequent oil changes.

Taking your car in for an oil change has some other benefits, too. The mechanic will check your other fluid levels and top you off before putting you back on the road.

At the same time, it’s a good idea to be wary of what’s known as the “oil change upsell.” Here’s how it works. You, a first-time car owner, take your car into the mechanic for an oil change, thinking that you’re going to pay somewhere between $40 and $80.

You drop off your beloved car, go have a coffee at a nearby cafe, and when you come back, the mechanic is barraging you with a long list of things that are wrong with you car. They might suggest changing your air filter. They might have found a light that needs replacing. Maybe the window mechanics are working slowly, in their opinion.

This doesn’t happen at every garage, obviously. But if you ever feel like the person changing your oil is trying to upsell you, don’t feel like you have to say yes to everything. It’s perfectly fine to get a second opinion before you commit to paying extra money.

Cost #5: Tire rotation and changes

Tire rotation is a normal part of tire care. The basic idea is that you change the position of your tires periodically so that they wear more or less evenly and last longer. Changing your tires regularly can also improve your gas mileage.

If you are so inclined, you can rotate your tires at home. It’s pretty good practice for if you ever get a flat tire and need to use the spare. And it can save you a bit of cash. Of course, having a professional rotate your tires is probably faster and more convenient, and it’s not usually too expensive.

In theory, rotating your tires should be free if you take your car to the place where you bought your tires. Sometimes it’s even a service that’s included with your oil change. But, that’s not always the case.

According to Auto Service Costs, the average cost for a tire rotation is $66, but it could cost anywhere between $20 and $100 depending on where you live.

So how often should you rotate your tires? Well, it kind of depends on your driving habits, but most experts suggest that you do it around the time of your oil changes. Every 6 months or 5,000 miles.

Now, how about changing your tires completely? The best way to tell is by the wear on the tread. If you’re looking for a precise number, the experts say 2/32”. And if you’re thinking, “How do I even measure that?” it’s pretty simple. Try the penny test. All you have to do is insert a penny into your tread with the top of Lincoln’s head pointing to the tire. If the penny can sink into the tread until the top of Lincoln’s head, you’re good to go. If not, you’re driving on worn tires. Time to change.

In general, you shouldn’t expect to have the same tires for more than 6 years. That number is going to be less if you’re constantly driving on rough terrain or using your car for work purposes.

Now, how much does a new set of tires cost?

Unfortunately, it can be quite costly. According to Angie’s List, the average American pays somewhere between $70 and $200 per tire. Tires for smaller, average cars will be cheaper while the tires for SUV and luxury vehicles will be higher.

Another consideration is whether you need all-weather tires. If you live in the snow and would rather not buy a whole separate set of tires for winter, all-weather tires are a good option. They’ll be more expensive than a regular set of tires, but they can be essential in severe weather.

Cost #6: Squeaks and Squeals

If you’re a first-time car owner who has purchased a used car, it’s normal to freak out at the first sign of your car squeaking or squealing. Sometimes it’s a high-pitched whine when you break. Other times it’s an unnerving squeal from under the hood when you start your car.

In most cases, you’re dealing with normal wear and tear on your brake pads, belts or pulley system that will need to be taken care of. So, what’s the cost involved?

If you need to replace your brake pads, you can expect to pay an average of $241, according to Auto Service Costs. Replacing a belt will probably cost you somewhere between $300 and $500. And if you need to fix or replace the idler pulley, you’re looking at about $200 or more.

It may seem like a lot of money, but these fixes generally only need to happen about every five years.

Cost #6: Parking

Parking is a cost that’s easy to overlook if you don’t own a car. But it can be a huge expense depending on where you live.

According to Forbes, New Yorkers paid an average of $5,395 in 2017 for parking, while drivers in San Francisco, Los Angeles, Washington D.C., Chicago, and Boston all paid somewhere between $2,000 and $3,000. Those numbers are only expected to rise as urban populations grow and real estate becomes even more competitive.

We’ve even seen parking spaces being sold for astoundingly high prices. In NYC, the ultra-rich are parking their cars in spaces worth $1,007,994, and in Boston, a single parking space sold for $560,000 in 2013.

Okay, you’re probably not going to be spending six figures on parking as a first-time car owner, and we don’t want to scare you. So, how can you figure out how much you will be paying monthly for parking?

Spacer is your go-to parking option for affordable and convenient parking. Simply enter your city or neighborhood into the search bar and find cheap parking options near you.

If you look at listings in Los Angeles, for instance, you can see parking spaces available for around $200 per month. Chicago has parking options between $200 and $300 per month. And even the city where parking seems impossible – New York City – offers monthly parking in Brooklyn for $250 to $350.

Cost #7: A few emergency operations

Everything we’ve covered so far can be seen as an ongoing expense. Getting your oil changed, rotating your tires, paying for gas, they’re all costs that you can see coming. But it’s also important to budget for when things go wrong.

Cars, as you’ve undoubtedly realized at this point, are complicated machines. There are a lot of things that could potentially go wrong. Instead of budgeting individually for having to call a locksmith or getting towed, it’s a good idea to have an emergency fund that will cover a range of emergency situations.

At the very least, you should have enough money saved up to be able to pay your insurance deductible. You might also look into the cost of a car tow in your area and include that in your emergency fund.

Some more severe car repairs, including problems with your alternator or starter motor or even your transmission, could push you beyond $500 and even well into the thousands of dollars.

Takeaways on car ownership costs

If you were unaware of all of the expenses that go into car ownership, you might feel a bit stressed after reading those 7 common car costs. And yes, owning a car can be quite a big expense.

But it’s much better to familiarize yourself with the expenses attached to car ownership so that you can budget accordingly. Having a financial plan in place is the best way to lower anxiety about car ownership costs.

If there’s one last thing that we can say about car costs it’s this: don’t put off paying for regular maintenance. Driving around with the engine light on is a sure-fire way to end up paying more in the long run. Instead of delaying the inevitable, it’s always best to take your car in for a service and get it out of the way. Otherwise, you may end up paying for a much larger problem later on.

Part Two: Car Ownership Maintenance

With most auto shop classes going out of fashion in high schools, there’s a whole generation of new car owners who have never learned car maintenance. Don’t worry – we’ll cover the basics here!

Maintenance Tip #1: Check Your Fluid Levels

Making sure that your car has adequate fluid levels is a great way to avoid overheating problems and other engine breakdowns. But, what fluids are we talking about, where can you check them, and how can you fill them up?

Once you’ve learned it the first time, it’s super easy. We’ll cover the main fluids to check here, but you’ll also want to check your owner’s manual to see where you can physically find the dipsticks and the gauges and all that good stuff. Here are the main things to know:

• Engine oil or motor oil. You should check your motor oil about once a week in warmer climates, and to do so, you’re going to check the reading on a dipstick, which is essentially a long metal rod with measurements on the end. To check your engine oil, make sure your car is level and that the engine has been off for at least a few minutes. Locate the dipstick, remove it, and wipe it clean with a paper towel. Then, reinsert the dipstick, give it a second to rest, and remove it again. This time, you should see oil on the end of the dipstick – if it’s within the normal amount, you’re good to go. If not, you’ll need to top it up.
• Transmission fluid. Like the engine oil, you can check your transmission fluid with a dipstick once per week. Usually, the transmission fluid dipstick looks different from the engine oil dipstick, and you can find its location by reading the owner’s manual. Unlike the engine oil though, you’ll want the car to be running while you check the transmission fluid unless the manual tells you otherwise. To check the fluid, remove the dipstick, wipe with a paper towel (keeping in mind that the fluid might be hot), replace the dipstick and remove again to check the level of the fluid on the markings. If it’s low, you’ll need to add more fluid with a funnel to the dipstick tube a little bit at a time. To make sure that the fluid circulates properly, you’ll also want to take your car through each of the gears before putting it in park and allowing it to run for a few minutes again. After this step, check the transmission fluid again.
• Coolant/Antifreeze. Checking your coolant levels is fairly easy, as in most cars, you can simply read the fill line in the reservoir. You can take a quick glance anytime you pop the hood. If you do need to add more, the most important thing to remember is that you must wait until the car is completely cool. That might be a few hours after driving. Otherwise, hot fluid can spray out of the cap as you open it. Then, once the car is cool and you’re able to remove the cap, simply pour in enough coolant to reach the fill line.
• Power steering fluid. You can generally tell when you’re low on power steering fluid because turning will become more laborious. Luckily, checking it is really easy. First, turn off your car. Don’t worry about the temperature. Like coolant/antifreeze, power steering fluid has a reservoir that is easily checked by looking at the fill lines on the side. If you can’t easily see the fill lines from the outside, you can remove the cap, clean the short dipstick inside, replace it and remove it again to check the reading. If you need more, simply pour it into the reservoir until you reach the appropriate fill line.
• Brake fluid. In newer cars, you can check the brake fluid in a plastic reservoir with fill lines. Make sure that the car is completely cool before you take your reading. And, if it looks like you’re running low, make sure to check your owner’s manual before adding more. Some cars with anti-lock braking systems require a few extra steps like pumping the brakes before adding more fluid. The important thing to remember when adding more brake fluid is that you should clean the cap thoroughly before opening. Dirt that falls into the reservoir can damage the brake system. Another thing to keep in mind is that dips in your brake fluid could mean a leak in the system. It’s important to have the brake fluid changed and the system checked every 2 years and if you see the brake fluid levels falling between that 2 year checkup.
• Windshield wiper fluid. Good news: this one is the easiest! Windshield wiper fluid isn’t necessary for your car to run normally, but it’s a lifesaver when you want a clean windshield without doing it manually. To fill it up, find the wiper reservoir (usually it has an image of windshield wipers on the cap) and fill to the fill line. Ready to go!

Clearly, there are a lot of fluids to keep track of if you want your car to continue running smoothly. If it’s helpful, you might create a log that you can keep in your glove box or on your phone to stay up-to-date on these quick but necessary checks.

Maintenance Tip #2: Keep Your Tires Full

Earlier, we mentioned that keeping your tires filled can improve gas mileage. So, how often should you be checking and how can you fill-up?

A good rule of thumb is to check the tire pressure once per month and before and after long trips. Checking is fairly easy. If you have a newer car, your car’s electronic system will monitor tire pressure for you. If not, there’s a cheap little tool, called a tire gauge, that you can buy at your local auto shop that attaches to the tire valve. This will tell you your tire’s current PSI, and you can check that against the recommended PSI listed in your owner’s manual.

If you need to fill up, simply go to your local gas station where they have an air compressor for public use and fill up to the recommended PSI. Make sure to fill up your tire in small increments and check the PSI with your tire gauge. If you accidentally overfill, most tire gauges have a little knob that you can use to release a little bit of air.

Maintenance Tip #3: Wash Regularly

Keeping your car clean inside and out may seem optional, but it’s going to help you maintain the value of your car for longer. The general recommendation is once every two weeks or more if you live in an area with extreme weather or ocean air.

If you’re interested in washing your car at home, there are a few extra steps you can take to make sure you’re conserving water and not dumping harmful waste into the local environment. Popular Mechanics has a great article on  washing your car with a single cup of water.

Maintenance Tip #4: Learn How to Jump a Car

At some point, every car owner needs to be able to jump a car. Whether your own battery has gone dead or your neighbor is in need of a jump, it’s a skill that is really useful. And although it might seem intimidating, it’s actually pretty simple.

You’re going to need a pair of jumper cables and a car with a fully charged battery. Put both cars in park and shut off the ignition in both. Then, follow these steps:

• Attach one red clip to the positive terminal on the dead battery
• Attach the other red clip to the positive terminal on the live battery
• Attach one black clip to the negative terminal on the live battery
• Attach the other black clip to an unpainted metal surface on your car that isn’t near the battery

One way that you can remember this is: red to dead, red to donor, black to donor, black to metal. Not the catchiest memory trick but it’s the best we’ve got.

Once the cables are attached, turn on the car with the live battery and wait for 2 to 3 minutes. In the dead car, try turning on one of the internal lights to see if the car has picked up any charge. If it has, try starting the dead car.

Now, it’s time to remove the cables. You’ll want to remove them in the order that you put them on, so: black from the metal surface, black from live battery, red from live battery, red from dead battery. From here, you’ll want to keep your previously dead car running for the next 10 to 15 minutes.

Make sure not to tap the clamps together. And, because doing this wrong could damage you and the car, it’s best to watch a video of it being done before trying it yourself.

Are you ready to hit the road?

We have covered so much information in this guide, from learning how to use a car loan calculator to the cost of ownership car owners should budget for to how to jump a car.

While you may not have enough information to open up your own mechanic shop, you at least know the basics of Car Ownership. So, buckle up and get behind the wheel!